Zymeworks Inc. (ZYME) Earnings Call Transcript & Summary

Great. Good afternoon, everyone. My name is Jess Fye. I'm one of the senior biotech analysts at JPMorgan. And we're continuing the 2021 Healthcare Conference today with Zymeworks. I'm joined by the company's CEO, Ali Tehrani. But one point, you know that instead of moving to a breakout room for Q&A this year, you have a blue, Ask a Question, button on your screen. You can use that to send questions to a portal. We'll pop up for me, and I can ask management during Q&A, which we'll follow the presentation. So with that, let me turn it over to Ali.

Thank you, Jess, and thank you to the JPMorgan team for organizing this conference, especially virtually, especially everything that is going on in the world. I'm going to start my presentation by highlighting our priorities, followed by a more complete look at our company, especially for those that are not very familiar with us. And we'll end on back on the key accomplishment and catalysts and priorities again. Next slide. I want to quickly remind everyone of the legal disclaimer outlined here, especially as relevant to forward-looking statements in this presentation. Next slide. So a key takeaway from my presentation should be that 2021 will be a data-rich year and our priorities enable that. The data directly relate to 3 thesis points. First, we believe zanidatamab also known as or previously known as ZW25, or more easily pronounced as zani, will replace Herceptin as a foundational drug for HER2-expressing cancers. And it will go where Herceptin perhaps did not go and may have gone or should have gone. The second thesis point is that the advancement of ZW49 will be a second weapon in our battle against HER2-positive cancers alongside zani and not in competition with zani. And third, Zymeworks is more than zani and ZW49, and that we will be bringing forward more paradigm changing therapeutics to patients into the market, especially as a company that has platforms and products. So as seen here on Slide 3, our priorities include completing enrollment in our ongoing pivotal trial for zanidatamab in HER2-positive biliary tract cancer. As you may recall, we promised this as a fast-to-market strategy for zani, and we're on track to deliver with the BLA submission in 2022. Next, launching our second pivotal trial for zani, which will be in frontline HER2-positive gastroesophageal cancers. This was promised as a first step in establishing zani as a foundational drug, especially in a head-to-head against Herceptin and then in the frontline setting itself. And to go on top of that in this study, zani will be combined with BeiGene's anti-PD-1, tislelizumab, which perfectly positions the combo against what would likely be the future standard of care in GEA and gastroesophageal. We are working to bring the data from the 2 Phase IIs relating to this pivotal trial that we'll launch in the first half of this year, this year ahead of the pivotal launching. One of these Phase IIs -- again, Phase IIs, as a reminder, again, is zani plus chemo in frontline GEA, and the other is zani plus chemo plus BeiGene's PD-1, tislelizumab, again in frontline GEA. The third priority is presenting data in support of our breast cancer development strategy for zanidatamab. Again, as you may recall, this has always been a part of our story, and this will support what we believe and have communicated in the past, is the opportunity for zani to displace Herceptin plus or minus PERJETA to the benefit of patients. Fourth, we will advance our second clinical program, ZW49 into the expansion phase -- stage of its Phase I, and we'll share the data. We will share a profile of activity and safety that supports the initial expansion stage and the different dose regimens. We will share our plans for the expansion stage, including the cohort subtypes and the number of patients that will be enrolled. And then at a later point this year in 2021 at a medical conference, we will share the totality of the data. Together, what I just mentioned for ZW49, we'll additionally further validate our ADC platform, ZymeLink. And the fifth priority, last one, not least, is that we will unveil new therapeutic programs and platforms. And this is planned for this year's AACR conference as a starting point. This will support the total strength and the trajectory of Zymeworks as a platform and a product company in not just its current clinical programs. Next slide, please. So in Slide 4, I wanted to provide a quick snapshot of the company. Top of mind, we have a strong balance sheet, which gives us a runway into next year and potentially beyond. Also, we've advanced both of our clinical assets per outlined strategies and notably received breakthrough designation for zanidatamab in second-line biliary tract cancer. And in terms of data reporting in 2021, again, as I just mentioned, we will likely be at every medical conference along with a number of webcasts that we will be hosting ourselves to share data and progress. In the very near term, look for us at ASCO GI, which starts in a few days from now, especially for data in BTC and GEA for zanidatamab. There will be additional color on the data that is presented at ASCO GI at a company webcast, this Friday, January 15 at 5:00 p.m. Eastern Time, and the data will be discussed by the lead investigator, Dr. Funda Meric-Bernstam, who is a clinical investigator and the Chair of the Department of Investigational Cancer Therapeutics at the University of Texas MD Anderson. Then on January 27, we have scheduled another webcast to provide an update on the escalation portion of ZW49's Phase I study. And as I just mentioned, later in the year, we plan to share Phase II data for zani in frontline GEA and then present data for ZW49 at a medical conference, which will likely include data from the expansion phase. Next slide. So now I want to take a second and switch tracks to introduce Zymeworks to those of you who are not fully familiar with our story and are new to the Zymeworks story. Again, I think something that is worth mentioning is that the company as a whole is more than just our lead clinical assets zanidatamab and ZW49. We are focused on the research and development of multifunctional antibodies. We believe to combat complex disease like cancer, you're going to need complex multifunctional drugs, more than just bind and block, more than 1 antibody for one function. We believe this is the future. And in fact, it even holds true in the context of what the world is going through with COVID 19. As I'm sure you've heard, the more effective use of antibodies will likely involve combos or multifunctionals versus just monoclonals. What sets us apart is our core competency in protein engineering and protein modeling that enables us to discover new biologies and develop tailored antibodies to address the need. Over the years, we have developed proprietary protein modeling and engineering tools, protected by a large family of patents that uniquely enable us to generate insight relating the function of a protein to its structure. This allows us to change the structure to alter the function and make a protein or an antibody do something that we want, tailored to the biology that we're trying to address. Next slide, please. And as you see on Slide 6, we have built, we have externally validated multiple platforms that gives us the ability to build multifunctional antibodies, more specifically, bispecific antibodies, bispecific antibody drug conjugants, mass antibodies, multivalent antibodies, so forth and so on. These capabilities extend beyond just creating value for patients in cancer and ultimately extend into autoimmune inflammation and other therapeutic areas that Zymeworks will be pursuing as we go forward. Look, the takeaway is that we can think it, we can build it, we can validate it, we can take it into the clinic and ultimately commercialize it. And that is an aspect that we're very proud of, especially from a business standpoint of doing it faster, better and cheaper. Our 2 lead molecules, zanidatamab and ZW49 are perfect examples of this. Next slide, please. So if you really take the statements that I just made, the validation really comes in terms of our top 9 pharma and biotech deals that we put on the table. The key takeaways from these partnerships from these collaborations from our platforms is that we can potentially receive up to $8 billion if everything is a success and then royalties on top of that. These deals are tech transfers and nonexclusive. What does that mean? That means that none of them take away from our internal resources. We have simply given access to these partners, access to our patents and our know-how, and these companies use that information to, on their own, develop next-generation multifunctionals and bispecifics with our technology and with our know-how and will pay us along the way in terms of upfronts, in terms of success payments, in terms of royalties, sales, et cetera. So a very typical deal structure. And again, whatever they build does not take away from what we want to develop for our own pipeline as a wholly owned asset. And that access to the technology does not preclude us in any shape or form from building our own company. We have not given a target away. We've not given an indication away. We remain free to work. And in fact, through these deals, we've created an ongoing source of revenue and non dilutive financing. Next slide. So on Page 8 -- on Slide 8, what you can take away is that all of these deals are active and they're going forward. And at the very top, you can note that Eli Lilly has advanced 2 programs built using Zymeworks technology into the clinic. And we fully expect that a number of our other partners shown on this slide on Page 8, we'll also enter the clinic this year and for the foreseeable future. Next slide. So this brings me back to my point that we can think it, we can build it, we can validate it, we can commercialize it. And to that end, as I mentioned before, we are working on a next wave of wholly owned assets that we are excited to unveil starting at this year's AACR conference in March. So look for that, our posters have been submitted. Our work is ongoing, and we look forward to introducing you to more Zymeworks technologies and assets. Now let's turn our attention to zanidatamab ZW25 and then ZW49. Again, for those that are not familiar with our programs, we developed zanidatamab to address HER2-positive cancers where HER2 is the driver of the cancer. And in fact, it needs to be stopped in terms of signaling inside the cancer cells and interacting with neighboring receptors for escape. The thesis for zanidatamab is to come early and stop the cancers from proliferating and getting out of hand. We developed ZW49 to address the stage of HER2-positive cancers where HER2, the receptor, the target is no longer the main driver of the cancer and is more a biomarker. This often is the case in the metastatic setting, where you want to use a very specific antibody, in our case, a bispecific antibody, to target cancer cells and deliver a very potent toxin to destroy everything from the inside. We also believe ZW49 biology and MOA will be a beneficial added value to HER2 low patients, which is a critical area of unmet need. Next slide, please. So as you can see on Page 10, many of you would agree with me that Herceptin is perhaps the greatest example of a foundational drug, especially in breast cancer, where it is used essentially in every line. And Herceptin has remained the cornerstone of treatment in breast cancer despite many recent approvals. The other key takeaway here relates to competition. Most of the recent advances and approvals have been in third-line or later setting when it comes to breast cancer and typically utilize or combine with Herceptin. We believe we have the new and better Herceptin for every line and every HER2 tumor type. We recognize displacing Herceptin in early stages of breast cancer is a tall order. But we believe our strategies and what I will show you are up to the task. And in fact, we believe we have every potential to deliver on our thesis. Next slide. So again, further to my point, as you can see here on Page 11, all 8 approved HER2-targeted agents are essentially for breast cancer, with the exception of Herceptin, which is approved in frontline gastric. In reality, HER2 over-expression is linked to many different tumor types, which presents opportunities for development, especially for a company at the stage of Zymeworks and addressing unmet need before getting into the big tall order of breast cancer. And these opportunities include gastric cancer, colorectal cancer, pancreatic cancer, biliary tract cancer. And this is where our strategies were born from. And this is a mechanism for us to sort of build a step-by-step and ultimately come in and address the need across all HER2-positive tumor types every line. Next slide. As you can see on Page 12, the other key interesting point that I already alluded to is that the 8 approved drugs in our 4 HER2-positive breast cancer, which is only 15% of the overall need. The key takeaway also relative to Zyme is that we believe zani and ZW49 have the opportunity -- may have the opportunity to address the remaining major portion of the need, which is, at least in breast cancers another 66% representing what is now considered as HER2 low. And this holds very much true also in the case of gastric cancer, as you can see on the other side of the chart. Next slide. So why is zani foundational? Why do we believe it can be all that? And as you can see on Page 13, the answer simply comes down to is a unique structure, which gives it a novel mechanism of action. This really comes down to that there is -- we see the robust antitumor activity as a monotherapy and in combo because of the way zani is well tolerated, because it can address the needs of patients that can't stand aggressive treatment anymore, and it's because zani provides the true opportunity to go where, as I mentioned before, Herceptin could have gone, but it didn't Herceptin plus or minus PERJETA. So how does zani work? If you look at Page 14, this slide shows you the differentiated mechanism of action of zani, where it heavily clusters on the surface of cancer cells, resulting in an increased internalization and then the down-regulation of HER2 activity. On top of that, it increases effective function mediated cytotoxicity, also known as ADCC. All of this simply comes down to the fact that zani binds to 2 distinct locations on the HER2 protein on the HER2 receptor. One half of zani binds to one location on HER2, while the other half binds to a different location on a different HER2. This comes back again to the blockage of the signaling. That's really important in blocking the signaling of not only just HER2, but potentially the other members of the ErbB receptor. Key takeaway from this slide, every HER2 will be targeted by 2 zanidatamab antibodies, and that's unique here. Next slide. On Page 15, the proof is in the data. In total, to date, I'm happy to say that we've treated nearly 300 patients with zanidatamab as monotherapy or in combo with chemo or other targeted agents. Here, you're looking at the data that we have previously shared for heavily pretreated biliary tract cancers, whereby zani as a monotherapy results in a response rate, which is considerably higher than the current standard of care. And as I mentioned before, you will see a more complete and updated version of this data coming out at ASCO GI in a few days from now. Next slide. Further evidence here is you see data for zanidatamab monotherapy in GEA. Then again, we have shared before in heavily pretreated patients that essentially have failed approved and experimental therapies, and yet they are responding very encouragingly and very promising way with zani without chemotherapy. This is monotherapy data. Next slide, please. Now on Page 17, now you're looking at zanidatamab plus chemo, which again results in deep, durable responses. And again, this data will be further looked at in a much more comprehensive fashion at the upcoming ASCO GI. So look for that. All right. Let's talk about development strategy now. Next slide, please. It is really important to put everything into context, and it is really important to bring it home in terms of development strategy for zanidatamab. As I mentioned before, our long-standing strategy can be classified as having 4 components to it, namely one, a fast-to-market strategy, which is meant to get zani to patients and doctors as quickly as possible. This will enable the broader usage of zani, especially off-label. And we are on track for a BLA submission in 2022 for second-line biliary tract cancer, setting the stage for that first potential approval. The second part of our strategy is to go head to head against Herceptin and displace it in a frontline setting. We're accomplishing this with our GEA studies. Two Phase IIs that are underway looking at zanidatamab plus chemo in front-line GEA and then zanidatamab plus chemo plus tislelizumab GEA, which is BeiGene's PD-1, also in the frontline GEA setting, set the stage for a pivotal multi-arm randomized Phase III trial that will kick off in the first half of this year, supporting this strategy. And then the next 2 parts of our strategy revolve around expanding and diversifying into other tumor types, which, as I said before, include breast cancer, endometrial cancer, colorectal cancer, so forth and so on. So let's look at some specifics. Next slide, please. On Slide 19, you get more details into the timing and the specifics of zanidatamab studies. The best way to break this down is to first note the tumor types on the left-hand side of the screen. And then we can start to look at each part separately. First, note the pivotal study in biliary tract cancer, BTC in orange that started in 2020 and the triangle mark for a BLA submission in 2022. Next, please note the pivotal trial in GEA that will start this year again as a multi-arm and randomized in a frontline setting. And note that 2 ongoing Phase IIs that we are working on to report on and present the data before the start of this pivotal Phase III trial. These Phase IIs that I highlight here for you could continue reporting even after the start of the Phase III, which, in a way, becomes a potential proxy for how the Phase III is turning out in the foreseeable future. Then in purple, note the breast cancer studies, namely zanidatamab plus Pfizer's Ibrance and hormone positive HER2-positive patients, zanidatamab plus chemo in frontline metastatic breast cancer by BeiGene, zanidatamab plus ALX's Anti-CD47 antibody, and what I would go so far as to say that you can expect additional studies in breast cancer to kick off this year all in support of our thesis to clearly demonstrate the superiority of zanidatamab over Herceptin and the ability to go beyond Herceptin and to unlock value where it was not possible or has not been done by Herceptin as a foundational drug. Next slide. Switching to ZW49 on Page 20. We see ZW49 as a transformative HER2-targeted antibody drug conjugate. Why? Because it combines the unique attributes of zanidatamab with a novel linker payload. A novel linker and payload that is proprietary to Zymeworks. And this is to really provide benefit to patients that are HER2 high, HER2 low, without sacrificing safety. We wanted to develop something that is potent, that is efficacious, but it does not come, as I said, with sacrificing safety. We're excited to move ZW49 into the expansion portion of its Phase I, where we can study this asset in a homogeneous patient population, including breast, gastric and other HER2-expressing tumor types. And as I mentioned before, we've planned a webcast on January 27, where we will profile the activity and the safety of this asset relative to our go-forward expansion plans. Next slide, please. For those of you who are not familiar with this program, we advanced ZW49 into the clinic based on a robust preclinical data set, increased internalization rates, accumulation of cytotoxin inside of cancer cells, which, all in all, together, results in the death of the cancer cells, all versus in this data set that you're looking at versus other Herceptin-based ADCs, other ADCs that have Herceptin as the backhaul. Next slide, please. And when you take that into account, all of this translates into the ability to evaluate the potency in animal models versus Kadcyla and versus in HER2, which is demonstrated and shown to you in these preclinical studies on Slide 22. And for my last slide on Page 23, next slide. On a final note, what I wanted to really end on is that for the past 29, 30 minutes, I've spent a lot of time introducing Zymeworks. I have spent a lot of time introducing our clinical programs. I want to take my last maybe 5 or 10 seconds to end on a note of thank you to our team at Zymeworks, to all of the patients and all the folks that have participated in our studies to our Board of Directors, to our shareholders. A lot has been accomplished, as you can see here, but a lot more is on the horizon. And we thank you for all of your support in helping us get here. That is the end of my presentation, and I'm happy to move into Q&A. Thank you.

Great. Thanks, Ali. Maybe we can start out with an e-mail question. And I just want to remind investors that you can use the blue, ask a question button, to submit questions to the portal. But one that we have got here is on ZW49. Can you help us understand what data kind of is and is not going to be presented to the Street on this January 27 webcast? And specifically, is the full data not going to be there? And if it's going to be at a scientific conference, when is that? What are we actually going to learn on January 27?

Thank you for that. So let's go straight to the heart of the question. The full data, especially with an emphasis, potentially in the expansion data, is thought of for a medical conference in the second half of 2021 this year. For a second, I was going to say 2020. I haven't fully processed we've moved the year forward. But in 2021, this year. What we really want to do on January 27 is to set the stage for the expansion cohorts and the justification for the expansion cohorts, the decision-making process for the expansion cohorts. As I mentioned, a profile that includes safety and activity. We've been honing on, on a go-forward dose. And it is our opportunity on January 27 to share that information with everyone. And to elaborate where the escalation is going to go, to elaborate on how we see this asset progressing through expansion and ultimately into pivotal trials and so forth and so on. So that's our opportunity for January 27.

Okay. Great. Are you still dose escalating now?

Yes.

Okay.

And Jess, thank you for bringing that up because as we mentioned before, if we had reached an MTD, as we've mentioned on a numerous different calls and presentation, we would announce that. The fact that we haven't announced it simply suggest the fact that we have not reached an MTD.

Okay. And can you talk a little bit about the rationale behind exploring a third dosing regimen in the dose escalation in addition to the every 2-week and every 3-week schedule? And is this because of safety issues?

So the January 27 is the perfect time to fully dive into that, especially in terms of the profile of safety. And you may recall that at your conference last year, this time, I mentioned that our safety profile was grade 1, grade 2 reversible, manageable AE. So we will dive into that on the 27th. But what I would say is that we are exploring other regimens exactly as we said, that we want to maximize the potential value of this asset and put that right next to the fact that we've honed in on an active dose on a safe dose that we can go into expansion. So there is a lot of value to be unlocked. There is a lot of potential to be unlocked, and we will continue to do so through escalation dosing up and exploring different dosing regimen. So one would -- and I think as the question would imply, the fact that we are starting expansion cohorts means that we're at MTD, and we're not continuing escalation. As I mentioned, we are continuing to escalate, and we're going to continue to explore the expansion directly relates to the fact that we have honed in on a go-forward dose, and we were providing the justification and the profile for that on January 27.

Given the competitive nature of the HER2 space, one of the things we've been trying to think about is kind of the ways that you could be strategic in your approach to developing ZW49 and it also applies to zanidatamab. But as we think ahead to this update and the expansion cohorts, you're going to outline, are there potential surprises here? Or does that come later? Should we think about sort of more traditional kind of HER2-positive breast, gastric, things we've seen before?

Well, the -- I think I'm glad you brought up the competition. And as I addressed in my presentation, the majority of the approvals and the majority of the competition, all of it is focused right now on third line and fourth line. And with ZW49 and with zanidatamab, we've always said there is a later lines, of course. But HER2 low and early lines of treatment is where we want to be. So that message has been there from the get-go. And as I mentioned, at least with regards to zanidatamab, the data in breast cancer this year will really clarify our position in that. And look, safety is a component that will further enable moving up in lines. So those will become clear through the January 27 through our presentations for both zanidatamab and ZW49. And ultimately, it will enable us to also explore combos. So to the question you're asking that we've noted you're exploring different regimens and schedules, do be shocked when we also, in the future, explore combo. This is part of a strategy to fully explore.

Okay. I think in the past, you've suggested that zanidatamab could be kind of getting to a point in next development where it could make sense to find a partner as part of a means to kind of maximize the value and opportunity of the asset. So I'm curious on your latest thinking there. I think in the past, you said something like we don't want to do any deal. We want to do the deal. So can you expand on that? What does the deal mean to you?

We've always believed if anyone has been sort of with our story from the beginning, pre-IPO, post-IPO, that zanidatamab can displace tras and pert. And the data that we're generating the data that could come in the second half of the year, it could be really a demonstrative of displacing tras and pert, which brings the deal to the table. So we've been very clear that we know what kind of a deal we want, who we want it with, and when we want it. And that hasn't changed. And the objective always in the partnership has been to expand and accelerate. And with what we are messaging this year for breast cancer, it should become clear what sort of data is generating. And again, I want to highlight for everyone that we have a frontline breast cancer study that is underway with BeiGene. We have a number of breast cancer studies that we've initiated and more to come. So a central thesis to zanidatamab has always been breast cancer, especially in a very competitive field, but not in third or fourth line. This is meant to go in the early lines as we have suggested before, and the partnership is meant to really accelerate the development and the time to market.

Okay. We've got a portal question here. Just to clarify, the data update for ZW49 at a conference in the back half of the year, will that be just the dose escalation? Or will that also include expansion patients by that point in time?

The -- our likely objective is to do our best to include expansion.

Okay. And then it kind of goes on here. I'm not sure if you can answer these ones, but what kind of patients are we going to see data in HER2 experienced patients?

I'll leave that for the 27th. I think there's plenty of time for the 27th to go through this. But suffice it to say that we've had a heterogeneous patient population, people who have seen in HER2 and people who haven't seen in HER2. And that information will become clear in the appropriate amount of time that we set aside on the 27th.

Okay. Maybe bouncing back to zanidatamab. Thinking about that Phase IIa study in combination with chemo, what are the key measures that you're looking at in that study that could be informative as you initiate the pivotal trial in first-line HER2-positive gastric cancer?

I'm really glad you asked that, Jess. Look, we've been studying the bar, so to speak. And Herceptin plus PERJETA generates an unbelievable response rate. I think it's, I don't know, 85%, 88%, whatever it is, it's really high. And it's very durable. And what we've seen, the depth of response and the durability of that depth of response is where value can be created. Meaning that Herceptin and PERJETA do not give CR after CR after CR after CR in these early lines. They create response and ORR persist but that response could go deeper and longer. So there is a scenario where we believe that is exactly what zanidatamab plus chemo plus other targeted agents can do, we're especially in early lines of treatment that depth of response equals the desired outcome versus almost there for a long time. This is good enough versus great. And our objective is not to take 88% and make it 90% and call victory. That is still very beneficial to patients. But true victory for patients in this case is to really take that antitumor activity, that depth of antitumor activity to the next level.

And will we be able to see that in the next update?

That is our objective. That's the bar that we're throwing out as a priority for ourselves and for everyone out there. Because, again, in terms of a partnership in terms of expanding and accelerating, it has always been about early lines of treatment. And we believe, as I've said over and over again, zanidatamab is the new foundational drug in the space of HER2-positive tumor types.

Great. Well, looks like we're out of time, so we'll leave it there. Ali, thanks so much. And thanks, everyone, for tuning in.

Thank you very much. Thank you for having me.