Zymeworks Inc. (ZYME) Earnings Call Transcript & Summary

Good afternoon, everyone. We are continuing our second Annual Wolfe Healthcare Conference. I have the pleasure of hosting CEO of Zymeworks, Dr. Ali Tehrani. Thank you so much for taking the time. If you have any introductory remarks, please go ahead, and then we can get started with some questions.

Thank you, Akash, and thank you to the Wolfe team for putting the conference together. We're glad to be here, and we're glad to be able to introduce those of you that are not familiar with Zymeworks to the story and also at the same time, provide additional details. In terms of a little bit of a go-forward look into 2021, we have a very exciting year ahead of us. And we're excited to talk about various data releases for both of our programs ZW49 and 25 and various business inflection points that are in front of us. So happy to jump into it.

Sounds good. So let's get started maybe with -- on the 49 side, and this is -- I would say, mistakenly where a lot of investors spend most of their attention on. I'm a big 25 bull on my own. But if we can talk about -- like I remember, I was reading your midyear update transcript. And you had mentioned like, look, are we going to show data at the end of the year? And at that time, it was -- I think it's best once we have the full data and we have MTD, that's when we're going to kind of show data. But now it seems like you are kind of looking forward to showing something it sounds like January, JPMorgan time. Can you, first of all, talk about why you feel like that's important for investors before you hit an MTD to kind of talk to your investors about what you're showing and then what can we kind of expect in that? Is it going to be waterfall plots, AE charts? Or is it going to be maybe here's a response rate, and then here's kind of where we're headed? What should we expect?

So I just wanted to start with something here that you alluded to before we jump into the 49 aspect is that with regards to ZW25's data map, as many have heard me say, there is very little doubt in our mind that, that is an approvable drug. And we'll talk about that, and we'll go through that. So there is one side of our story that has ZW25, which has a BLA submission in 2022. And and then there's the other side of our story, which is ZW49, which is a very exciting transformative molecule. All right. Let's take a half step back. What we've been guiding throughout the last year, maybe 1.5 years, is that we designed a dose escalation scheme and -- study to really get to a go-forward dose that sets up the expansion cohort and expansion cohorts. In that, we always talked about the potential we see in ZW49 is very broad. That it really has a number of different lanes in front of it. So one objective in the expansion -- in the escalation cohort is to find the initial go-forward dose and the other objective was to look for other potential dosing regimens that fully capture and unlock the value that we see with ZW49. This has always been the thesis. This is actually quite common in drug development, especially ADCs, where you want to have a point of focus, but you also have the flexibility and the opportunity, if your drug is capable of doing that to explore more. That's the same playbook we've been taking. To take the guidance further, what we did say in June, July, was that at any point after that, corporate update, if we were to reach MTD, we would automatically announce that. We have not reached an MTD. And if we do tomorrow, if we do that at December 5 or December 26, we'll be sure to provide that. So that hasn't changed, and that remains in place that if we reach MTD, that will be announced. Now with regards to the January update, the focal point of the January update is to highlight the go-forward plans in terms of ZW49. These go-forward plans will likely include expansion cohort design, expansion cohort specifics in terms of tumor types, in terms of number of patients, and more importantly, the starting go-forward dose. And when you sort of highlight plans, as I'm describing for you, one of the critical elements because the justification, the reasoning of what gives you sort of the information you need to go into these plans. That includes a profile for activity and a profile for safety. This is, again, pretty common procedure in drug development, where you want to go through these steps to go forward and develop the asset to its next stage. So the January update has its specifics, and it has its components that are meant to provide all of our shareholders and investors the information to invite them into our mindset of how are we going to take this asset forward. Then subsequently, at a medical conference, and we're working on which one it will be, we will release data, comprehensive data set that further goes into that activity profile and goals there. Now one of the things we've been talking to folks is activity and response rates. Typically in a dose escalation, the focal point is determining activity. And the reason there's a difference between activity and response rate is because in dose escalations, the n is not there. So the n becomes available in the expansion phase. You have homogeneous patients, and you have an n of 10 or 12 per tumor type where you can now extrapolate and drive a rate. That being said, where we sit with our dose escalation, we are in a position to hone in on a promising go forward rate -- dose that has -- is backed up by the rate or by the activity rather.

Right. So -- and to me, I know like the way you talked about data in the past, and it's incredibly important from smid cap oncology companies, you give data that's helpful for investors at the right time. So like if you are in a medical conference, I don't think there's any problem. But I also -- one of the things we've seen with our research is there does seem to be this kind of interesting threshold effect for HER2 ADC, right? Pfizer's molecule saw it, Kadcyla have seen it, I heard you very famously also have kind of saw that. Now what I am trying to understand, and I think what becomes interesting from investors is you guys -- we get into the fall, and you start talking about we're going to show some data by year-end or January. To me, that sounds like we're getting into the ballpark or maybe we've crossed some type of threshold. We don't know if those responses are going to deepen. We're going to need more time to do that. But we're seeing something that we've seen in other compounds, and we're getting to kind of the light at the end of the tunnel, right? Now if I tune that in even more, when I think about data that you're going to show, is it going to be, hey, like for our tool, right, like if a patient had lymphocytosis, we know that they're going to get a response later. Are we going to see something that says these patients are starting to see responses that are going to -- and we think they're going to deepen? Or will it be something like, hey, these patients have got responses, and we think they're going to deepen over time to maybe something even more? Like how durable will that data be in the doses that you think are interesting from a pharmacological perspective?

I think you need to stay tuned for the actual details. What I would say is that you're on the right thinking. You basically captured everything that I would have wanted to say more eloquently. The extrapolation from what we said in July to January is exactly what we said. We started in June to come out of COVID-related impacts on the rate of our study. So from June to November, we've seen a big change in sites being activated, enrollment in our study, a wait list being there, which by itself is a data point. We made a good amount of progress in terms of honing in on an initial go-forward regimen and dose, and we do not believe we've reached any form of a ceiling with this asset. So exactly as you put it, we are making progress. We're going forward, and we want to inform people in terms of where we're at and where we're going in the decision-making process in January, so everyone can come along with us.

Okay. Understood. And maybe the reductive question. If I'm -- in January, should we expect a -- like maybe not a waterfall plot, maybe not AEs, but if -- could we expect, like, "Hey, we're showing 2 responses here, don't read into it too much, we're going to need more durability." Like will you get something like that?

Yes. That is a fair assumption. Because, again, I mentioned, if we're talking about go-forward plans, a plan has to have substance behind it, a plan, otherwise, it's a theory. By talking about a plan, we want to talk about what supports the plan. And in this case, as I mentioned, we want to talk about a profile that includes activity and safety, which supports [indiscernible].

Right. Now -- it's always interesting, like because in HER2 never technically reached an MTD or like, I guess, maybe neutropenia at some point. But 58 wasn't the dose, right? It was 54. But it also took a long time, like, I don't think people understood. You're -- the San Antonio data and you have an extremely mature data set. And that's only when Daiichi kind of figured out, well, 54 is really where we want to go. Can you talk about how different dosing regimens and doses change your risk-benefit profile and therapeutic index on these types of assets? Because I think the other thing that's interesting is you have a different half life than all these other Herceptin backbone compounds. And so when you think about what's driving efficacy, is it Cmin trough? Is it Cmax? Safety seems to be Cmax. But how do you think about both the safety issue, but then the efficacy issue and selecting doses that you think are appropriate for going forward?

So again, I'll fall back on the traditional understanding of drug development and especially ADCs, where a dose escalation is absolutely required. And you go into a dose escalation with a thesis based on your preclinical studies, which we've shared with everyone. As you are in the dose escalation, you also get real-time data, and that data further drives your next steps. And in some cases, if you've thought about a broad set of plans as we did because we went into our dose escalation with a number of different opportunities that we saw for ZW49, we already went into it thinking about it. That being said, you always start with a starting point that is specific and you build flexibility around it. And that's exactly what we did. We have a regimen in mind, we are getting to a preferred regimen, initial preferred regimen, but that is not to the exclusion of exploring to its right and left because what we want for ZW49 is to become that new transformative ADC in the HER2 space, and that has many different avenues. That has different tumor types, that has different HER2 expression levels. And then it does bring up the notion of combinability. Because again, if you look at other ADCs, historically, there's always been a sort of a very -- at the 40,000-foot level, there's been a parallel approach that you want to establish very competitive, very differentiated single-agent activity, and then you want to also explore combinability to create additional opportunities and unlock additional value. So with ZW49, we are honing in on a preferred initial dosing regimen to kick off our expansions, to continue the development of the asset, and we're also developing a lot of understanding around the total potential of the asset. And as I said, we have not reached the ceiling. And this total potential of the asset will potentially also include looking at combinations. I believe in HER2, did the same thing. And they are looking at combinations. I believe they did look at combinations, so our playbook is very much similar -- has a lot of similarities to Daiichi's playbook and other ADC's playbook. Except, as I said, we have not reached any form of a ceiling with this asset, and we're going to fully exploit all of its potential. And to a point that you made that I think is very critical, if you go back and look at 4 or 5 very notable ADCs that have made it into the market or they're in the late stages, including Pfizer's, these studies are often 24 months or more in case of Pfizer's, is over 3 years. So there is no sort of, okay, in 6 months or 7 months done. It is -- dose escalations often are pretty dragged out and then you catch up and you generate the kind of information and expansion phase, which is exactly where we're headed and where we want to be.

Sure. Now I think one of the most interesting things from the Pfizer data set is like it's a type DAR, DAR4 Herceptin backbone or on same payload. I mean that should have been able to dose higher than for 4 mg/kg, at least in my estimation, right? You look at it, you think maybe they should have gotten at least higher than Kadcyla. But it did, right? And you had a grade 3 DLT. And when I look at your asset and some of the commentary you're giving, and I don't know if I'm interpreting this directly, but it sounds like look, every ADC is going to get a grade 3 AE. You're going to get a grade 4 AE, whatever, like that happens. That's not unexpected. But it seems like -- whether it's Pfizer's HER2 or yours, it seems like all 3 are very different AE profiles. So can you talk about like our research and I think maybe we're over our skis. We focused on GI, liver and lung tox as potential possibilities, but I feel like we're missing something. So when we think about your payload type design, the high internalization, if I'm an investor thinking about what are the side effect profiles that we should be aware of, and then how are they managed, what is different about ZW49 versus some of the competition?

So obviously, again, that -- the perfect opportunity for the details for this is, to some degree, the January update and the medical conference. But here's what I would tell you is that if you fall back to the conversation we had with everyone in January of 2020 this year at the JPMorgan conference, what we did highlight for everyone is that we had grade 1, grade 2 reversible manageable, on an outpatient basis, treatment related AEs. And we -- I think the most important thing to take away from that is reversible manageable on an outpatient basis. And as you mentioned, with any ADC, with any drug development, especially ADCs, you're going to have some degree of AEs. And in fact, I think there's been ADCs that have been approved, most recently GSKs with a high degree of AEs, but because the benefit was there, it outweighed the risk. In our case, preclinically, we looked at a wide variety of potential tox events. And clinically, at least what we provided in January was that grade 1, grade 2, reversible and manageable. And we stand by that. We've been making progress. We've been adding sites. We have a waiting list. So, so far, the bits and pieces of the information that has been shared is that pretty much we're on that trend, and we're on that path. And really, as you mentioned, what's critical and to also take away is that these ADCs are all very different. The backbone antibody is very different. The linker is very different. The payload is different. And in our case, our linker payload has a different hydrophobicity, hydrophilicity profile than even that of Pfizer's or other MMAEs or MMAFs. So there are nuances that are very critical, and it's going to be very hard to sort of go, well, they had this, you're going to have this or they didn't have this, you're not going to have this, because there are specifics. But as best as I can tell you right now is that we're making great progress. We're on track to get to the next stage of the development of this asset. And we haven't reached any ceilings. There are no major stumbling blocks in front of us that we don't see being able to, in shape or form, get through.