ZymoGenetics and Merck Serono Initiate Second Phase 2/3 Clinical Study of Atacicept in Lupus.

- Trial in Systemic Lupus Erythematosus Intended to Form Part of Potential Registration Package -

SEATTLE -- ZymoGenetics, Inc. (NASDAQ:ZGEN) announced today that its partner Merck Serono, a division of Merck KGaA, Darmstadt, Germany, initiated a Phase 2/3 trial of atacicept in patients with systemic lupus erythematosus (SLE). This study will evaluate the efficacy and safety of atacicept for the treatment of patients with SLE.

The study is being conducted under a Special Protocol Assessment (SPA) agreement with the U.S. Food and Drug Administration (FDA). A second Phase 2/3 study in lupus nephritis, a severe form of SLE in which the kidneys are affected, was initiated in December 2007. These two studies are intended to form part of a potential registration package to support worldwide applications for marketing authorization.

"Atacicept has the potential to alter the course of SLE, a complex and devastating disease," said Anton Hoos, M.D., Merck Serono's Head of Global Development. "This study should provide us with a basis for assessing treatment outcomes with atacicept."

"Our development program, evaluating both lupus nephritis and SLE, gives us the opportunity to assess broad utility in treating lupus," said Nicole Onetto, M.D., Senior Vice President and Chief Medical Officer of ZymoGenetics. "The mechanism of action of atacicept, inhibiting the two growth factors BLyS and APRIL that are known to have an impact on disease progression, is the basis for studying atacicept in SLE, and our research may lead to a new therapy for patients with lupus."

The one-year (52-week), randomized, double-blind, placebo-controlled international Phase II/III clinical trial will enroll approximately 500 patients with SLE. The trial will evaluate the efficacy and safety of atacicept compared to placebo in preventing SLE flares. The primary efficacy endpoint is the proportion of subjects experiencing a new disease flare, based on BILAG1 measurements, during the 52-week treatment period.

Footnotes

1BILAG (British Isles Lupus Assessment Group) is a scoring system used to assess the status of a patient suffering from SLE with respect to the severeness of the disease. The scores range from A (severe) to E (no disease). The advantage of using BILAG as compared to other assessment methods is that it allows each organ system to be evaluated individually.

About Atacicept

ZymoGenetics and Merck Serono are co-developing atacicept (formerly referred to as TACI-Ig) as a potential treatment of autoimmune diseases, such as systemic lupus erythematosus (SLE), lupus nephritis (LN), rheumatoid arthritis and multiple sclerosis, as well as B-cell malignancies. Atacicept, a recombinant fusion protein, contains the soluble TACI receptor that binds to the cytokines BLyS and APRIL. These cytokines are members of the tumor necrosis factor family that promote B-cell survival and autoantibody production associated with certain autoimmune diseases such as SLE. Current data indicates that levels of BLyS and/or APRIL are elevated in patients with rheumatoid arthritis, SLE, B-cell malignancies and multiple sclerosis. Atacicept has been shown in animal models to affect several stages of B-cell development and may inhibit the survival of cells responsible for making antibodies.

About Systemic Lupus Erythematosus (SLE)

Lupus is a chronic inflammatory disease, where the immune system attacks the body's own tissues and organs. Systemic lupus erythematosus (SLE) is the most common form of lupus and can result in swollen, painful joints, skin rash, extreme fatigue and kidney damage. In the United States, for example, SLE affects 1 person in 2,000, with higher rates among women and among individuals with African, Asian, and Hispanic genetic heritage.

About the Special Protocol Assessment

In the Special Protocol Assessment (SPA) process, the FDA evaluates the design of a clinical trial that will form the basis of an efficacy claim to support a new drug application. Unless the FDA identifies a substantial scientific issue essential to determining the safety or effectiveness of the drug after testing has begun, the SPA provides a binding agreement between the FDA and a company that the study design, trial size, endpoints and data analyses plan, are acceptable to the FDA and would provide certain types of data needed to support a license application for marketing in the United States.

About ZymoGenetics

ZymoGenetics creates novel protein drugs with the potential to significantly help patients fight their diseases. The Company is developing a diverse pipeline of product candidates that are moving into and through clinical development. These candidates span a wide array of clinical opportunities that include bleeding, autoimmune diseases and cancer. ZymoGenetics intends to commercialize these product candidates through internal development, collaborations with partners, and out-licensing of patents from its extensive patent portfolio. For further information, visit www.zymogenetics.com.

This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on the current intent and expectations of the management of ZymoGenetics. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. ZymoGenetics' actual results and the timing and outcome of events may differ materially from those expressed in or implied by the forward-looking statements because of risks associated with our unproven product sales and marketing abilities, discovery strategy, preclinical and clinical development, strategic partnering, regulatory oversight, intellectual property claims and litigation and other risks detailed in the company's public filings with the Securities and Exchange Commission, including the company's Annual Report on Form 10-K for the year ended December 31, 2007. Except as required by law, ZymoGenetics undertakes no obligation to update any forward-looking or other statements in this press release, whether as a result of new information, future events or otherwise.