ZymoGenetics Reaches End of Road in Seattle, Faces Uncertain Future, Potential Job Cuts

Xconomy Seattle — 

[Updated: 5:12 pm Pacific, 9/7/10] ZymoGenetics, the company that once aspired to replace Immunex as the anchor company of Seattle’s biotech cluster, has reached the end of its road as an independent company. Many of its 320 employees could potentially lose their jobs as part of a takeover agreement reached with Bristol-Myers Squibb. The companies aren’t saying how deep the cuts may go.

[Update with ZymoGenetics CEO comment] While a ZymoGenetics spokeswoman told Xconomy initially that a lot of local ZymoGenetics employees are likely to lose their jobs through the acquisition, CEO Doug Williams stressed in a follow-up phone call that “no decisions have been made.”  A Bristol Myers spokeswoman, Jennifer Fron Mauer, also emphasized via e-mail that “no decisions have been made yet about people or the site.”

The two companies have set up a transition team that will sort through the hard decisions over the next couple months, Williams says. He cautioned against jumping to a conclusion that this takeover will end up costing hundreds of jobs, like Eli Lilly’s 2007 takeover of Bothell, WA-based Icos. “That was a different company, different circumstances,” Williams says.

While Bristol-Myers has said the key to its takeover is ZymoGenetics’ most valuable asset—pegylated interferon lambda—it has also said it plans to continue selling recombinant thrombin (Recothrom) and has shown interest in other drugs in the ZymoGenetics pipeline, Williams says. He refused to speculate on how many people might be retained by Bristol in the end. But ZymoGenetics’ finance chief, Jim Johnson, noted that Bristol’s recent pattern—based on acquisitions of Adnexus Therapeutics and Medarex—suggests it also may want to retain many people with expertise in biotech drug R&D like those employed by ZymoGenetics.

“I’m going to advocate on behalf of the many talented workers we have here, I think Bristol sees a lot of value in the people that are here,” Williams says.

Still, many ZymoGenetics employees were “surprised” by news of the sale and asked a lot of questions of senior management during an afternoon meeting to discuss the transaction, according to ZymoGenetics spokeswoman Susan Specht.

Officially, this deal isn’t yet done until shareholders who represent 56 percent of ZymoGenetics’ shares agree to hand over their stock to Bristol at its settled-on price of $9.75. But that is likely to happen without a serious fight, given that Bristol offered 84 percent more than Zymo’s $5.30-per-share closing price. Plus, the two biggest shareholders in ZymoGenetics—Denmark-based Novo Nordisk and the private equity firm Warburg Pincus—have agreed to hand over their shares to Bristol, which represents a combined 37 percent ownership stake in ZymoGenetics.

Bristol first approached ZymoGenetics’ board in May, and the board agreed to consider its overture, Specht says. The ZymoGenetics board was able to negotiate for a higher price, and—with the consultation of its finance and legal advisors—it chose to take the offer on the table, Specht says. In the end, it was really about getting some returns for shareholders, she says.

“They felt the share price was stalled, and it was really best to take the offer,” Specht says. “The share price hasn’t reflected our real value for some time.”

Fron Mauer, the Bristol-Myers spokeswoman, said no decisions have been made about what to do with ZymoGenetics’ people and facilities in Seattle, and those decisions won’t happen until after the deal is closed in the coming months. Specht noted that while many of ZymoGenetics’ business functions—finance, HR, legal, communications—could get cut as part of the deal, there is a chance … Next Page »

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3 responses to “ZymoGenetics Reaches End of Road in Seattle, Faces Uncertain Future, Potential Job Cuts”

  1. I’m well aware most successful biotechs get purchased before they have a chance to grow, but this is a terrible deal. Bristol is paying a tiny 11% premium over Zymo’s 52-week high. RecoThrom is cash-flow positive at the end of this year. Assuming interferon-lambda is successful, which is a safe assumption otherwise partner Bristol wouldn’t be doing this deal, Zymo’s Board is accepting $200 million LESS in this buyout than they likely would have earned anyway in established milestone payments from the original deal. Not to mention 50% of NA profit and 15-28% ex-NA royalties or, for that matter, the rest of the pipeline and RecoThrom cash stream.

    I know, risk-adjusted NPV… blah, blah, blah.

    Fact of the matter is, Zymo’s Board sold shareholders and employees out. This is a terrible deal. With 66% of the needed shares already locked up, however, Bristol has it in the bag.

    A terrible ending for one of Seattle’s best biotechs.