Zymeworks Inc. (ZYME) Earnings Call Transcript & Summary

Good afternoon, everyone. My name is Jess Fye. I'm one of the biotech analysts at JPMorgan, and we're continuing the 2020 Healthcare Conference today with Zymeworks. Quick housekeeping note. We're going to do a Q&A session with the management team right after this wraps up. You can follow me down the hall. We're going to go to the Sussex room. But with that, I'll turn it over to the company's CEO, Ali Tehrani.

Thank you. Good afternoon. Thank you to the JPMorgan team. Thank you to all the organizers. My name is Ali Tehrani, and I'm the President and CEO of Zymeworks. Today, what I'd like to start with is by letting you know that Zymeworks is focused on the research and development of first and best-in-class multifunctional therapeutics. We have developed a number of platforms resulting in a number of deals, specifically 10 active collaborations, which I will cover towards the end of my conversation. And also, we have created a deep preclinical pipeline based on our own platforms that are unencumbered; followed by a clinical pipeline of 2 assets, which are going to be the focal point of my presentation today. Where I want to start is by introducing ZW25 and ZW49 the way we see it. We see ZW25 as a foundational anti-HER2 therapeutic and ZW49 as a transformative anti-HER2 therapeutic. So what do I mean by that? Many of you would agree with me that one of the best examples of a foundational therapeutic is Herceptin. For example, if you look at breast cancer, Herceptin is the foundational piece across basically every line of treatment from neoadjuvant all the way to salvage line. And it's always the foundational piece that is combined with 1 other agent on 2 other agents, but it is the beauty of Herceptin that makes it a foundational drug. And basically, we believe ZW25 will displace Herceptin as a foundational anti-HER2 therapeutic. What a lot of people might not necessarily appreciate is that HER2 expression and HER2 overexpression is linked beyond breast cancer. And that could be also seen in other types of cancers as depicted in this diagram, salivary gland, ovarian, endometrial, biliary tract. And what's interesting to note is that Herceptin has been approved for only breast cancer and gastric cancer. So essentially, all the other cancer types that you see here are an unmet need, and represent an unmet opportunity for a drug like ZW25 and ZW49 to meet that need and go forward. So what makes ZW25 foundational? First and foremost, its unique structure results in a novel mechanism of action, which, in turn, has resulted in very robust anti-tumor activity, very durable anti-tumor activity as single agent and in combination with chemotherapy. What we see as a result of this is that ZW25 has become almost that ideal partner for combination therapy to, again, treat patients in all lines of treatment from neoadjuvant all the way to salvage line across multiple tumor types. So how does ZW25 work? As you see in this diagram, ZW25, on the left-hand side of the screen -- your right-hand side rather, 1/2 of the antibody binds to 1 location on HER2, while the other half of the antibody binds to a different location on HER2. This mechanism of action essentially enables 2 antibodies to target every single HER2 that is on the surface, and it blocks signaling through 1 domain inside the cell and blocks receptor interaction, homo or heterodimerization through a different domain. In totality, you have a cluster form, a chain link form on the surface that ultimately results in internalization and in the destruction of the cells. Most recently at ESMO Asia, we presented our data. So what you're looking at here is single-agent ZW25 activity across multiple different tumor types. Notably, if you look at the dark blue lines, which represents gastric cancer, we had a response rate of 39%. And if you look at the salmon-colored line, which is biliary tract cancer, we had a response rate of greater than 65%. And if you look at the green, the bright green, that's colorectal cancer, which we had over 40% response rate. Again, this is single-agent ZW25 that has been provided to patients after they've been treated with the standard of care and any other approved anti-HER2 therapy, and it still generates response rates and activities such as this. The response rate and the activity has also been quite durable. So first and foremost, one of the things that is worth noting here is the number of patients that are crossing the 6-month line. Again, recall that these patients are resistant/refractory to standard of care and the approved HER2 therapies at the time. And many of them as of the cutoff date of this data were active on the study. So this is extremely exciting. And again, why we believe it will make ZW25 a foundational drug that will replace any place that Herceptin is used or Herceptin and PERJETA are used. In another study that we presented at the triple conference, in a very small end, we wanted to evaluate the addition of chemotherapy and evaluate what happens to the response rate. Again, this is a very small end but a very telling study. In this case, we're looking at gastric patients, where the response rate from single agent that was approximately 40% went to approximately 60%. This again speaks to the value of how ZW25 as a single agent or in combination could be the go-to agent in HER2 therapies -- in HER2 cancers, sorry. If you look at now the durability, again, you see many patients that were in this very small study, in this very limited study either crossing the 6-month line and in some cases, getting over a year or remaining active on the study and having the potential to cross that line at the time when we looked at this. So we are very excited about this robust data and the future of ZW25 as a foundational drug. Looking at the development plan for ZW25, what I first want to do is provide the strategy behind this development plan. This development plan was designed to accomplish a number of things: first, there is a strategy of fast to market; second, there is a strategy of displacing the standard of care; and third, there is a strategy to evaluate the potential of ZW25 in earlier lines of treatment. Working at the very top, our fast-to-market strategy, as we discussed before, involves biliary tract cancer as a first, what we call, orphan niche HER2 indication. We believe we have a great opportunity to provide great benefit to these patients, as I just showed you the data. In terms of displacing the standard of care, our approach includes running a study in first-line gastric cancer going ultimately against Herceptin plus chemo, which is the standard of care there. And then when it comes down to earlier lines of study as we disclosed yesterday, in collaboration with Pfizer, we have initiated a study in combination with palbociclib looking at ZW25 plus palbo in HER2-positive hormone-responsive patients which, again, provides a potential opportunity for chemo-free treatment with dual-targeted agents. Since our last presentation, we have had a number of updates and a number of regulatory interactions to update you on. First, late last year, we completed our end of Phase I meeting with the FDA. We remain steadfast and on track to deliver on all of our priorities that were communicated in 2019, namely our goal to start a registrational study in biliary tract cancer this year. It's also worth noting that we have received orphan drug designation for ZW25 in BTC, along with fast track designation. And just as a reminder, this is our third orphan drug designation, as we have it also in -- for gastric cancer and ovarian cancer for ZW25, and it's our second fast track designation alongside gastric cancer. We've also, as I've just mentioned, initiated a study in collaboration with Pfizer in -- with palbociclib, which is a CDK4/6 inhibitor. And also, we are exploring additional registrational study in orphan and niche HER2 indications. Now I want to switch to ZW49. As you may recall, at the beginning of my presentation, I referred to ZW49 as a transformative anti-HER2 therapeutic. So what do I mean by that? First and foremost, ZW25 benefits from the unique backbone that it is ZW25. So the backbone antibody here is the same as ZW25. So the unique mechanism of action, the unique structure provides a unique opportunity to ZW49. Secondly, the linker payload for ZW49 is a proprietary linker payload. The payload is an auristatin analog and the linker is a cleavable linker that is proprietary to Zymeworks. We believe ZW49 will ultimately pave the path for future ADCs, with the mindset that you develop these drugs with potency in mind without sacrificing safety. And that's how we went into developing this drug. And based on a very robust preclinical data set, we advanced this asset into the clinic. So let's have a look at the -- some of the highlights of the preclinical data set. What you see here in these 3 graphs is essentially what we believe is required for any ADC to make its way into the clinic. One, we looked at internalization. And here, we compared ourselves to trastuzumab, which happens to be what a lot of anti-HER2 ADCs are based on. Our internalization rate was much greater than Herceptin conjugated to Zymelink, which shows you that the backbone antibody, the clustering is key to that rate of internalization. Second, in the middle graph, we looked at uptake of the toxin. And we see that, again, the uptake of the toxin was bigger than control, meaning that, ultimately, the potency should be greater as well. And then finally, we look at cytotoxicity, which covers that proves that point that I just made. That data transferred well into animal models. And looking at some efficacy studies that you see here. So wherever you see T-Exatecan on this model or the gold line, that is Daiichi 8201 that we made in-house. So here, we're comparing ourselves to T-DM1, which is Kadcyla and Daiichi 8201. What you see here that essentially, both DS-8201 and ZW49 seem to always outperform Kadcyla. And then, the comparisons between 8201 and ZW49 are quite competitive. We're very excited about this data. And based on this data, we advanced ZW49 into the clinic in the middle of last year. So here are the key updates for ZW49. As I have mentioned, we dosed our first patient in early Q2 of last year. To date, as of we stand here, more than 10 patients have been dosed. And the dose escalation study has not reached an MTD, or a maximum tolerated dose, nor has it reached a dose-limiting toxicity, so the study is continuing. We have not observed, as I mentioned, any DLTs; and the majority of the treatment-related AEs were limited to Grade 1 or Grade 2, reversible and manageable on an outpatient basis. So we are very excited about the safety profile. None of the treatment-related AEs included thrombocytopenia, neutropenia, interstitial lung disease or lung toxicity, which has often been associated with some of our competitors on some of the other approved agents. And we are very excited to report that preliminary results in our dose escalation include anti-tumor activity. Now as I promised, I wanted to switch gears and go back and talk about the company for a second. The company was founded on the basis of the future of drug development will be based on multifunctional therapeutics. So we built a core competency in protein engineering to be able to build platforms that enable the development of multifunctional therapeutics, and to date, we've been quite successful at doing that. Our platforms include the ability to build bispecific antibodies, as you just saw some examples, bispecific antibody drug conjugates, as you saw some examples; and more importantly, a mechanism by which we can rev up or rev down an immune response based on Fc domain, which we call the EFECT platform. And we're not done innovating in this area. What I just mentioned is the first generation of platforms that we put on the table. The next generation of platforms that we're working on currently include the utilization of cytokines, includes masking technologies, which enables us to be even more targeted and more effective in the context of oncology; and ultimately, to utilize all of our platforms to expand beyond oncology into autoimmune and inflammatory disorders. We're very excited about the partnership that we've put on the table. And when people see the list of partnerships we've put on here, one of the common questions is, "Well, how many exclusivities have you given? How much of your resources and how many of your employees are dedicated to these collaborations?" The answer is very simple. All of our platform deals have been on a nonexclusive basis, which means we have not encumbered ourselves in any shape or form in terms of what we can develop for our own preclinical pipeline. These deals have been a technology licensing deals, which speaks to the power and to the desirability of our Azymetric platform for the development of bispecifics. These deals provide a massive source of nondilutive financing as evidenced by some of the deals that we announced in 2018 and 2019. For example, in our deal with Johnson & Johnson, the upfront payment was $50 million. And in our collaboration with BeiGene, the upfront was $60 million. All of these fundings provide us with the opportunity to continue investing in our own preclinical pipeline and ultimately, in our clinical programs. And as these partners move forward into the clinic, not only we generate more validation for what is happening, but we also continue to receive nondilutive financing. And we will provide updates on a regular basis. Here, you have a look at the overall deal profile. And the deal profiles have been structured such that there are upfront payments, there are, in some cases, preclinical and late preclinical milestone payments, there are clinical payments and there are royalties that, in some cases, get to double digits. Ultimately, Zymeworks stands to generate up to $8 billion, assuming everything is successful here. And as we've already seen, Eli Lilly has moved multiple programs into the clinic. And per some of our announcements last year, we anticipate multiple of our other partners also advancing programs into the clinic this year and for the foreseeable future. Looking at priorities for this year and looking at some highlights. On the priority side, specifically, we plan to -- ahead of all of our registrational studies that are upcoming in biliary tract cancer, in gastroesophageal cancer, to provide an update and a justification for going into these late-stage studies. So look for those updates throughout this year. And also, as we intend to have additional programs come online, we -- and a lot of programs have already started, we intend to provide a regular update as possible and as necessary to ensure that everyone is on the same page with us as we move ZW25 into that foundational position. The last 12 months has been a very busy year. We generated exceptional results for ZW25. We advanced ZW49 into the clinic. We announced that Celgene, Daiichi Sankyo, Merck, all were able to advance their programs into late-stage preclinical setting, the stage we're going into the clinic. We are very much excited about the first partnership that we announced around our Zymelink platform, our ADC platform, with Iconic Therapeutics. And of course, we're very excited about many additions to our Board of Directors and to our management team. So with that said, I've come to the conclusion of my time, and thank you for your attention. Thank you very much.