ZymoGenetics Cash Gets Lean, Recothrom Sales Still Slow
(Update: This story has been updated to add material from ZymoGenetics’ conference call with analysts, starting with the fourth paragraph.)
ZymoGenetics still hasn’t found a groove with its recombinant thrombin drug (Recothrom) for surgical bleeding. The Seattle biotech company said today it sold $1.8 million of the drug in the quarter ending Sept. 30.
Things are beginning to get ugly for this bellwether company of Northwest biotech. ZymoGenetics said it had $81 million in cash left at the end of September, after recording a net loss of $29 million in the quarter. The company points out that it can borrow as much as $100 million from Deerfield Management if it wants to, but paying back debt is never easy for a company running in the red. Even so, the company said it is planning to borrow the first $25 million chunk from Deerfield in the fourth quarter of this year.
The company was dealt a setback last month when its partner, Merck KGaA, halted a clinical trial of its atacicept drug candidate for lupus of the kidneys, which whacked 29 percent off of ZymoGenetics’ stock value in one day. The stock has recovered a bit after news yesterday that another candidate, peg-interferon lambda, was able to kill the hepatitis C virus without causing the flu-like symptoms of standard interferon drugs. This morning, ZymoGenetics was trading at $3.73 a share, down 68 percent so far this year.
There wasn’t a lot of sugarcoating on ZymoGenetics’ conference call, at least on the subject of recombinant thrombin. “Sales are still low, and our goal is, and must be,” to boost them, said CEO Bruce Carter, during his prepared remarks.
Through the end of September, 177 hospital purchasing committees had made decisions on the new ZymoGenetics product for surgical bleeding, with two-thirds deciding to at least add it as an option for their surgeons, and one-third rejecting it, Carter said. The company’s sales staff has been working to explain the risks of the standard cow-derived thrombin, to motivate more hospitals to switch. The company has also lowered the price, starting in early October, so that it won’t cost hospitals any more than the cow-derived standard, he says.
Lowering the price has generated positive feedback, Carter said. The company expects to record $3 million in fourth-quarter sales, bringing the total sales for the drug in its first year to $7 million, he said.
This is way below what most analysts projected for the drug early in the year, and it is putting pressure on ZymoGenetics to find ways to conserve cash. The company did a layoff in early 2008, handed over development rights to atacicept to its partner Merck KGaA, sold land for more than $11 million, and settled a patent suit with Bristol-Myers Squibb for $21 million, said Jim Johnson, the company’s chief financial officer. ZymoGenetics is also in “active partnership discussions” on pegylated interferon lambda, which could bring more cash into the company, Johnson said.
Based on its cash conservation moves, and tapping the loan from Deerfield, ZymoGenetics expects to end the year with $75 million to $80 million, Johnson says. The company has historically tried to keep at least two years’ worth of cash on hand, Carter said, although it “relaxed” that policy early this year when it prepared to introduce recombinant thrombin to the market. The company expects to have cash resources to adequately fund the company now “into 2010,” Johnson said.