ZymoGenetics Axes 52 Jobs, Quits Discovery of Immunology Drugs, to Conserve Cash

12/3/09Follow @xconomy

Bad news today for employees of ZymoGenetics (NASDAQ: ZGEN). The Seattle-based biotech company said today in a regulatory filing it is cutting 52 jobs, or about 15 percent of its workforce, and scrapping its group that seeks to discover immunology drugs, so that it can put its resources into its marketed drug for surgical bleeding and other drug candidates moving along in development.

The company says it will retain drug discovery capabilities to continue supporting its existing product candidates, and that the cuts will affect new drug discovery. It expects the move will save the company $8 million to $10 million a year, starting in 2010. ZymoGenetics now has about 300 employees left, including about 160 in research and development.

This is the second mass layoff for ZymoGenetics this year, after it cut 161 jobs in April and got out of the cancer research business. The company will continue to invest in the sales and marketing of its lone marketed product, recombinant thrombin (Recothrom) for surgical bleeding. That drug got off to a slow start last year with just $8.8 million in first-year sales, and it is forecasted to generate $28 million to $30 million this year. ZymoGenetics also hopes to bring in more money by forming partnerships with larger drugmakers, like the deal it struck in January that is potentially worth $1.1 billion with Bristol-Myers Squibb, to co-develop pegylated interferon lambda against hepatitis C.

“We’re a different company now than we were a year ago,” says ZymoGenetics spokeswoman Susan Specht in an e-mail. “We’ve changed our business model from discovering many candidates and licensing them at an early stage to focusing on fewer candidates, taking them into development, and partnering them at later stages in deals where we keep an ownership stake with good economics upfront. We now have a narrow and focused pipeline. Human Genome Sciences and Onyx Pharmaceuticals are recent examples of companies that have done this and gone on to achieve success.

“To become a successful company, we must focus our resources and efforts on development candidates with the greatest potential. Our decisions have us focusing our cash on programs that have the greatest potential for value creation in the next 3-4 years and beyond,” Specht says.

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  • Jay

    It’s sad to see the company that Earl Davie worked so hard to create be destroyed in such a short time under the leadership of Doug Williams. Even if Zymo survives it will no longer be the great research company that so many in the Seattle area knew and loved.

  • http://www.northcoastbio.com Johnny T. Stine

    I agree – it is sad – but it’s not the fault of Doug Williams. Virtually everyone in our biotech community began turning away from R&D back in 2000/2001. Zymo was apparently the last to even have an R&D program. I know this because I was trying to do an antibody deal with Zymo the summer of ’08. During the negotiations, the BD guy said that they wanted the antibodies for research purposes only. I laughed in his face because I thought it was a joke. He was serious. So I said “you mean you want it for target validation…?”…..”nope, just research”. I said – “no biotech does research anymore…”. Well, much to my surprise, these guys were doing just that. And frankly it’s amazing that they were able to do so for this long.
    Not Doug’s fault – he just gets to be the guy that takes the blame for doing what EVERYONE else was doing 5-7 years ago – cutting R&D so that they could focus resources on late stage products. It actually should’ve happened a few years ago…..and that would make it NOT on his watch – but on Carter’s.

    Cut him some slack – it’s not easy doing this. He’s at the mercy now big time of his investors and crappy markets with the latter making the former even more vicious.

    And you’re right – if it does survive, it most likely will never be the great research company it once was. That’s because it’s not in the current game plan for biotech in this country or as a whole. With very few VC’s funding early stage ideas and all big pharma abolishing R&D in favor of buying companies to get their pipelines – there’s already an enormous vacuum being created by this – and that’s actually just fine with me. I’m now producing drugs for people who don’t want to run a $20M/year R&D division.

    There’s room for more companies like North Coast. Come on in – the waters fine…..

    Surf’s up on the North Coast….

  • http://www.xconomy.com/author/ltimmerman/ Luke Timmerman

    Johnny—great point about the overall decline of basic research at biotech. I would add that while it may be convenient to make Doug into the bad guy for doing this, since both big rounds of cuts happened under his watch as CEO, Bruce Carter is still the chairman of the board. A decision like this surely is something the board would discuss.

  • http://www.northcoastbio.com Johnny T. Stine

    Thank you Luke. This decline can be reversed, but it’s going to be done by a bunch of fearless, creative people – and I’ve found that there aren’t many out there that are both. I’ve got three pharma deals and a research reagent deal looming that will allow me to hire up to 24 people. I have another deal that was due to be signed but they want to send the jobs to India…..? I’m reluctant to sign that one – I’d rather create jobs here.

    Less fear and more creativity = jobs. I’m almost there. By signing these deals, the other deals will snowball and the accompanying growth in my infrastructure will lead to even more jobs. There’s a ton of work out there and nobody’s doing it. I’m on the cusp of pushing back a ton of dogma – perhaps that will make the creative people less afraid. If I can do it – anyone can.

    India??? WTF?
    -JTS

  • CMCguy

    Johnny T Shine interesting comments and seen decline in Biotech (and more so large Pharma) R vs D but believed was because that was the type of funding available so simple matter of survival. Many companies reach this decision point on where to focus and no doubt many would like to continue research yet the cost of promoting development generates difficult restructure or collapse entirely option.

    As I see it does not appear as much “fearless” investors as once were who will tolerate the long period, expensive burn and high failure rate of transitioning the ideas of “creative” people in Biotech/Pharma areas. Most such creative people lack the resources and business awareness to take the first steps and therefore need to be combined with those that can balance out and drive initial stages. Perhaps you are an exception and if so the good luck to you.

  • http://www.northcoastbio.com johnny T. Stine

    CMCguy:

    I’m the exception for three reasons:
    1) I’ve reduced the risk by reducing the time, burn, and odds of failure (minimally, mabs to known validated targets) – to the degree that I don’t need venture money – just need multiple partners (whose fear in discovery is reduced because the atypical low costs).
    2) Accelerator – a great experience that will show you how things are done. No book or degree could’ve ever taught me what I know today. I thank the Accelerator for that.
    3) Behavior of both pharma (pull back & shitcan research & discovery) and the fear-laden investors – both emotion-driven and market driven. Because of both of these behaviors over the last eight years – they’ve created an enormous amount of space for which I can play. Take a look at how they are filling their pipelines today – buy a company to take the drug – from $300M-$500M or more.

    By the way – in the older model – we didn’t have to worry about loosing R&D or the decision point – R&D was something we all did while we made drugs. Icos was a great example. In my early years, we were more excited about getting a paper accepted in J.Exp.Med, or Blood than we were finding a drug. Well – that changed – our little research haven became drug lead generation and product development in about ’99/2000. Icos continued to try and find new drugs even after the bubble burst of 2001- and even after IC351/Cialis, but new companies just prior and after that were under new rules. Cell Tech shut their doors here locally to do what the entire industry did – focus on late/mid stage and eliminate research. They claimed they would buy drugs when they needed them later. But the problem with that is that simultaneously the VC’s were no longer funding things that low – they were happy funding more CD20 antibody companies or other EGFR antibody companies because they were safe bets despite being 7th or 8th to market – but not new discoveries or drug targets.

    None of what I’m doing is new – it’s just going back to the early days of our industry – labs in leaky warehouses – they didn’t have EBay back then so I have an advantage. But I’m convinced that we’ve lost our way and this is how to get it done right. Deploy a technology like mine as broadly as you can and as fast as you can – and then everyone benefits. The VC’s will soon see companies founded on antibodies that I’ve made to kill certain tumors or to known, validated targets (this will make them happy). Big pharma can get drugs from me for the cost of a couple of FTE’s and small ‘stones and royalties. Jobs will be created in the product development sector and within my company as a result. It will snow ball as more and more work is coming in.

    Keep the faith – 2010 will be different……I can assure you.