ZymoGenetics Inc (ZGEN)

Q2 2010 Earnings Call

August 03, 2010 4:30 p.m. ET


Susan Specht – Director of Corporate Communications

Doug Williams – CEO

Jim Johnson – EVP, CFO, Secretary, Treasurer

Lenny Ramos – SVP, CMO

Stephen Zaruby – President


Brian Abrahams – Oppenheimer & Co.

Edward Tenthoff - Piper Jaffray

Jonathan Eckard – Leerink Swann & Company

John Sonnier - William Blair & Company

Nicholas Abbot - Barclays Capital

Chad Messer – Piper Jaffray

Paul Latta – McAdams Wright Ragen



Greetings, and welcome to the ZymoGenetics Second Quarter 2010 Financial Results Conference Call. At this time all participants are in a listen only mode. A brief question-and-answer will follow with formal presentation. (Operator Instructions.). As a reminder this conference is being recorded.

It is now my pleasure to introduce your host, Susan Specht, Director of Corporate Communications for ZymoGenetics. Thank you, Ms. Specht. You may now begin.

Susan Specht

Good afternoon everyone, and welcome to our second quarter 2010 conference call. Before we begin, I would like to remind you that we will be making forward-looking statements as a part of our prepared remarks, and in answering your questions. These statements are subject to many risks and uncertainties that could cause actual outcomes to be much different than we predict. Please look at our SEC filings, including the Form 10-K, for more information.

And now I'll turn the call over to our CEO, Doug Williams.

Doug Williams

Thanks, Susan. And good afternoon to everyone. Thank you for joining us today for our second quarter earnings call. We're very pleased with our performance during the quarter with continuing revenue growth in RECOTHROM, progress moving our development candidates forward towards important data events, and ongoing benefits in our cost structure due to last year's restructuring.

Besides Susan, I'm joined by Stephen Zaruby, our President; Lenny Ramos, our CMO; and Jim Johnson, our CFO. I'll begin by updating you on progress on our clinical development programs then I'll review progress with our commercial product RECOTHROM, which provides a nice segue to Jim, to discuss the Company's second quarter financial performance.

I'm pleased to report impressive progress in the development program for Interferon Lambda. As you know, we and our partner Bristol-Myers Squibb see this molecule as having the potential to become the Interferon of choice for the treatment of HCV. The Phase IIa study is progressing according to plan, and we continue to observe safety and antiviral activity consistent with our expectations. We’ve submitted a total of four abstracts to the AASLD meetings on Lambda. All four abstracts have now been accepted and we will present four-week and 12-week viral response data in genotype I, IV and genotype II, III patients, along with safety and tolerability.

We also plan to present our early data IL28b genotype and examine the relationship to antiviral response, including viral kinetic modeling. Despite the relative small sample size of the Phase IIa study, these data will provide important insights into the market potential for this molecule.

Moving now to the ongoing Phase IIb study, we're enrolling patients very rapidly in this study. We began enrollment in this 600 patient, blinded randomized Phase IIb study in late May, with the expectation to complete enrollment by the end of the year. We're accruing well ahead of expectations and we now anticipate completing enrollment in this quarter.

Top line data on the primary endpoint of the study, 12-week viral response, or cEVR, will be available to us in the first quarter of 2011. As a reminder, this study is a head-to-head comparison of Pegasys plus ribavirin at the labeled dose versus three doses of lambda plus ribavirin. Each cohort will be composed of 120 genotype I, IV treatment naive patients and 30 treatment naive genotype type II, III patients. IL28b polymorphism data is being collected, and patients will be treated for the standard 48 or 24 weeks depending upon viral genotype.

The very rapid enrollment to this study is a testament to both the talents of our clinical team and the enthusiasm of the HCV treating physicians for this exciting new Interferon. Another important development is our decision to initiate a Phase II study of Interferon lambda in hepatitis B virus in the fourth quarter. Since Interferons can potentially lead to a cure in hepatitis B patients, and our partner BMS is a recognize leader in this area, we see this as an attractive additional market to pursue. To remind you, there are 350 million people infected with hepatitis B worldwide.

Interferons are dosed for 48 weeks, and tolerability of Interferon alpha is just as much of a problem in HBV as HCV, making lambda an attractive potential alternative. Furthermore, by conducting a trial in HBV, where ribavirin isn't routinely used, we can generate direct comparison data between lambda and alpha without the inherent tolerability issues of ribavirin. The decision to proceed in this indication is important to ZymoGenetics because it opens the way to additional milestones beyond those for HCV, as well as expending the revenue opportunity for this drug by moving into a second potentially large global market.

We've also made substantial progress in advancing our IL21 program in frontline metastatic melanoma. We hold the worldwide rights to this asset and have a very strong intellectual property position. Our collaborators from the National Cancer Institute in Canada made an oral presentation at the recent ASCO meetings on our Phase IIa data. We reported impressive response rate, disease control and progression-free survival results from the study, which looked better than prior study results with DTIC or ipilimumab. The results showed more than a doubling of PFS compared to matched historical controls at NCIC in both BRAF positive and negative patients.

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