ZymoGenetics Announces Start of TACI-Ig Clinical Study in RA; 2nd Phase 1b Study Initiated in Patients w/Autoimmune Disease

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ZymoGenetics Announces Start of TACI-Ig Clinical Study in Rheumatoid

Arthritis; Second Phase 1b Study Initiated in Patients with Autoimmune

Disease

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SEATTLE--Aug. 30, 2004--ZymoGenetics (Nasdaq:ZGEN) announced the start

of a Phase 1b clinical study of TACI-Ig, in collaboration with Serono

S.A., for patients with rheumatoid arthritis (RA). The study is designed

to evaluate the safety and pharmacokinetics of escalating doses of

TACI-Ig, while also monitoring its biological effects. Previously,

ZymoGenetics and Serono started a Phase 1b study with TACI-Ig in lupus

patients and also completed a Phase 1 study of TACI-Ig in healthy

volunteers. The companies are committed to investigating other

indications for TACI-Ig, such as B-cell disorders.

" The role of B-cells in RA is becoming more well established, making RA

a promising indication for TACI-Ig, " said Bruce L. A. , Ph.D.,

President and CEO of ZymoGenetics. " We see a number of interesting

possibilities for TACI-Ig and we're leveraging our investment in the

program by expanding into other areas besides lupus. RA represents a

large potential market with well-defined clinical trial parameters for

approval, and yet there are many patients who have not been helped by

recent advances in therapeutic approaches. "

The Phase 1b study in RA patients will assess the systemic and local

tolerability of TACI-Ig in a single and repeat dose escalation

placebo-controlled double-blind study. The secondary objective is to

characterize the pharmacokinetics and pharmacodynamics of TACI-Ig and to

monitor the effects on biological markers of disease activity. The study

will be conducted by Serono in a total of 60 patients in Europe and

Australia.

About TACI-Ig

TACI-Ig is a soluble fusion protein that links the extracellular portion

of the TACI receptor to the Fc portion of human immunoglobulin (Ig).

TACI binds to BLyS and APRIL, TNF family cytokines that promote B-cell

survival and the production of harmful autoantibodies, which cause

certain autoimmune diseases such as SLE. Preclinical data indicate that

levels of BLyS and APRIL, as well as complexes containing both APRIL and

BLyS, are elevated in RA. TACI-Ig has been shown to affect several

stages of B-cell development and may inhibit the survival of cells

responsible for making antibodies. In addition, because TACI-Ig blocks

BLyS and APRIL, it has a different mechanism of action from anti-TNF agents.

About RA

Rheumatoid arthritis affects over two million Americans and more than

five million people in Europe and Japan. It is a disabling autoimmune

disease in which the joint lining and other organs become inflamed.

Despite new therapies developed in recent years, an estimated 20% to 40%

of RA patients do not respond to the current anti-TNF agents, leaving a

large number of patients who do not respond to first line therapies

seeking decreased disease progression and improved quality of life.

Other agents with different mechanisms of action are needed to provide

relief to these patients. The current market size is estimated to be $3

billion and is projected to grow to over $8 billion by 2010.

ZymoGenetics and Serono Collaboration

ZymoGenetics and Serono entered into an exclusive co-development and

commercialization agreement in 2001 focused on the development of

TACI-Ig. The two companies share research and development expenses

worldwide, except for Japan, where Serono covers all expenses.

ZymoGenetics intends to co-promote products with Serono in North

America. The two companies will share commercialization expenses and

profits equally in North America. ZymoGenetics receives a royalty in the

rest of the world. Serono has exclusive rights to market TACI-Ig in the

remainder of the world, for which ZymoGenetics is entitled to receive

royalty payments. Serono is responsible for manufacturing the product

for both clinical trials and commercial sale.

About ZymoGenetics

ZymoGenetics is a biopharmaceutical company focused on the discovery,

development and commercialization of therapeutic proteins for the

prevention or treatment of human diseases. The Company is developing a

diverse pipeline of potential proprietary product candidates that are

moving into and through clinical development. These span a wide array of

clinical opportunities that include bleeding, autoimmune diseases and

cancer. ZymoGenetics intends to commercialize these product candidates

through internal development, collaborations with partners and

out-licensing of patents from its extensive patent portfolio. For

further information, visit www.zymogenetics.com.

This press release contains " forward-looking statements " within the

meaning of the Private Securities Litigation Reform Act of 1995. These

forward-looking statements are based on the current intent and

expectations of the management of ZymoGenetics. These statements are not

guarantees of future performance and involve risks and uncertainties

that are difficult to predict. ZymoGenetics' actual results and the

timing and outcome of events may differ materially from those expressed

in or implied by the forward-looking statements because of risks

associated with our unproven discovery strategy, preclinical and

clinical development, regulatory oversight, intellectual property claims

and litigation and other risks detailed in ZymoGenetics' public filings

with the Securities and Exchange Commission, including ZymoGenetics'

Annual Report on Form 10-K for the year ended December 31, 2003. Except

as required by law, ZymoGenetics undertakes no obligation to update any

forward-looking or other statements in this press release, whether as a

result of new information, future events or otherwise.