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 ongoing public health restrictions related to COVID-19, Zymeworks is holding its Annual General Meeting virtually. We have ensured that registered shareholders and duly appointed proxy holders will still be able to participate in the 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 Tony Polverino, our Executive Vice President, Early Development and Chief Scientific Officer; Neil Klompas, our Executive Vice President, Business Operations and Chief Financial Officer; Diana Hausman, our Chief Medical Officer; James Priour, our Chief Commercial Officer; Kathryn O'Driscoll, our Chief People Officer; Daniel Dex, our Vice President, Legal and Corporate Secretary; and our Audit partner, Jason Bower from 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 moments, 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 proxy statement dated March 23, 2021, 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 specific questions on an item 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. [Operator Instructions] We will do our best to answer your questions. But if for any reason, we are unable to do so during the meeting, we will do our best to do so after the meeting. We will now proceed with the formal portion of the meeting. I will act as Chair of this meeting and will now call the meeting to order. Daniel Dex, Vice President, Legal and Corporate Secretary for Zymeworks, will be acting as Secretary for this meeting. If there are no objections, I shall appoint an Anita Basi of Computershare Investor Services to act as scrutineer. Before proceeding with formal business of the meeting, I would like to discuss a few procedural matters related 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 Corporation Act, the corporation's articles and the rules of order established by Nathan's company meetings. The only persons 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 for registered shareholders of record. I have a copy of the notice calling the meeting and evidence as to its mailing to all shareholders on March 24, 2021. 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 are represented by proxy shareholders who, in aggregate, hold at least 30% of the issued shares entitled to be voted at the meeting. The scrutineer has provided me with a 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 the financial statements of Zymeworks for the fiscal year ended December 31, 2020, 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 2020 Annual Report. In the interest of expediting the meeting, I will defer any discussion of the financial statements and auditor's report 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, 3 of whose terms of office are deemed to have expired today pursuant to the corporation's articles. The proxy statement dated March 23, 2021, contains the names of 3 persons who are proposed by management for election at this meeting. In accordance with the advanced notice provisions of the corporation's articles, no further nominations 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 of the Board of Corporation, Susan Mahony, Kelvin Neu, Ali Tehrani?

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 43 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 29 of the proxy statement. May I now have a motion to approve the nonbinding resolution approving the compensation of the corporation's named executive officer?

I so move.

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

We will now vote on this motion -- sorry, 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 ballot now. [Voting]

As a reminder, I will be providing a President's report following conclusion of the formal portion of this meeting. In addition, if anyone would like to discuss the financial statements and auditors' reports, please enter your questions now if you have not already done so. Is there any other business that may be 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. We will be closing the polls momentarily. [Voting]

That concludes the voting at today's meeting. The polls are now closed. 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 by 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 19,001,319 voting shares representing 71.17% of the votes cast voted in favor of the election of Susan Mahony and a total of 7,695,418 voting shares representing 28.83% of the votes cast were withheld. A total of 19,092,462 voting shares representing 71.52% of the votes cast voted in favor of the election of Kelvin Neu and a total of 7,604,275 voting shares representing 28.48% of the votes cast were withheld. A total of 19,090,115 voting shares representing 71.51% of the votes cast voted in favor of the election of Ali Tehrani and a total of 7,606,622 voting shares representing 28.49% 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 24,073,940 voting shares representing 90.18% of the votes cast voted in favor of the motion. A total of 2,607,651 voting shares representing 9.77% of the votes cast voted against the motion, and a total of 15,146 voting shares representing 0.06% of the votes cast abstained from voting.

I declare the motion passed.

With respect to the proposal relating to the appointment of the auditor and authorizing the directors to fix their remuneration, a total of 28,644,626 voting shares representing 98.98% of the votes cast voted in favor of the motion and a total of 296,499 voting shares representing 1.02% 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. Once again, good morning, everyone. It gives me great pleasure to welcome you to Zymeworks' Annual General Meeting. It goes without saying that this has been a year like no other. The challenges of the COVID-19 pandemic forced all of us to reshape the way we work and interact with each other. It has introduced us to new technology that, in some ways, has increased our efficiency and in others, has reminded us of the importance of human interactions. And as we start the process of returning to normal, it is clear that it will be a new normal. And at Zymeworks, I believe we have a unique opportunity to emerge as a stronger and smarter company. Most importantly, throughout this period of change, all of us here at Zymeworks have never lost sight of our mission of returning patients home to their loved ones disease-free. At last year's AGM, I shared our key goals of advancing our lead asset, zanidatamab, formerly known as ZW25, into a pivotal clinical trial as well as advancing our novel antibody drug conjugate, ZW49, into initial expansion cohort phase of clinical development. Both of these goals represent important steps on route to bringing these potential novel therapeutics to patients in need. I am extremely proud to inform you that we have delivered on these goals, including reporting promising data on both programs along the way. From a business standpoint, our partner assets continue to make progress towards an interclinical development. We took important steps to improve manufacturing efficiency and increase drug supply, and we have expanded our clinical trials into more sites around the globe, and last but not least, grew the leadership team in important areas of clinical development and commercialization. Financially, we finished the year with a strong balance sheet that will carry us into the second half of 2022 and potentially beyond. With the above said, today, I would like to focus on 3 areas where we made significant progress, which are: one, Zymeworks' clinical and preclinical pipeline; two, business development and partnership activities; and three, our leadership team. Starting with our clinical programs. Our 2 clinical candidates, zanidatamab and ZW49, continue to advance in multiple clinical trials. From the get-go, our aim has been to establish zanidatamab as the foundational HER2 therapy in early regimens across multiple tumor types and for ZW49 to be an important option for patients with refractory and potentially lower HER2-expressing cancers. Our long-lasting -- our long-standing overarching strategy for the development and commercialization of both of these assets include fast to market, displacing the standard of care, and expanding and diversifying into other areas of unmet need. We are executing and delivering on all 3, which I will report on now. In July 2020, we took a major leap forward in terms of developing our lead clinical program, zanidatamab. We launched our first pivotal clinical trial, meaning that if the trial meets its endpoint, we will be in a position to submit an application for potential accelerated regulatory approval. This is a global Phase II trial of zanidatamab in patients with previously treated HER2-gene-amplified biliary tract cancer, also known as BTC, and has a primary endpoint of objective response rate and a secondary endpoint of duration of response and safety. Throughout the year, zanidatamab also received several important drug review special designations in the U.S. and the European Union. The USFDA granted breakthrough therapy designation for BTC, and the European Commission granted orphan drug designation for gastroesophageal adenocarcinoma, or GEA, expediting potential commercialization. These add to the previously granted fast track designations for BTC and GEA and orphan drug designations for BTC GEA in ovarian cancers. These marked important milestones towards our accelerated commercialization strategy for zanidatamab. We're now on track to potentially file our first biologics license application, or BLA, with the USFDA as early as late 2022 for relapsed/refractory HER2-amplified BTC on route to potentially becoming a commercial stage company as early as 2023. In support of this pivotal trial, earlier this year, we presented updated clinical data at the American Society of Clinical Oncology Gastrointestinal Cancer Symposium for zanidatamab in both HER2-expressing BTC and GEA, where zanidatamab continued to demonstrate durable anti-tumor activity in refractory BTC and GEA that compared favorably to the current standard of care and emerging treatments. Our next clinical data disclosure is expected to be the presentation of zanidatamab in combination with chemotherapy in first-line HER2-positive GEA at a medical conference later this year. These data are important to zanidatamab's clinical development plan in support of Zymeworks' first randomized Phase III clinical trial, also expected to start this year. Named HERIZON-GEA-01, this trial is a randomized multicenter study of zanidatamab in combination with chemotherapy, plus or minus, our partner, BeiGene's PD-1-targeted antibody tislelizumab as a first-line treatment for patients with HER2-positive unresectable locally advanced, metastatic GEA cancers. I am excited to announce today that the USFDA recently cleared the investigational new drug application for this Phase III study which represents a significant corporate milestone. As aside, I vividly recall getting Zymeworks off the ground back in 2004 with the support of 3 angel investors. It is an absolute dream come true to share that we are now a Phase III stage company and on the doorstep of potentially graduating to a commercial stage company soon. This was made possible because all of our shareholders along the way and, of course, a dedicated team that has always prioritized patients first. There is lots more to do and we will deliver. That said, let's get back to the accomplishments. Beyond our progress in BTC and GEA, in parallel, we have continued to explore additional opportunities in areas of unmet need that zanidatamab could address, including new indications and combinations. For example, in October, the first patient was dosed in a Phase II investigator-initiated trial conducted by Dr. Vicky Makker at Memorial Sloan Kettering Cancer Center, which is designed to evaluate zanidatamab in HER2-overexpressed endometrial cancers. We look forward to the results of this trial, which could identify HER2-positive endometrial cancers as an additional indication for zanidatamab. In November, we entered into a clinical collaboration with ALX Oncology to evaluate combination of zanidatamab and ALX148, a next-generation CD47 blocker, for the treatment of patients with advanced HER2-expressing breast cancer and other solid tumors. Now switching to our clinical program, ZW49. In January, interim data was presented for this program, which is a bispecific antibody drug conjugate targeting HER2. The data was supportive of anti-tumor activity and a differentiated safety profile. Specifically, there have been no dose-limiting toxicities, no treatment-related hematological or pulmonary or liver toxicity and no treatment-related deaths. Over 90% of treatment-related adverse events have been mild or moderate in severity, with the most common being keratitis, fatigue and diarrhea, which have been reversible, manageable in an outpatient basis. ZW49 has demonstrated anti-tumor activity at all dose levels evaluated in the once every 3-week regimen, including confirmed partial responses and stable disease for RECIST 1.1. Dose escalation is continuing in both the weekly and every 3-week schedules and 3 indication-specific expansion cohorts, which include HER2-positive breast cancer, HER2-positive GEA and a basket cohort of HER2-positive cancers, utilizing the 2.5 milligrams per kilogram once every 3-week regimens have also been initiated. The objective of these studies is to identify the recommended Phase II dose and schedule by the end of this year. Looking ahead, the next 12 months promises to be data-rich for both zanidatamab and ZW49 as we continue to demonstrate their potential to become groundbreaking therapies in the treatment of HER2-expressing cancers. Beyond our clinical assets, we are leveraging our integrated drug development engine to create the next wave of multifunctional therapeutics. Data presented at the American Association for Cancer Research, AACR, in April highlighted preclinical data that reveal new insights into the unique mechanism of action for our lead clinical candidates zanidatamab and described 2 new preclinical assets focused on both the cytokine, IL-12 and immuno-oncology target 4-1BB. At AACR, we also introduced our fourth proprietary technology platform, ProTECT, which enables tumor-specific activity that may reduce systemic toxicity and simultaneously enhances localized immune co-stimulation or checkpoint modulation that may increase efficacy. Many novel immuno-oncology biologics are limited in clinical utility by narrow therapeutic windows. The ProTECT platform is designed to increase the therapeutic window by limiting exposure and activity in peripheral tissues while focusing activity to the tumor. We continue to discover and develop novel platforms and assets to advance our robust pipeline. Now switching to business development and partnerships. Through 2020, our clinical and technology partners made significant progress and advancements. In March and November of 2020, our partner, BeiGene, achieved milestones as part of our clinical partnership for zanidatamab, resulting in payments to Zymeworks of $5 million and $10 million, respectively. In July, we signed a new licensing agreement with our long-term partner to develop additional multispecific antibody therapeutic candidates using the Azymetric and EFECT platforms. As part of the partnership, we are eligible to receive up to $411 million in option exercise fees and clinical development and regulatory approval milestone payments and up to $480 million in commercial milestone payments as well as tiered royalties on worldwide sales. We also expanded our Azymetric collaboration with BMS, providing access to EFECT platform and extending the research term with the objective of developing up to 10 therapeutic candidates. The expanded partnership resulted in a $12 million payment to Zymeworks, and milestones remain up to $1.7 billion plus royalties on global sales. Our first ZymeLink antibody drug conjugate technology partnership continue to advance as well. In December, Exelixis exercised its exclusive option for our partner, Iconic Therapeutics, resulting in a milestone payment to Zymeworks. Exelixis is now responsible for the future clinical development, commercialization and manufacturing of the tissue factor targeting ADC known as XB002, and we look forward to continued success in the Phase I clinical trial. At the current time, Zymeworks has 9 active collaborations that could result in up to $8.6 billion in potential milestone payments in addition to royalties on potential product sales. Now on to leadership team and Board of Directors. As Zymeworks progresses through the latter stages of clinical development, we continue to build out the core competencies required to advance the company into commercial stage. We brought on key commercial, scientific and clinical development talents to the leadership team to support our maturing clinical pipeline towards commercialization with the addition of James Priour as Chief Commercial Officer; Guowei Fang, Ph.D, as Senior Vice President of Research; Manny Duenas as Vice President, Global Value at Access; Pamela Farmer as Vice President, Global Patient Safety; Kaycia Wilde as Vice President, Clinical Operations; and Jonas Hylton as Vice President of Medical and Scientific Affairs. In conclusion, overall, this was a very notable year for Zymeworks, in which we made major advancements in the clinic, saw a considerable business development progress and added team members that will help move us to the next stage of development. We remain committed to delivering on the following priorities: completing enrollment of zanidatamab pivotal trial in second-line HER2-amplified BTC, launch of zanidatamab pivotal trial in first-line HER2-positive GEA and presenting supporting Phase II clinical data, presenting data to support zanidatamab breast cancer development strategy, advancing ZW49 through cohort expansions and beyond, presenting data from new therapeutic programs and technology platforms. I'm extremely proud of all that Zymeworks has been able to accomplish throughout this last year, and I look forward to another successful year as we move closer to becoming a commercial stage company and building Zymeworks into a fully integrated, self-sustaining biotechnology leader. It is my privilege to lead the company into this next stage of the development. I'd like to sincerely thank our team members and shareholders who continue to support our mission of sending patients home to their loved ones disease-free. Last but not least, our patients are our purpose. Thank you.

No questions have been submitted.

Great. There being no further questions, that concludes the meeting. Thank you for attending.