News Release

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

October 27, 2009

PEG-Interferon lambda is a Targeted Type 3 interferon in development for Hepatitis C

SEATTLE--(BUSINESS WIRE)--Oct. 27, 2009-- ZymoGenetics, Inc. (NASDAQ: ZGEN) today announced the initiation of a Phase 2 clinical trial of PEG-Interferon lambda (IL-29) and ribavirin in treatment-naïve patients with chronic hepatitis C virus (HCV) infection (the “EMERGE” study). The first patient has been dosed in the study, triggering a $70 million milestone payment to ZymoGenetics from Bristol-Myers Squibb Company (NYSE:BMY), pursuant to the terms of a previously announced collaboration agreement.

“In the Phase 1b clinical trial, PEG-Interferon lambda demonstrated robust antiviral activity and was well tolerated in patients with genotype 1 hepatitis C,” said Eleanor L. Ramos, M.D., Senior Vice President and Chief Medical Officer of ZymoGenetics. “Because PEG-Interferon lambda binds to a unique receptor, it has the potential to treat HCV without many of the treatment-limiting side effects associated with current interferons.”

The EMERGE study is an international, randomized multi-center clinical trial that will enroll approximately 50 patients in the first, open label portion that will explore a wide range of doses to be tested in the second part of the study. The second part of the study is designed to enroll approximately 500 patients. Weekly subcutaneous doses of PEG-Interferon lambda will be administered for up to 48 weeks. The study will assess the safety and antiviral efficacy of PEG-Interferon lambda compared to PEGASYS®. 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 (cEVR). Sustained virological response (SVR) defined as undetectable levels of HCV 24 weeks after treatment will also be assessed.

PEG-Interferon lambda

PEG-Interferon lambda (IL-29) is a novel type 3 interferon in development for hepatitis C. The native human protein Interferon lambda is generated by the immune system in response to viral infection. In a Phase 1b clinical trial in patients with relapsed HCV, administration of PEG-Interferon lambda over four weeks in combination with ribavirin was shown to be well-tolerated and resulted in significant antiviral activity.

About ZymoGenetics

ZymoGenetics is focused on the creation of novel protein drugs to improve patient care and address unmet medical needs. The company’s strategy is to discover, develop and commercialize its products independently, in collaboration with partner companies or through out-licensing. ZymoGenetics developed and markets RECOTHROM® Thrombin, topical (Recombinant), a synthetic version of a human blood-clotting enzyme used to stop bleeding during surgery. The company is developing a proprietary portfolio of immune-based product candidates. PEG-Interferon lambda is a novel type-3 interferon in clinical development for the treatment of chronic hepatitis C infection. Interleukin-21 is a novel cytokine in clinical development for the treatment of metastatic melanoma and renal cell carcinoma. Several other proprietary product candidates are in preclinical development. In addition, ZymoGenetics has licensed rights to multiple clinical and preclinical drug candidates being developed by other companies. For further information, visit www.zymogenetics.com.

ZymoGenetics Forward-Looking Statements

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 and uncertainties associated with clinical development. For example, the results of preliminary studies do not predict clinical success, and larger and later-stage clinical trials may not produce the same results as earlier-stage trials. In addition, the forward-looking statements in this press release are subject to the other risks detailed in the company's public filings with the Securities and Exchange Commission, including the company's Annual Report on Form 10-K for the year ended December 31, 2008 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2009. 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.

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

Source: ZymoGenetics, Inc.

Media and Investors
ZymoGenetics, Inc.
Susan W. Specht, 206-442-6592
spechts@zymogenetics.com

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"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding ZymoGenetics Inc.'s business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report or Form 10-K for the most recently ended fiscal year.