ZymoGenetics executives have been tamping down sales expectations for months about the company’s first marketed product, and they weren’t kidding. Recothrom, a genetically engineered treatment for surgical bleeding approved by the FDA in January, eked out $1.4 million in net sales in the second quarter, the company said yesterday. Even Kevin DeGeeter, an analyst with Oppenheimer & Co. in New York who has a “sell” rating on the stock, was expecting more—about $3.5 million in sales.
The Seattle biotech company (NASDAQ: [[ticker:ZGEN]]) insists better days are ahead. Four of the six major bulk-buying organizations that serve hospitals have agreed to purchase discounted Recothrom since mid-July, and talks are ongoing with the other two, said CEO Bruce Carter, in a conference call with analysts. Hospital purchasing committees have taken a long time to meet and decide on surgical bleeding drugs, but when they sat down, about three-fourths agreed to switch to Recothrom or add it to their preferred drug list along with the standard product. And it’s only been since mid-June that ZymoGenetics has been able to offer a more complete array of Recothrom in small and large vials, and a spray kit to put it on a better footing against archrival King Pharmaceuticals’ Thrombin-JMI, Carter says.
“Most people think that with a new drug, it’s like Cialis, where you have a sales person say ‘Please prescribe it,’ the doctor does it, and you’re off to the races,” Carter said yesterday in an interview. “Selling to hospitals is different.” Still, he conceded he’s been surprised that hospital purchasing committees sometimes fail to meet because they lack a quorum, bleeding drugs aren’t always a top priority, and even when they agree to put it on their list, they don’t always start placing orders right away. “It’s a bit frustrating,” he says.
All of this is putting pressure on the company’s sales team. ZymoGenetics had a net loss of $37 million in the quarter, with $117 million of cash and investments left in the bank at the end of June. Even though it can tap a $100 million loan from Deerfield Investments, the company is counting on Recothrom sales to pick up fast. “It’s make-or-break time for these guys,” says DeGeeter.
The opportunity isn’t a huge one by biotech industry standards. The King product is used in an estimated 1 million surgeries a year in the U.S., and generated $267 million in sales in 2007. Carter is not offering any forecast on sales or market share, but here’s his latest read on the demand:
—Since Recothrom was approved in January, 169 hospital purchasing committees have held meetings with an agenda that included discussion of whether to buy it. Decisions have been put off or are pending for 66 of them, while 103 have made decisions, Carter says.
—Of those 103 who made decisions, 30 percent of the hospitals decided to completely switch over to Recothrom, which ZymoGenetics and its partner Bayer (NYSE: [[ticker:BAY]]) markets as a potentially safer alternative to Thrombin-JMI, because as a genetically engineered product that mimics a human clotting protein, it is less likely to carry a blood-borne pathogen like HIV or cause the body to mount an immune reaction to the drug that could cause a bleeding episode.
