In a move to raise cash without selling more of its battered stock, ZymoGenetics announced Monday a deal to borrow up to $100 million from...

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In a move to raise cash without selling more of its battered stock, ZymoGenetics announced Monday a deal to borrow up to $100 million from investment fund Deerfield Management.

Deerfield will provide the funding in $25 million segments that can be tapped by ZymoGenetics at any time during the next 18 months. Each withdrawal will give Deerfield royalties amounting to 2 percent of sales for Recothrom, the Seattle biotech company’s only commercial product, as well as stock warrants.

The borrowed funds, which accrue an interest of 4.9 percent, must be repaid in 2013. Royalties end upon repayment.

The money will go to strengthening the commercial sales effort for Recothrom, a genetically engineered form of thrombin, a protein that helps control surgical bleeding. The product, launched in January, is ZymoGenetics’ first foray into the commercial market.

The Seattle-based company is raising cash by borrowing, instead of selling shares, in part because in recent months its stock has wallowed at five-year lows amid uncertainty about Recothrom’s prospects.

Its shares closed at $8.42 Monday, down from a 52-week high of $15.23 last summer.

“We think our company is undervalued,” said Chief Financial Officer Jim Johnson.

The flexible arrangement with Deerfield, which owns about 3 percent of ZymoGenetics’ shares, allows the company to borrow only as much as it needs.

“It’s always difficult to predict the future … how quickly Recothrom sales will ramp up,” Johnson said in an interview.

The company says that within three or four years, it can win most of the $300 million market for recombinant thrombin from its competitors, which derive their products from bovine and human blood.

Oppenheimer analyst Kevin DeGeeter, who estimates Recothrom sales will ramp up more slowly than the company and many analysts predict, said the Deerfield deal won’t be enough to carry ZymoGenetics all the way to profitability.

In a report distributed Monday, DeGeeter said the company is likely to sell shares in the next 12 months to raise additional cash.

David Miller, president of Seattle-based Bio Stock Research, is more optimistic.

If sales of Recothrom “shape up as expected” and the company gets a lucrative partnership for one of its experimental products, the Deerfield money could be enough, said Miller.

“I don’t even believe they need to get the entire $100 million,” he said.

So far ZymoGenetics hasn’t touched the cash, “but it’s likely that we’ll draw the first $25 million between now and the end of the year,” Johnson said.

The money would help pay for the company’s 60-strong national sales force, which scours hospitals seeking to persuade surgeons to adopt Recothrom, which the company claims has less risk of producing an immune response in patients than competitors.

The cash would also bankroll the planned buildup of a two-year inventory of the product.

Ángel González: 206-515-5644 or