Zymeworks Inc. (ZYME) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. My name is Ali Tehrani, the President and Chief Executive Officer of Zymeworks. Welcome to this Annual General Meeting of the Shareholders of Zymeworks. This year, due to unprecedented public health restrictions related to COVID-19, Zymeworks is holding its Annual General Meeting virtually for the first time. We have ensured that registered shareholders and duly appointed proxy holders will still be able to participate, submit questions and vote at the meeting. Before we begin, I would like to introduce the other members of our Board of Directors who are attending today's live audio webcast. Lota Zoth, our Board Chair; Troy Cox; Kenneth Hillan; Susan Mahony, Hollings Renton; Natalie Sacks; and Kelvin Neu. Also attending today's live audio webcast are Neil Klompas, our Executive Vice President of Business Operations and Chief Financial Officer; Diana Hausman, our Chief Medical Officer; Tony Polverino, our Executive Vice President, Early Development and Chief Scientific Officer; Kathryn O’Driscoll, our Chief People Officer; Darren Hoegler, our Vice President of Finance; Daniel Dex, our Vice President of Legal and Corporate Secretary; and Pauline Wu from our auditor, KPMG. Voting at today's meeting will be open to registered shareholders and duly appointed proxy holders and will be conducted by online poll. In a few minutes, the polls will be open for all items of business to be voted on at the same time. This will allow you to vote on each item immediately, or if you prefer, you may wait until the conclusion of discussion on each item prior to casting your vote. The matters of business to be voted on and your available voting options will be visible on the voting panel on your screen. To submit a vote, please select the voting choice displayed on your screen. Once discussion has concluded on all matters of business, you will have a moment to finish entering your votes. I will then declare voting closed on all matters of business. At the end of the meeting, we will announce provisional voting results based on proxy votes received prior to the meeting. The online polls are now open for voting. I would like to remind you that during the formal meeting and during the president's report that I will provide following the formal meeting, we may be making forward-looking statements. Please refer to the proxy statement dated March 23, 2020, for more information regarding forward-looking statements. Given the virtual format of the meeting and in order for us to expeditiously address as many questions as we can, we would encourage registered shareholders and duly appointed proxy holders who have a specific question on items of business to be discussed at today's meeting to submit their questions now. If you have any questions about Zymeworks not specifically relating to an item of business to be discussed at today's meeting, please feel free to submit those questions at any time, and they will be addressed at the conclusion of the meeting. To submit a question, please click on the question icon, type in and submit your question. We will do our best to answer your questions. But if for any reason we're unable to do so during the meeting, we will do our best to do it after the meeting. We will now proceed with the formal portion of the meeting. I will act as the chair of this meeting and will now call the meeting to order. Daniel Dex, Vice President, Legal and Corporate Secretary of Zymeworks, will be acting as the secretary of the meeting. If there are no objections, I shall appoint Anita Basi of Computershare Investor Services to act as scrutineer. Before proceeding with the formal business of the meeting, I would like to discuss a few procedural matters relating to the meeting. The business to be transacted at the meeting is set out in the notice calling the meeting. The procedures to be followed at this meeting will be governed by the British Columbia Business Corporations Act, the corporation's article and the rules of orders established by [ nation's ] company meetings. The only person who may move motions, ask questions, vote or take any other actions at this meeting are registered shareholders, authorized representatives of registered shareholders or proxy holders of the registered shareholders of record. I have a copy of the notice calling the meeting and evidence as to mailing to all shareholders of March 24, 2020. Copies of these documents can be made available to any shareholder upon request. As such, proper notice of the meeting has been given. I will dispense with the reading of the notice calling the meeting. A quorum for the transaction of business at a meeting of shareholders is 2 shareholders who are or who, represented by proxy shareholders who in aggregate hold at least 30% of the issued shares entitled to the vote at the meeting. The scrutineer has provided me with the preliminary report regarding attendance, and I confirm that the requisite quorum is present. As such, I declare this meeting regularly and duly called and constituted for the transaction of business. We will now proceed with the presentation of financial statements on Zymeworks for the fiscal year ended December 31, 2019, and the report of the auditors thereon to the shareholders. The financial statements and the auditor's reports are included in the corporation's annual report on Form 10-K, which can be accessed by clicking on the link on your screen titled 2019 Annual Report. In the interest of expediting the meeting, I will defer any discussion of the financial statements and auditor's reports until the conclusion of the formal part of this meeting. I'm also placing before the meeting a copy of the minutes of the last Annual General Meeting of the corporation. A copy of the minutes can be made available for viewing by any shareholder upon request. The Board of Directors presently consists of 8 directors, 2 of who -- whose terms of office are deemed to have expired today pursuant to corporation's articles. The proxy statements dated March 23, 2020, contains the names of the 2 persons who are proposed by management for election at this meeting. In accordance with the advance notice provisions of the corporation's articles, no further nominations being -- may be made at this time. Therefore, I declare the nominations closed. May I now have a motion to proceed with the vote for the election of the following nominees to the Board of Directors, Hollings C. Renton, Lota Zoth?

I so move.

We will now vote on this motion. Please submit your online ballot now by selecting a voting option on the voting panel displayed on your screen. [Voting]

The next item of business is to consider, and if thought fit, approve a nonbinding resolution approving the compensation of the corporation's named executive officers. The corporation's compensation discussion and analysis is contained on Page 34 through 39 of the proxy statement. The full text of the proposed nonbinding resolution approving the compensation of the corporation's named executive officers is set out on Page 28 of the proxy statement. May I now have a motion to approve a nonbinding resolution approving the compensation of the corporation's named executive officers?

I so move.

We will now vote on this motion. Please submit your online ballot now. [Voting]

The next item of business is to consider the frequency at which the shareholders will be asked to approve the compensation of the corporation's named executive officers. Our Board values the opinion of the corporation's shareholders. Although the vote is nonbinding, the Board and its committee will carefully consider the outcome of the frequency vote when making future decisions regarding the frequency of a nonbinding vote on compensation of the corporation's named executive officers. The Board recommends that a nonbinding vote on the compensation of the corporation's named executive officers be held annually. We will now proceed with the vote. Please submit your online ballot now. [Voting]

The next item of business is the appointment of the auditor of the corporation. Would someone move that KPMG LLP be appointed as auditor of the corporation until the next Annual General Meeting at a remuneration to be set by the directors?

I so move.

We will now vote on this motion. Please submit your online ballots now. [Voting]

As a reminder, I'll be providing a president's report following conclusion of the formal portions of this meeting. In addition, if anyone would like to discuss the financial statements and auditor's report, please enter your questions now if you have not already done so. Is there any other business that may properly be brought before this meeting? For those of you who have not voted on all of the matters of the business, please do so now. [Voting]

We will be closing the polls momentarily. This concludes the voting at today's meeting. We will now announce provisional voting results based on the proxy votes received prior to today's meeting. The final report of voting results will be filed and made available for viewing on the corporation's SEDAR profile after the meeting. The scrutineer will now provide the provisional results.

With respect to the election of directors, a total of 23,776,748 voting shares, representing 84.19% of the votes cast, voted in favor of the election of Hollings C. Renton. A total of 4,465,185 voting shares, representing 15.81% of the votes cast were withheld. A total of 23,764,694 voting shares, representing 84.15% of the votes cast, voted in favor of election of Lota Zoth, and a total of 4,477,239 voting shares, representing 15.85% of the votes cast, were withheld.

I declare each of these nominees duly elected.

With respect to the nonbinding resolution approving the compensation of the corporation's named executive officers, a total of 27,550,018 voting shares, representing 97.55% of the votes cast, voted in favor of the motion. A total of 266,013 voting shares, representing 0.94% of the votes cast, voted against the motion. And a total of 425,901 voting shares, representing 1.51% of the votes cast, abstained from voting.

I declare the motion passed.

With respect to the nonbinding vote on the frequency of holding a nonbinding advisory vote on the compensation of the corporation's named executive officers, a total of 28,181,129 voting shares, representing 99.78% of the votes cast, voted in favor of holding the nonbinding vote on an annual basis. A total of 38,694 voting shares, representing 0.14% of the votes cast, voted in favor of holding the nonbinding vote every 2 years. A total of 8,650 voting shares, representing 0.03% of the votes cast, voted in favor of holding the nonbinding vote every 3 years. And a total of 13,458 voting shares, representing 0.05% of the votes cast, abstained from voting.

I declare the results of the nonbinding vote on the frequency of the nonbinding advisory vote on executive compensation to be -- for such vote to be held on an annual basis.

With respect to the proposal relating to the appointment of the auditor and authorizing the directors to fix their remuneration, a total of 32,999,576 voting shares, representing 99.2% of the votes cast, voted in favor of the motion. And a total of 264,840 voting shares, representing 0.8% of the votes cast, were withheld.

I declare the motion passed. There being no further business, may I now have a motion in the following terms, be it resolved that this meeting be terminated?

I so move.

The motion is carried. This meeting is now terminated. I will now provide the president's report and answer any questions you may have. Good morning, again, everyone. Before we begin today, I'd like to say a special thank you to the entire Zymeworks team, our collaborators and our clinical investigators. Despite the unprecedented global challenges presented by COVID-19 pandemic, all of you have demonstrated your commitment to our shared mission of returning patients home to their loved ones disease-free. The clinical trials for our lead candidate, ZW25 and ZW49, provide potential options for patients whose cancer has become refractory to the standard of care. And I'm extremely proud of how everyone has come together to ensure that patients enrolled in our studies continue to receive their treatments as we advance these therapies. To our shareholders, thank you for your continued support. With a strong balance sheet and runway into 2022 and beyond, substantial drug supply and clinical trials in diverse sites around the globe, we are well prepared to continue moving forward through these challenging times. Today, I would like to focus on the progress we've made in 3 key business areas: clinical and preclinical research and development, business development and partnerships and leadership team and Board of Directors. Clinical programs. Our 2 lead candidates, ZW25 and ZW49, continue to advance in multiple clinical trials. Our aim is to establish ZW25 as the foundational HER2 therapy early regimens across multiple tumor types, and for ZW49 to be transformative and refractory in low HER2-expressing cancers. Throughout 2019 and early 2020, we reported on the investment of both programs, and I'll provide a brief overview of these highlights. In 2019, we presented ZW25 single-agent and chemotherapy combination data at multiple medical conferences, which strongly support the initiation of 2 upcoming registration-enabling studies. In September 2019, at the European Society for Medical Oncology Annual Meeting in Barcelona, and again, in the encore meeting in Singapore in November of 2019, data were presented, demonstrating the antitumor activity and the durable disease control of single-agent ZW25 across multiple HER2-expressing tumors, including biliary tract cancers, gastroesophageal adenocarcinomas or GEA, and colorectal cancers that have progressed after standard-of-care therapies. With this, we plan to initiate our first registration-enabling trial evaluating single-agent ZW25 in HER2-positive biliary tract cancer, for which we have received both orphan drug and Fast Track designations from the U.S. FDA. In October 2019 and -- at the EORTC-NCI-AACR annual meeting in Boston, we presented for the first time ZW25 in combination with chemotherapy. These data demonstrated that the addition of chemotherapy to ZW25 treatment may enhance antitumor activity versus ZW25 alone, and the combination therapy was tolerated in heavily pretreated HER2-expressing GEA patients. These data further support the ongoing Phase II trial of ZW25 in combination with standard-of-care chemotherapy in first-line GEA. ZW25 has also received both orphan drug and Fast Track designations from this indication. Earlier this year, we announced an agreement with Pfizer in a Phase II trial to evaluate ZW25 in combinations with Pfizer's Ibrance, palbociclib, an oral CDK4/6 inhibitor, and a hormone therapy, fulvestrant, in patients with previously treated, locally advanced and/or metastatic HER2-positive hormone-responsive-positive breast cancer patients. The goal is to potentially provide a chemotherapy-free option to HER2-positive hormone-responsive-positive breast cancer patients. Most recently, in March, our partner, BeiGene, dosed the first patient in a 2-arm Phase Ib/II trial in Asia. The first arm will evaluate ZW25 in combination with chemo as a first-line treatment for patients with HER2-positive breast cancer. This study provides an opportunity to evaluate ZW25 in early metastatic breast cancer before patients' tumors have developed resistance to HER2-targeted agents. The second arm will evaluate ZW25 in combination with both chemotherapy and BeiGene's PD-1 targeted antibody, trastuzumab as a first-line treatment for patients with HER2-positive GEA. This study will help determine the value that PD-1 inhibition provides and help guide the design of our upcoming registration-enabling trial and first-line HER2-positive GEA. Zymeworks' second product candidate, ZW49, began a Phase I clinical trial to evaluate safely -- safety and antitumor activity and to establish a recommended dose and schedule for expansion cohorts. A recent update highlighted that there had been no dose-limiting toxicity observed and the maximum tolerated dose had not been reached. The majority of treatment-related adverse events were grade 1 or 2 and reversible and manageable on an outpatient basis. Preliminary results from these initial dose cohorts included antitumor activity. We believe that ZW25 has the potential to be a best-in-class compound. Beyond ZW25 and ZW49, we're leveraging our integrated drug development engine to create the next wave of multifunctional therapeutics in the areas of bispecific and monospecific antibody-drug conjugates, immune cell-engaging bispecifics, microenvironment modulators and cytokine receptor modulators. We continue to discover and develop novel preclinical therapies to advance our robust pipeline. As ours and our partners' early-stage programs materially move forward towards clinical testing, we will provide you with further updates. Business development and partnerships. In 2019, we began to see our partners advance their assets towards and into the clinic. Eli Lilly entered into clinic -- into the clinic with this immuno-oncology bispecific candidate built using our novel Azymetric platform. Merck, Celgene, which is now Bristol Myers Squibb, and Daiichi Sankyo advanced their bispecific candidates towards clinical testing, which resulted in numerous milestone payments to Zymeworks. GSK expanded its Azymetric partnership, resulting in an increased total deal size and thus larger payments to Zymeworks throughout the duration of the collaboration. We were also pleased to announce that we signed our first ZymeLink ADC collaboration with Iconic Therapeutics, where Zymeworks will gain co-promotional rights with increased royalties for products developed using the Iconic ADC program. In total, we have 9 active collaborations that offer up to $7.9 billion of potential future milestone payments as well as royalties on potential product sales. Leadership and Board of Directors. As we continue to advance into a late-stage clinical company, we have been tremendously proud of the talent we brought on for this year. We added key functional expertise to our leadership team that will support the development of our maturing clinical pipeline with the appointments of Mark Hollywood, Senior Vice President, Technical Manufacturing Operations; James Priour, Senior Vice President, Commercial; Neil Josephson, VP Clinical Research; and Bruce Hart, VP Regulatory Affairs. Our notable additions to our executive team this year includes Kathryn O'Driscoll, Chief People Officer, who will strategically manage the growth of our expanding workforce; David Poon, Vice President, Business Development and Alliance Management; Steven Xanthoudakis, Global Search and External Scientific Strategy and Search and Evaluation; Darren Hoegler, VP Finance; and Daniel Dex, VP, Legal and Corporate Secretary. Our Board of Directors. We increased our commercial expertise with the addition of Dr. Sue Mahony and Troy Cox, 2 pharmaceutical executives with extensive global drug commercialization experience; Dr. Kelvin Neu of Baker Bros. adding clinical knowledge and partnering expertise; and our long-term Board members, Lota Zoth, former CFO of MedImmune, assuming the role of Chair of the Board. All in all, it was a pivotal year for Zymeworks, one in which we saw major clinical and business development advancements as well as growth in our leadership team that we are very proud of. Despite the challenges that the COVID-19 pandemic have presented, we remain committed toward delivering our priorities, which include initiating ZW25 registration-enabling studies in second-line HER2-positive biliary tract cancers and first-line HER2-positive gastroesophageal adenocarcinoma; reporting on ZW49 Phase I dose escalation studies and initiating expansion cohorts, expanding ZW25's clinical development into additional HER2-expressing cancers; reporting on ZW25 Phase II chemotherapy combination study from first-line HER2-positive GEA; and continuing to build a strong preclinical pipeline through internal R&D and external partnerships. In closing, I want to express my sincere appreciation to our dedicated, talented team here at Zymeworks, who continue to collaborate, innovate and work together during such a unique time in history. I would also like to thank our experienced Board of Directors and trusted advisers, who offer us invaluable insights and guidance as well -- as we build Zymeworks into a fully integrated, self-sustaining biotechnology leader. It is my privilege to be working with each and every one of you. And last but not least, thank you to our shareholders, who continue to support us in our mission of sending patients home to their loved ones disease-free. Thank you. I am now happy to take questions. As there seemed to be no questions, I'm happy to close this meeting in its entirety. Thank you to everyone that made this meeting possible. Thank you to all of the staff at Zymeworks and all of our collaborators outside of Zymeworks who have made this possible. Thank you, and have a good day.