ZymoGenetics’ New Boss Sees Parallels to Dark Days at Immunex

1/5/09Follow @xconomy

ZymoGenetics is enduring one of the ugliest stretches in its 28-year history. Now the Seattle-based biotech company is hoping that Doug Williams, an executive who lived through both the darkest days and finest moments at Immunex in the 1990s, will be able to engineer one more turnaround.

Williams, 50, took over as CEO of ZymoGenetics (NASDAQ: ZGEN) last week after Bruce Carter, one of the region’s biotech pioneers, retired. Williams inherits a company that has fallen short of investors’ expectations with its first marketed product, a treatment for surgical bleeding. And that’s not all. One of ZymoGenetics leading candidates in its pipeline, atacicept, failed in a clinical trial for lupus of the kidneys when it raised the risk of infections. The setbacks, combined with a bad overall market, wiped out 76 percent of the company’s value in the year.

When we spoke by phone on a snowy day before Christmas, Williams was keeping the faith, and I didn’t get the sense he was being Pollyannish or trying to pull some sleight of hand. He said he sees a historic parallel with ZymoGenetics of 2009 to the predicament Seattle-based Immunex faced with a hostile takeover bid from Wyeth in 1995. Immunex was then limping along after its first marketed product, GM-CSF (Leukine), was crushed by a competing drug from Amgen. In that vulnerable period, Wyeth brass met Immunex CEO Ed Fritzky at the Four Seasons hotel in downtown Seattle, and handed over an offer of $14.50 a share to buy the company, which was then trading at about $12. The Immunex directors were furious, swearing, wondering whether they could turn down what they saw as a low-ball offer.

That night, Williams, Immunex’s chief technology officer at the time, was lying in bed reading the still-confidential Phase II study report on the company’s drug for rheumatoid arthritis. The results showed etanercept (later named Enbrel) had an unprecedented effect on the disease. That gave Immunex the guts to refuse the offer and remain an independent company.

“ZymoGenetics now feels a little like Immunex did before Enbrel,” Williams says. “We have great scientists, a fabulous pipeline, and the market’s not recognizing it. It took time for things to fall into place, and for Enbrel to show it was real and that it would transform the company.”

The hidden gem at ZymoGenetics, Williams says, is pegylated interferon lambda, or IL-29. This experimental drug is made to treat hepatitis C, and bring all the viral killing power of standard interferon drugs, without the nasty flu-like side effects that force many people to quit taking their meds. Preliminary results released in November, from 18 patients, support the assertion, but the drug still has to pass much bigger and more rigorous studies before investors will start to believe this is really a blockbuster-in-the-making.

While ZymoGenetics trudges forward through the lean times, investors have to bank heavily on Williams’s word. Stephen Graham, the managing partner at Fenwick & West in Seattle, who represented Immunex during its turbulent days, said this about Williams: … Next Page »

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