ZGEN's HCV Candidate Progresses

Recently, ZymoGenetics Inc. (ZGEN) announced the completion of enrollment in the second part of a mid-stage study (EMERGE) involving its candidate PEG-Interferon lambda (formerly known as IL-29) and ribavirin in treatment-naive patients suffering from chronic hepatitis C virus (HCV) infection.

As a reminder, on January 12, 2009, ZymoGenetics and Bristol-Myers Squibb Co. (BMY - Analyst Report) announced a global collaboration for PEG-Interferon lambda. 

PEG-Interferon lambda is a novel type III interferon being developed for treating HCV patients. The native human protein Interferon lambda is generated by the immune system in response to viral infection.

The second portion of the mid-stage study will evaluate the safety and antiviral efficacy of PEG-Interferon lambda at three doses - 120 mcg, 180 mcg and 240 mcg. The study is designed to evaluate the safety and antiviral efficacy of the three specified doses of PEG-Interferon lambda compared to Roche's (RHHBY) Pegasys.

The company enrolled 570 patients with genotypes 1 - 4 chronic HCV infection for this portion of the study. While the genotype 1 and 4 patients will be administered with weekly subcutaneous doses of PEG-Interferon lambda or Pegasys for 48 weeks, the rest will be administered the same for 24 weeks.

However, all the 570 patients will receive ribavirin on a daily basis. The primary goal of the international, randomized multi-center study is the proportion of patients who achieve undetectable levels of the virus after 12 weeks of treatment.

PEG-Interferon lambda Targets Lucrative HCV market

The HCV market is lucrative with a huge unmet need. Chronic HCV infection is a leading cause of cirrhosis, liver failure and hepatocellular carcinoma across the globe. It is estimated that HCV is associated with up to 20,000 deaths annually in the US. Furthermore, HCV is the main reason behind liver transplantation. HCV affects approximately 4 million people in the US and 11 million people globally.

Our Recommendation

Currently, we have a Zacks Rank of #3 (short-term Hold recommendation) on the shares. However, the bright long-term outlook arising from its marketed product Recothrom coupled with its promising pipeline lead us to have an Outperform rating on the stock. Our long-term Outperform rating indicates that the stock is expected to outshine the US equity market over the next 6+ months.

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