ZymoGenetics falls 29 percent after lupus trial is halted

ZymoGenetics shares fell 29 percent Monday after a trial of its drug to treat kidney disease in lupus patients was discontinued by partner Merck Serono because of high risk of infection.

The Seattle biotechnology company said in a securities filing Monday that Merck had halted a midstage trial of atacicept in people with systemic lupus erythematosus. ZymoGenetics shares closed at $3.53, down $1.42.

The ZymoGenetics-developed drug began testing in December in combination with therapies that help suppress the immune system. ZymoGenetics says it was the presence of the other drugs — not atacicept — that caused the infection.

"We think it was the combination ... we haven't seen any signs of infections like this in any of the other trials," said spokeswoman Susan Specht.

This trial is done, but other trials are continuing: Atacicept trials for other ailments such as rheumatoid arthritis and multiple sclerosis are still ongoing, the company said.

ZymoGenetics handed off the development and worldwide rights for atacicept to Merck Serono in early September. It will receive milestone payments and royalties from sales once the product launches.

The trial's discontinuation could delay the drug's commercialization until 2014, as the safety concerns reduce the possibility of an accelerated review by the U.S. Food and Drug Administration, said Oppenheimer & Co. analyst Kevin DeGeeter in a report.

ZymoGenetics shares have suffered in recent months, as the market seemed disappointed with the slowly growing sales of Recothrom, a compound to control surgical bleeding, which in January became the company's first commercial launch.

Monday's announcement further damaged the stock, now a far cry from its 52-week high of $15.23.

"Until we get data, it's really going to weigh on the stock," said Paul Latta, an analyst with McAdams Wright Ragen.

The event is "unfortunate for ZymoGenetics and for lupus patients," said Latta said. "There hasn't been a new treatment for lupus in decades."

Ángel González: 206-515-5644 or agonzalez@seattletimes.com