ZymoGenetics Leads With Its Chin

It says a lot about ZymoGenetics' (Nasdaq: ZGEN  ) quarter that management decided to open the conference call talking about its hepatitis C drug still in trials, rather than the sales results of its blood-clotting agent, Recothrom.

I can see why management might be excited about the hepatitis drug. The phase 1b trial testing of its "IL-29" in hepatitis C patients just came out on Monday. And the stock shot up 17% as a result. But the decision to lead with that probably had more to do with the drug likely joining a market with Schering-Plough's (NYSE: SGP  ) Pegintron, which brought in $235 million last quarter. Compare that to Recothrom, which brought in just $1.8 million.

$1.8 million? Ouch! That's no way to support a drug pipeline.

Unfortunately, this thrombin is competing against entrenched leader King Pharmaceuticals (NYSE: KG  ) -- which sold some $65 million worth of its own version in its second quarter -- and Omrix Biopharmaceuticals' (Nasdaq: OMRI  ) Evithrom, which is sold by powerhouse Johnson & Johnson (NYSE: JNJ  ) . Recothrom has some definite safety advantages over King's product, but the decision-makers at the hospitals just don't seem to be aware of the added safety.

In order to get hospitals to use its Recothrom, ZymoGenetics is dropping its price. The plan seems to be to switch the hospitals to Recothrom with prices competitive with King and Omrix, while emphasizing the safety. Management said that early results seem positive, and they are projecting $3 million in fourth-quarter sales. They'll begin to raise prices once the hospitals are using the product. Good luck with that.

While I think we can write off Recothrom as being the saving grace of the company -- at least for now -- ZymoGenetics shouldn't be left for dead. This quarter it'll get a milestone payment from Bayer, its international partner for Recothrom, and some cash from Bristol-Myers Squibb (NYSE: BMY  ) for settling a patent dispute. That, along with a licensing deal it's hoping to set up, should get it into 2010. Hopefully by then, ZymoGenetics will be close to receiving royalties from its earlier licensed products, like Factor 13 from Novo Nordisk (NYSE: NVO  ) , and it'll be happy to start its conference call with a report of the quarterly finances.

Omrix is a Motley Fool Rule Breakers pick. The newsletter is always on the hunt for hot drug stocks and other cutting-edge picks. Click here to see all of our latest discoveries with a free 30-day trial subscription. 

Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Novo Nordisk is a Global Gains selection. Johnson & Johnson is an Income Investor pick. The Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 770128, ~/Articles/ArticleHandler.aspx, 10/23/2014 5:45:27 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement