ZymoGenetics says first product is meeting expectations
ZymoGenetics' executives said Tuesday that the company's first commercial product, a synthetic protein to control bleeding during surgery, has brought in nearly a million dollars in sales since its launch in mid-January ?an amount they said met their expectations.
However, analysts cautioned that it was too early to tell how much market share ZymoGenetics' product, Recothrom, would ultimately capture from King Pharmaceuticals, which has dominated the market for treatments to control bleeding during surgery for more than a decade.
ZymoGenetics claims that Recothrom avoids complications associated with King's animal-derived product, which is sold with a warning regarding the potential for abnormalities, including severe bleeding.
Although the Recothrom sales numbers were below several analyst's estimates, analysts said that the early figure was largely inconsequential.
Because Recothrom is bought by hospitals, committees at those institutions have to meet in order to decide whether to add the treatment to the selection of products that doctors can choose from to use. The process can take six months or more.
"Everybody wants to read a lot of information into the first data point you get. But it's the first one you get," said Kevin DeGeeter, an analyst at Oppenheimer & Co., who has repeatedly questioned Recothrom's prospects because ZymoGenetics has priced Recothrom at a 20 percent premium to King's product. "My concern ultimately remains the same."
DeGeeter had estimated that Recothrom would bring in $3.3 million during the first quarter. "There's nothing here to suggest this is jumping off the shelves," he said.
Hanzhong Li, an analyst at Stanford Group, expected Recothrom to bring in $2 million but said the figure was largely a "placeholder," noting that ZymoGenetics had long said that most of Recothrom's sales would take place during the second half of this year. He estimates that Recothrom sales will reach $35 million for the year.
Of the 60 hospital committees that have reviewed Recothrom so far, 22 have decided to buy the product exclusively, while another 27 more have added it, in addition to the King product, said ZymoGenetics CEO Bruce Carter during a conference call. The other committees have not yet made decisions. An additional 100 committee meetings will take place this month alone.
Carter said that ZymoGenetics has enlisted the support of more than 2,000 surgeons and 1,000 pharmacists to ask that their institutions add Recothrom to the selection of products that they could use.
"It will take time for our efforts to bear fruit," he said during the conference call, which was held to report the company's first-quarter earnings. "We do expect that work to pay off in the second half of the year."
For the quarter, ZymoGenetics said that its total revenue increased to $13.5 million, compared to $5.2 million during the same period a year earlier, due in part to milestone payments associated with treatments in its pipeline. The company also posted a net loss of $40.9 million, or 60 cents per share, compared with a net loss of $33.3 million, or 49 cents a share, during the first quarter of 2007.
As of March 31, ZymoGenetics had $155 million in cash and short-term investments.
During the conference call, ZymoGenetics CFO James Johnson said that the company was working on a "financing transaction" to raise additional funds this year. He said the company could potentially use its inventory of Recothrom in order to raise money.
DeGeeter of Oppenheimer & Co. said Johnson's remarks probably meant that the company would issue debt, backed in part by its inventory. But he said the company would probably eventually also have to issue more stock to raise funds.
"You have a company that in the first quarter that lost $41 million," he said. "How quickly can they grow sales to get that number down to something more manageable? Because $41 million is not manageable. We'll see."
May 6, 2008 3:26 p.m. View more
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King has dominated the market for more than a decade and is now facing competition from both Recothrom (which was approved by the FDA in January) and Johnson & Johnson's Evithrom (which went on the market last year).
