ZymoGenetics Initiates PEG-Interferon lambda Phase 2b Clinical Trial in Hepatitis C in Collaboration with Bristol-Myers Squibb

ZymoGenetics, Inc. (NASDAQ:ZGEN) today announced the initiation of the second part of a Phase 2 clinical trial with PEG-Interferon lambda (IL-29) and ribavirin in treatment-naïve patients with chronic hepatitis C virus (HCV) infection. ZymoGenetics is developing the investigational compound PEG-Interferon lambda in collaboration with Bristol-Myers Squibb Company (NYSE:BMY).

"We’ve moved forward into part B of our Phase 2 study of PEG-Interferon lambda in hepatitis C,” said Eleanor L. Ramos, M.D., Senior Vice President and Chief Medical Officer of ZymoGenetics. "In part B, we expect to generate a substantial body of data to inform the design of Phase 3 studies, which will assess the potential role of PEG-Interferon lambda in addressing the unmet medical need for a safer, more effective treatment for hepatitis C.”

The Phase 2 EMERGE study is an international, randomized multi-center clinical trial. The Phase 2a open label portion continues and is exploring a range of four doses. Based on antiviral effects after four weeks of treatment and accumulated safety data, doses were selected for the second part of the study (Phase 2b). A status report with top-line interim results from the Phase 2a clinical trial was disclosed by ZymoGenetics on May 4, 2010. The companies selected the three highest doses of PEG-Interferon lambda for inclusion in Phase 2b, namely 120 mcg, 180 mcg and 240 mcg.

The Phase 2b study will enroll approximately 600 patients with genotypes 1 – 4 chronic HCV infection. The study will assess the safety and antiviral efficacy of the three specified doses of PEG-Interferon lambda compared to PEGASYS^®. Each cohort of approximately 150 patients will include at least 100 genotype 1 patients. Weekly subcutaneous doses of PEG-Interferon lambda or PEGASYS will be administered for 48 weeks in genotype 1 or 4 patients and for 24 weeks in genotype 2 or 3 patients. All patients will also receive daily ribavirin. The primary endpoint of the trial is the proportion of patients who achieve undetectable levels of HCV RNA after 12 weeks of therapy (complete Early Virological Response). Sustained virological response (SVR), defined as undetectable levels of HCV RNA 24 weeks after treatment, will also be assessed.

PEG-Interferon lambda

PEG-Interferon lambda (IL-29) is a novel interferon in development for hepatitis C. PEG-Interferon lambda is a member of the Type III lambda interferon family, which includes IL-28A, IL-28B and IL-29 (also known as interferon lambda 2, 3, and 1, respectively). Type III interferons signal through a different receptor than type I interferons, such as interferon alpha. The native human interferon lambda proteins are generated by the immune system in response to viral infection. A Phase 1b clinical trial was conducted in patients with relapsed HCV, in which PEG-Interferon lambda was administered over four weeks in combination with ribavirin.

About ZymoGenetics

ZymoGenetics is a biopharmaceutical company focused on the development and commercialization of therapeutic proteins for the treatment of human diseases. The company has developed and is marketing RECOTHROM® Thrombin, topical (Recombinant) in the United States. ZymoGenetics has two product candidates in Phase 2 clinical development: PEG-Interferon lambda, being studied in collaboration with Bristol-Myers Squibb for treatment of hepatitis C virus (HCV) infection, and IL-21, being tested by ZymoGenetics as a potential treatment for metastatic melanoma. In addition, ZymoGenetics has an anti-IL-31 monoclonal antibody in preclinical development, which it expects to test initially as a treatment for atopic dermatitis. Several of the product candidates previously identified through ZymoGenetics’ discovery research efforts have been licensed to and are being developed by third parties, including Merck Serono and Novo Nordisk. ZymoGenetics is eligible to receive milestone payments and royalties related to these assets. For further information, visit www.zymogenetics.com.

ZymoGenetics Forward-Looking Statements

This press release contains forward-looking statements, including statements related to conducting and analyzing the results of clinical trials. Words such as "believes”, "should” and "could” and similar expressions are intended to identify forward-looking statements. These forward-looking statements are based upon ZymoGenetics’ current expectations and involve risks and uncertainties. Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitation, risks related to ZymoGenetics’ ability to design and conduct clinical trials, the possibility that clinical trial results may vary between different arms of a clinical trial and the difficulty of using prior clinical trial results to predict future outcomes, as well as those other risks detailed in ZymoGenetics’ filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2009 and periodic reports on Form 10-Q and current reports on Form 8-K. Do not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. All forward-looking statements are qualified in their entirety by this cautionary statement, and, except where required by law, ZymoGenetics undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this press release.

PEGASYS^® (Peginterferon alfa-2a) is a registered trademark of Hoffman La Roche