Will ZymoGenetics shares start to bleed?

BANGALORE (Reuters) - Shares of ZymoGenetics Inc (ZGEN.O) have gained 37 percent in the last six months, as its synthetic blood-clotting enzyme Recothrom continues to gain market share.

However, in the last three months a slew of bad news including a drug failure and a lawsuit have plagued the company.

Four analysts currently rate the stock a "hold" while one has an "outperform" rating on it and another has an "underperform" rating, according to Thomson Reuters data.

Analysts are divided on ZymoGenetics' ability to ramp up sales of its sole revenue-generating product Recothrom based on its safety profile, and the development path of its experimental hepatitis C drug.

Should investors buy into the stock now or is it time to take profits?

SALES UNDERESTIMATED

"We expect the company to beat expectations for sales of its Recothrom product and we also expect the Street to value the company's (experimental hepatitis C treatment) interferon lambda program higher than it does currently by the end of next year," Wedbush PacGrow LifeSciences analyst Gregory Wade said.

The absence of side effects and potential to be effective on patients who don't respond well to the current standard of care, alpha interferon, distinguishes interferon lambda in the market place, said Wade, who has an "outperform" rating on ZymoGenetics shares.

"Based upon the month-over-month growth we have seen for (Recothrom) this year, the analysts are underestimating the total sales that will occur in 2010," Wade said.

"I do believe Recothrom has a better safety profile."

GROWTH UNSUSTAINABLE

"There is going to be limited near-term growth drivers for Recothrom," Oppenheimer & Co analyst Brian Abrahams said.

"The association between bovine thrombin (produced by market leader King Pharmaceuticals Inc (KG.N)) and side-effects is relatively indirect, so it has been difficult to definitively prove Recothrom's safety advantages."

"It makes it a little bit more challenging to put out an economical argument to hospitals that they should put Recothrom on their formularies despite their premium pricing."

The analyst, who has an "underperform" rating on ZymoGenetics shares, said the development path for the company's experimental new form of interferon would be complicated.

"We think without any dosing advantage, the bar for replacing alpha interferon is going to be very high, from a safety point of view," he said.

(Reporting by Anand Basu in Bangalore; Editing by Unnikrishnan Nair)