8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

August 5, 2008

Date of Report

(Date of earliest event reported)

ZYMOGENETICS, INC.

(Exact Name of Registrant as Specified in Charter)

Washington	000-33489	91-1144498
(State or Other Jurisdiction of Incorporation)	(Commission File No.)	(IRS Employer Identification No.)

1201 Eastlake Avenue East, Seattle, Washington 98102-3702

(Address of Principal Executive Offices, including Zip Code)

(206) 442-6600

(Registrant’s Telephone Number, Including Area Code)

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

On August 5, 2008, ZymoGenetics, Inc. (the “Company”) issued a press release announcing its financial results for the second quarter and year ended June 30, 2008. The full text of the press release is set forth in Exhibit 99.1 attached hereto. The press release should be read in conjunction with the note regarding forward-looking statements, which is included in the text of the press release.

The information in this Current Report on Form 8-K, including the exhibits, will not be treated as “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section. This information will not be incorporated by reference into any filing under the Securities Act of 1933, or into another filing under the Exchange Act, unless that filing expressly incorporates this information by reference.

Item 9.01. Financial Statements and Exhibits.

(d) 99.1 Press Release dated August 5, 2008

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	ZYMOGENETICS, INC.
Dated: August 5, 2008	By	/s/ James A. Johnson
		James A. Johnson
		Executive Vice President and Chief Financial Officer

Exhibit Index

99.1 Press Release issued August 5, 2008

EX-99.1

Exhibit 99.1

Contact

Investor and Media Relations

Susan W. Specht, MBA Director, Corporate Communications (206) 442-6592 Michael Fitzpatrick Associate Director, Corporate Communications (206) 442-6702

FOR IMMEDIATE RELEASE

ZymoGenetics Reports Second Quarter 2008 Financial Results

- RECOTHROM^® 20,000-IU vial and spray kit approved by FDA -

- $100 million funding commitment secured from Deerfield Management -

Seattle, August 5, 2008 — ZymoGenetics, Inc. (NASDAQ: ZGEN) today reported its financial results for the second quarter ended June 30, 2008. The company reported a net loss for the quarter of $37.4 million, or $0.54 per share, compared to a net loss of $37.3 million, or $0.55 per share, in the prior year quarter.

“With FDA approval of the RECOTHROM^® 20,000-IU vial and the spray kit co-packaged with this larger vial, we now have a full line of product presentations available for sale. This, together with contracts now in place with several large group purchasing organizations, should help to accelerate market conversion in the second half of the year,” said Bruce L.A. Carter, Ph.D., chief executive officer of ZymoGenetics. “Further, we have increased our financial strength through the $100 million funding commitment from Deerfield Management.”

ZymoGenetics reported significantly higher revenues for the second quarter of 2008 compared to the prior year quarter, primarily due to increased collaboration revenues and product sales of RECOTHROM. Overall, revenues were $12.6 million in the second quarter of 2008, compared to $4.2 million in the prior year quarter. The $8.3 million increase resulted from revenues related to the RECOTHROM collaboration with Bayer Healthcare, milestone payments related to rFactor XIII, continuing sales of the 5,000-IU vials of RECOTHROM (which was approved by the FDA in January 2008), and initial wholesaler stocking of the 20,000-IU vials and spray kits of RECOTHROM (which were approved by the FDA in May 2008). Net sales of RECOTHROM totaled $1.4 million in the second quarter.

Costs of product sales included only the costs of packaging and distributing RECOTHROM that were incurred subsequent to the initial FDA approval in January 2008. All other costs of manufacturing RECOTHROM were incurred prior to the initial FDA approval and were expensed to research and development.

Research and development expenses were $33.1 million in the second quarter of 2008, compared to $32.0 million in the prior year quarter. The increase was primarily due to incremental clinical development costs associated with atacicept. This increase was partially offset by reduced contract manufacturing expenses, as all RECOTHROM manufacturing costs are now recorded as inventory and expensed as costs of product sales when product is sold, and by reduced salary and benefit costs resulting from the company’s February 2008 restructuring.

Selling, general and administrative expenses were $16.0 million in the second quarter of 2008, a $5.8 million increase from the prior year quarter. The increase was largely related to the deployment of the RECOTHROM sales force in the second half of 2007 and marketing costs related to the U.S. launch of RECOTHROM.

Net other expense in the second quarter of 2008 was $753,000 compared to $672,000 of net other income in the second quarter of 2007. The decrease reflects lower investment income, which resulted from lower cash balances to invest and decreased interest rates.

The company ended the quarter with $116.9 million of cash, cash equivalents and short-term investments. In addition to these funds, the company received a $100 million loan commitment in June from Deerfield Management, a leading healthcare investment organization and a significant ZymoGenetics shareholder. The funds generally can be drawn in $25 million installments at any time until January 2010 at ZymoGenetics’ discretion and will be repayable five years from the date of the funding arrangement.

Business Highlights

During the second quarter and to date in the third quarter, ZymoGenetics’ product development and commercialization programs continued to advance, including the following highlights:

RECOTHROM

• Received FDA approval for, and began shipments of, RECOTHROM^® Thrombin, topical (Recombinant) 20,000 international unit (IU) vial and co-packaging of the 20,000-IU vial with ZymoGenetics’ Spray Applicator Kit.

• Executed contracts with four of six key group purchasing organizations, the federal government and other hospital networks.

• Presented data from the Phase 2 spray application clinical trial in burn patients, showing that topical application of RECOTHROM using a pump spray device demonstrated a similar safety profile and rate of antibody formation to that observed in the RECOTHROM Phase 3 clinical trial.

Atacicept

• ZymoGenetics and Merck Serono began patient treatment in the Phase 2/3 general systemic lupus erythematosus clinical trial.

• ZymoGenetics and Merck Serono initiated Phase 2 clinical trials evaluating the safety and efficacy of atacicept in patients with relapsing multiple sclerosis and in patients with optic neuritis.

IL-21

• Completed patient enrollment in a Phase 2 study in combination with Nexavar^® (sorafenib) tablets in renal cell carcinoma patients.

PEG-Interferon lambda

• Completed enrollment of the second patient cohort and began enrollment of the third cohort in a Phase 1b study evaluating safety, tolerability and antiviral activity in chronic genotype-1 hepatitis C patients who have relapsed after prior therapy.

Conference Call and Webcast Information

ZymoGenetics Q2 2008 Financial Results Conference Call will be held on August 5, 2008 at 4:30 p.m. Eastern Time and may be accessed at www.zymogenetics.com or by dialing 877-407-0778 (International: 201-689-8565). Participants should dial in to the call approximately 10 minutes prior to the scheduled start time to register. A live webcast of the presentation can be accessed by going to: www.zymogenetics.com. The webcast will be archived for 60 days.

For replay, please visit www.zymogenetics.com or use the following information:

• U.S. callers: 877-660-6853

• International callers: 201-612-7415

Replay passcode account #: 286

Conference ID #: 290450

About ZymoGenetics

ZymoGenetics discovers and develops novel protein therapeutics that are based on the company’s research and biological insights into key disease pathways. The Company developed and markets RECOTHROM^® Thrombin, topical (Recombinant), which is the first recombinant, plasma-free thrombin. Other product candidates span a wide array of clinical opportunities that include cancer, autoimmune and viral diseases. ZymoGenetics intends to commercialize product candidates through internal development, collaborations with partners, and out-licensing of patents from its extensive patent portfolio. For further information, visit www.zymogenetics.com.

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 associated with our unproven product sales and marketing capabilities, manufacturing and commercialization capabilities, product safety, regulatory oversight, intellectual property claims and litigation and other risks detailed in the company’s public filings with the Securities and Exchange Commission, including the company’s most recent Annual Report on Form 10-K for the year ended December 31, 2007. 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.

Nexavar^® (sorafenib) tablets is a registered trademark of Bayer HealthCare Pharmaceuticals, Inc.

ZYMOGENETICS, INC.

STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2008			2007			2008			2007
Revenues:
Product sales, net	$	1,384		$	—		$	2,370		$	—
Royalties		1,700			1,751			3,234			3,702
Collaborations and licenses		9,498			2,486			20,490			5,718
Total revenues		12,582			4,237			26,094			9,420
Costs and expenses:
Costs of product sales		194			—			300			—
Research and development		33,060			32,043			72,308			61,811
Selling, general and administrative		15,955			10,121			30,582			19,816
Total costs and expenses		49,209			42,164			103,190			81,627
Loss from operations		(36,627	)		(37,927	)		(77,096	)		(72,207	)
Other income (expense), net		(753	)		672			(1,180	)		1,644
Net loss	$	(37,380	)	$	(37,255	)	$	(78,276	)	$	(70,563	)
Basic and diluted net loss per share	$	(0.54	)	$	(0.55	)	$	(1.14	)	$	(1.04	)
Weighted-average number of shares used in computing net loss per share		68,705			68,140			68,613			67,930

BALANCE SHEETS

(in thousands)

	June 30, 2008		December 31, 2007
	(unaudited)
Cash, cash equivalents and short-term investments	$	116,886	$	170,941
Inventory		15,682		—
Other current assets		23,132		11,841
Property and equipment, net		65,366		70,701
Deferred financing costs		7,326		—
Other assets		8,253		9,598
Total assets	$	236,645	$	263,081
Current liabilities	$	69,711	$	63,960
Lease obligations		67,492		67,044
Other non-current liabilities		47,074		17,247
Shareholders’ equity		52,368		114,830
Total liabilities and shareholders’ equity	$	236,645	$	263,081

# # #