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

January 12, 2009

Date of Report (Date of earliest event reported)

ZYMOGENETICS, INC.

(Exact name of registrant as specified in its charter)

Washington	000-33489	91-1144498
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

1201 Eastlake Avenue East Seattle, Washington	98102-3702
(Address of principal executive offices)	(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.):

¨ 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 1.01 Entry into a Material Definitive Agreement.

On January 12, 2009, ZymoGenetics, Inc. and its wholly-owned subsidiary, ZymoGenetics, LLC (together “ZymoGenetics”) entered into an exclusive worldwide collaboration with Bristol-Myers Squibb Company (“BMS”) relating to the type 3 interferon family, including PEG-Interferon lambda, which is currently in Phase 1b development for the treatment of Hepatitis C. Under the agreement, BMS will receive an exclusive worldwide license to develop and commercialize PEG-Interferon lambda.

Upon effectiveness of the agreement, BMS will be required to pay ZymoGenetics an upfront cash payment of $85 million for the development and commercialization rights to PEG-Interferon lambda. BMS is also required to make an additional payment of $20 million, which is expected in the first quarter of 2009. ZymoGenetics could receive additional payments of up to $430 million based on pre-defined development and regulatory milestones for PEG-Interferon lambda in Hepatitis C (of which $95 million is related to initiation of Phase 2 activities that are expected to occur in 2009), up to $287 million in development and regulatory milestones for other potential indications, and up to $285 million based on pre-defined annual sales milestones.

ZymoGenetics and BMS have agreed to co-develop PEG-Interferon lambda in the United States and Europe, and the companies will share United States and European development costs for PEG-Interferon lambda. ZymoGenetics will be responsible for 20% of such costs and BMS will be responsible for 80% of such costs, provided that ZymoGenetics will be responsible for funding the initial $100 million of such development costs, which will cover costs beyond initiation of Phase 2 clinical testing. The clinical development of PEG-Interferon lambda will be directed by a joint committee. ZymoGenetics will conduct certain clinical development activities for PEG-Interferon lambda, including certain clinical trials. BMS will be responsible for developing PEG-Interferon lambda outside the United States and Europe at its sole expense.

ZymoGenetics must make an election to co-promote or co-fund PEG-Interferon lambda in the United States within 30 days after acceptance by the FDA of a Biologics License Application filing, in which case ZymoGenetics will share in 40% of any United States profits or losses (including pre-launch commercialization expenses) and BMS will share in 60% of such profits and losses. A portion of ZymoGenetics’ share of losses incurred through the initial launch phase will be deferred, and deferred losses will subsequently be deducted from milestones, royalties and ZymoGenetics’ share of profits. In certain circumstances, ZymoGenetics may opt out of co-promotion or co-funding in the United States, in which case ZymoGenetics would be eligible to receive double-digit royalties on product sales in the United States. In addition, BMS may terminate ZymoGenetics’ right to co-promote PEG-Interferon lambda in the United States if ZymoGenetics’ cash and cash equivalents (after deducting amounts owed to BMS that are past due and borrowed monies repayable within six months) are less than $35 million and ZymoGenetics is unable to increase such cash and cash equivalents to $35 million or more within 10 days, in which case ZymoGenetics would receive royalties on product sales, instead of sharing profits and losses from PEG-Interferon lambda in the United States. In certain circumstances, following a change of control of ZymoGenetics, BMS may terminate ZymoGenetics’ right to co-promote PEG-Interferon lambda in the United States, provided that ZymoGenetics will retain the option to co-fund and share product profits and losses, and in no event will ZymoGenetics lose its right to royalties on product sales in the United States.

BMS will be responsible for commercializing PEG-Interferon lambda outside the United States and will pay ZymoGenetics double-digit royalties on product sales outside the United States.

The transaction is subject to and will become effective upon clearance under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended.

The foregoing summary is qualified in its entirety by reference to the full text of the agreement, which will be filed with ZymoGenetics’ Quarterly Report on Form 10-Q for the quarter ended March 31, 2009.

On January 12, 2009, ZymoGenetics issued a press release relating to the collaboration with BMS, a copy of which is filed herewith as Exhibit 99.1.

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ZymoGenetics Forward-Looking Statements

This current report on Form 8-K 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 the timing of clinical trials and the receipt of related milestone payments, our unproven clinical development and results, including efforts in and results of collaborations, regulatory oversight and approvals, product sales and marketing abilities, intellectual property claims and litigation and other risks detailed in ZymoGenetics’ public filings with the Securities and Exchange Commission, including ZymoGenetics’ 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 report, whether as a result of new information, future events or otherwise.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.	Description
99.1	ZymoGenetics, Inc. press release dated January 12, 2009.

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SIGNATURES

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.
Date: January 12, 2009	By:	/s/ James A. Johnson
		James A. Johnson
		Executive Vice President, Chief Financial Officer and Treasurer

EXHIBIT INDEX

Exhibit No.	Description
99.1	ZymoGenetics, Inc. press release dated January 12, 2009.

EX-99.1

Exhibit 99.1

Bristol-Myers Squibb and ZymoGenetics Enter Global Collaboration on

Novel Hepatitis C Compound

PEG-Interferon lambda is a Novel Type 3 Interferon in Phase Ib trials

PRINCETON, New Jersey, and SEATTLE, Washington – January 12, 2009 – Bristol-Myers Squibb Company (NYSE: BMY) and ZymoGenetics, Inc. (Nasdaq: ZGEN) today announced a global collaboration for PEG-Interferon lambda, a novel type 3 interferon currently in Phase Ib development for the treatment of Hepatitis C, and its related development program.

Under the terms of the collaboration, Bristol-Myers Squibb agreed to pay ZymoGenetics an upfront cash payment of $85 million for the development and commercialization rights to PEG-Interferon lambda, and to pay an additional license fee of $20 million in 2009. ZymoGenetics could receive additional payments of up to $430 million based on pre-defined development and regulatory milestones for PEG-Interferon lambda in Hepatitis C, up to $287 million in development and regulatory milestones for other potential indications, and up to $285 million based on pre-defined sales-based milestones.

The companies have agreed to co-develop PEG-Interferon lambda in the United States and Europe and will share development costs. It is anticipated that ZymoGenetics will conduct a significant portion of continuing Phase I and certain Phase II development activities. ZymoGenetics will have the option to co-promote in the United States and to share profits on product sales with Bristol-Myers Squibb. ZymoGenetics may opt out of the co-development, co-promotion and profit sharing arrangement in the United States, in which case ZymoGenetics will receive royalties on PEG-Interferon lambda sales worldwide.

Outside the United States, Bristol-Myers Squibb will be responsible for commercialization and ZymoGenetics will receive royalties on product sales.

“We welcome the opportunity to combine ZymoGenetics’ strong foundation in discovering and developing therapeutic proteins, with our own internal research and development expertise in working on this innovative Hepatitis C therapy that has the potential to help patients prevail over this serious disease,” said Francis Cuss, MD, Senior Vice President, Discovery and Exploratory Clinical Research, Bristol-Myers Squibb. “The profile of PEG-Interferon lambda offers the possibility of improvements in the safety and effectiveness of combination treatment for Hepatitis C and makes it an ideal fit with our emerging portfolio of small molecule
anti-virals.”

“We believe Bristol-Myers Squibb is the ideal partner for ZymoGenetics and that we share the vision that PEG-Interferon lambda could become an important part of treating patients with Hepatitis C,” said Douglas E. Williams, Ph.D., Chief Executive Officer of ZymoGenetics. “We look forward to a productive partnership focused on bringing PEG-Interferon lambda to Hepatitis C patients as rapidly as possible.”

PEG-Interferon lambda (IL-29) is a novel type 3 interferon currently in Phase Ib development for Hepatitis C. The native human protein Interferon lambda is generated by the immune system in response to viral infection. PEG-Interferon lambda has the potential to be uniquely differentiated from available interferon therapy because Interferon lambda mediates anti-viral activity through a receptor that is distinct from that used by Interferon alpha and is present on fewer cell types within the tissues of the body. As a result, the possibility exists for more targeted delivery of interferon therapy and an improved therapeutic index.

The effectiveness of the agreement is subject to antitrust clearance by the United States Federal Trade Commission and Department of Justice, under the provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other customary regulatory approvals.

About Hepatitis C¹

Hepatitis C is a virus that infects the liver and is transmitted through direct contact with blood. An estimated 170 million people worldwide are infected with Hepatitis C and, of these, 94.5 million people live in the Asia Pacific region. One to five percent of people with chronic infection will develop liver cancer. Although there is no vaccine to prevent Hepatitis C, it is a curable disease.

Conference Call and Webcast Information

ZymoGenetics will conduct a conference call/webcast on Tuesday, January 13, at 8:30 a.m. Eastern Time. The call and webcast 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 audio webcast and slide 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 #: 309378

About Bristol-Myers Squibb

Bristol-Myers Squibb is a global biopharmaceutical company whose mission is to extend and enhance human life. For more information visit www.bms.com.

About ZymoGenetics

ZymoGenetics creates novel protein drugs that help patients fight disease. ZymoGenetics developed and markets RECOTHROM^® Thrombin, topical (Recombinant). 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.

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 associated with our unproven preclinical and clinical development and results, strategic partnering, including efforts by and results of collaborations, regulatory oversight and approvals, product sales and marketing abilities, discovery strategy, 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 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.

Bristol-Myers Squibb Forward-Looking Statements

This press release contains “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995, regarding the research, development and commercialization of pharmaceutical products. Such forward-looking statements are based on current expectations and involve inherent risks and uncertainties, including factors that could delay, divert or change any of them, and could cause actual outcomes and results to differ materially from current expectations. No forward-looking statement can be guaranteed. Among other risks, there can be no guarantee that the clinical trials described in this release will support a regulatory filing or that the product described in this release will receive regulatory approval. There can be no assurance that if approved, the product will be commercially successful. Nor is there any assurance that the transaction described in this release will receive the necessary regulatory approvals to close. Forward-looking statements in the press release should be evaluated together with the many uncertainties that affect Bristol-Myers Squibb’s business, particularly those identified in the cautionary factors discussion in Bristol-Myers Squibb’s Annual Report on Form 10-K for the year ended December 31, 2007, its Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K. Bristol-Myers Squibb undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise.

References

1. World Health Organization Web site. Fact sheet N°164.

http://www.who.int/mediacentre/factsheets/fs164/en/. Accessed September 23, 2008.

Bristol-Myers Squibb Company	ZymoGenetics
Media	Media and Investors
Jennifer Fron Mauer, 609-252-6579	Susan W. Specht 206-442-6592
jennifer.mauer@bms.com	spechts@zymogenetics.com
or	or
Investors	Media and Investors
John Elicker, 609-252-4611	Michael Fitzpatrick 206-442-6702
john.elicker@bms.com	fitzpatm@zymogenetics.com

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