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ZymoGenetics Sells Inflammatory Drug to Old Parent, Novo Nordisk, for $24M Upfront

Seattle-based ZymoGenetics has struck a deal with its former parent from Denmark, Novo Nordisk, that will give Novo a jumpstart on its quest to become a bigger player in autoimmune diseases.

Novo said it agreed to pay $24 million in upfront cash, and milestone payments worth as much as $157.5 million over time to ZymoGenetics (NASDAQ: ZGEN). In exchange, Novo gets the worldwide rights to an antibody drug that ZymoGenetics has developed to block IL-21, a protein that’s found in excessive amounts in patients with autoimmune and inflammatory diseases. The drug candidate is still in animal testing.

The deal looks to fit nicely with the current strategies of both companies. Novo Nordisk, the world’s largest maker of insulin for diabetes patients, has invested millions in a Seattle research center that’s intended to help it diversify into autoimmune and inflammatory diseases. ZymoGenetics, meanwhile, has been cutting costs. Last week it decided to cut 15 percent of its workforce and quit discovering new immunology drugs, instead focusing on its existing pipeline of products in clinical trials.

“While the IL-21 monoclonal antibody is an exciting molecule, we believe for our company that other development programs have a better return on investment profile,” said ZymoGenetics CEO Doug Williams, in a statement. “We believe that Novo Nordisk will be able to develop and create value for this asset.”

The companies have a long history of working together. ZymoGenetics, founded in 1981, was acquired by Novo Nordisk in 1988 and then spent the next 12 years as its U.S. research wing. ZymoGenetics spun off as an independent company in 2000 and went public two years later, but Novo Nordisk still owns a 31.5 percent ownership stake in ZymoGenetics.

If Novo turns this particular drug candidate into something valuable, ZymoGenetics has retained the right to co-promote it in the U.S., as long as it foots part of the bill for Phase III clinical trials.

ZymoGenetics still retains the rights to another product called IL-21, which it has developed as a cancer treatment. That drug has been tested in clinical trials of kidney cancer and melanoma.