Zymeworks Inc. (ZYME) Earnings Call Transcript & Summary

Good morning, everyone. My name is Jess Fye, I'm a senior biotech analyst at JPMorgan. And we're continuing our 40th Healthcare Conference today with Zymeworks. I'm joined by the company's COO and CFO, Neil Klompas, and he's going to give a presentation followed by a Q&A session afterwards. [Operator Instructions] So with that, let me pass it over to Neil.

Great. Thank you, Jess. Good morning, everybody, and welcome to Zymeworks corporate presentation as part of the 2022 JPMorgan conference. As Jess mentioned, my name is Neil Klompas. I'm the long-time CFO and recently named COO of Zymeworks. I'm happy to be here today to present on behalf of the company. Before we start, I'd like to take a moment to thank Jess Fye of JPMorgan for inviting us and for hosting this fantastic conference. Jess, you and the entire JPMorgan team always put on a great event. So really, thank you for [ the event ]. Last week, Zymeworks announced that industry veteran, Mr. Ken Galbraith, would be joining Zymeworks as our new Chair and Chief Executive Officer. Ken formally served on the Zymeworks Board from 2009 to 2013 and he believes strongly in the company and the potential of our platforms and therapeutic candidates to make a meaningful difference in the lives of patients with hard-to-treat cancers. I personally worked with Ken directly in the past, and I know I speak on behalf of the entire Board of Directors and the company when I say we're really pleased to welcome Ken into his new role and we're excited for what our future brings in our next phase of development under his leadership. We also announced that our longtime founding CEO and my good friend, Dr. Ali Tehrani, would be leaving the company. We'd like to thank him for what he has built here and wish him all the best. I'm sure his next adventure will be a great one and that here at Zymeworks, we'll continue our shared mission of enabling patients to return home to their loved ones cancer-free. Now I'd like to talk about Zymeworks and our progress in 2021 and, importantly, opportunities in 2022. But first, I'll refer you to our safe harbor language around forward-looking statements and refer you to our SEC filings for more information. Now with that out of the way, let's dive into the presentation. At Zymeworks, we're leading the next wave of biotech breakthroughs. There's no question that today, across our industry, there's a paradigm shift taking place away from single modality therapeutics towards new multifunctional therapeutics that enable new ways of targeting addressing complex disease states. Here at Zymeworks, we're at the forefront of this paradigm shift. Our bread and butter has been developing next-generation, multifunctional therapeutics by leveraging our proprietary suite of technology platforms. As you'll see, we're enabling these advancements, not only with a host of pharmaceutical partners but by advancing a late-stage clinical pipeline. Our lead asset, zanidatamab, is a bispecific antibody which we believe has the potential to become the new foundational therapy for HER2-expressing cancers. So how do we do this? Zymeworks has 4 novel therapeutic platforms that enable us to design and develop both first and best-in-class multifunctional therapeutics. Azymetric, our industry-leading bispecific antibody that allows for the dual targeting of receptors and ligands on an easily manufacturable IgG1 format; ZymeLink our novel ADC platform that consists of a suite of proprietary payloads and linkers with demonstrated tolerability and a wide therapeutic window; EFECT, which consists of a tailored library of Fc modifications that can up or downregulate immune function; and ProTECT, our newest platform which we unveiled last year at AACR that allows for tumor-specific activity through conditional blocking and which can add co-stimulation or checkpoint modulation to enhance efficacy. These platforms are modular and scalable. And together, they enable new biologies. Moreover, our experience in protein engineering means that each platform provides multiple tools to our drug hunters and to our partners. The reality is that our industry has long since moved away from one-size-fits-all solutions. And a prime example of this is the multiple different formats that comprise our Azymetric bispecific platform. These different formats allow us to match the ideal structure to function to ensure that we're maximizing the potential effect of a new therapeutic candidate. And whether it's a specific format within the ADC platform, proprietary cytotoxics or a unique Fc modification, it doesn't stop there. The elegance of the Zymeworks platforms is in their synergies and their ability to combine these approaches to treat complex diseases. The first step in understanding the power of our platforms is achieved by looking at the breadth of our strategic partnerships. With 8 active collaborations, we believe our deals with pharma provide technical, scientific and clinical validation across a variety of indications. Notably, in 2021, Johnson & Johnson advanced 2 candidates into the clinic. And most recently, Exelixis acquired ICON-2, a novel ADC built using our ZymeLink platform from our partner, Iconic Therapeutics. Aside from the technical validation, these deals have provided, it's important to note that these active partnerships have generated more than $225 million non-dilutive partnership revenue and represent a total of over $8 billion in potential future milestone revenue in addition to future royalties on successfully commercialized product candidates. We believe this represents significant upside to both our company and to our shareholders. But what we're most excited about is our clinical pipeline. As you can see, zanidatamab, our lead clinical candidate, is currently advancing in 2 pivotal studies. And our clinical efforts span biliary tract cancer, gastric cancers as well as breast and colorectal cancers. Importantly, we're advancing studies demonstrating the potential of zanidatamab, both as monotherapy as well as a combination therapy with standard-of-care chemotherapies as well as with BeiGene's anti-PD-1 tislelizumab, Pfizer's anti-CDK4/6 agent Ibrance and ALX Oncology's anti-CD47 blocker. Evorpacept. In addition to zani, we're happy to announce that our first novel ADC, ZW49, continues to advance in Phase I studies and we look forward to providing an update to The Street later in 2022. We've leveraged our therapeutic platforms to develop 2 product candidates with the potential to address the entire spectrum of HER2-expressing disease. Zanidatamab is a bispecific HER2-targeted antibody using our Azymetric technology with a mechanism of action designed to shut down HER2 signaling and induce the immune system for HER2-driven disease. While ZW49 is a bispecific HER2-targeted antibody drug conjugate that combines the unique antibody framework of zanidatamab with Zymeworks' proprietary ZymeLink linker and cytotoxin designed to address tumors that express HER2, but are resistant or refractory to HER2 signal blockade. Now let me tell you a bit more about each of these assets. What makes zanidatamab special is the unique mechanisms of action that we observed when we targeted 2 key epitopes on the HER2 protein at the same time. This is called biparatopic binding. This resulted in HER2 binding across a range of expression levels, low to high; HER2 receptor clustering, internalization and downregulation; inhibition of growth factor-dependent and independent tumor cell proliferation; and potent antibody-dependent cellular cytotoxicity and phagocytosis and complement-dependent cytotoxicity. More importantly, this translated into real patient outcomes in the clinic. We have now treated over 400 patients across many tumor types, some of which we'll review today. And we've consistently seen robust antitumor activity, both as a monotherapy and in combination with chemotherapy and other targeted agents. And there's more data to come in the near term, with 3 new data presentations expected in the first half of 2022, including Phase II data in first-line GEA, evaluating the triple combination of zani plus chemotherapy with the anti-PD-1 tislelizumab; Phase II data evaluating zanidatamab plus chemotherapy in the first-line breast setting, a setting typically treated with the combination of Herceptin and PERJETA plus chemo; and Phase II data evaluating zanidatamab plus Ibrance and fulvestrant in third line plus HER2-positive hormone receptor-positive breast cancer. In ZW49, we sought to leverage the robust internalization we observed for the biparatopic design of zanidatamab as the ideal backbone antibody to deliver a potent toxin to HER2-expressing tumor cells. From the most recent update of our ongoing Phase I study, we have observed antitumor activity and confirmed responses in several tumor types as well as a differentiated safety profile. We are currently evaluating 2 parallel dosing regimens for ZW49 with the aim of selecting a recommended Phase II dose and expect to present these at a medical meeting later this year. When we think about HER2 treatment landscape, many people don't realize that of the 8 approved agents for HER2-positive disease, all but 2 are limited to breast cancer, with only Herceptin and Enhertu approved in the additional indication of gastric cancer. This leaves the opportunity to not only improve on these standards of care but to broaden the HER2 market to include many other tumor types, such as lung cancer, biliary tract cancer, endometrial cancer and colon cancer, just to name a few. And this leads me to our development strategy for zanidatamab. As I mentioned, our initial clinical data for zanidatamab monotherapy showed proof of concept in a number of different tumor types. However, seeing robust tumor regression in a very difficult-to-treat tumor type, such as biliary tract cancer where there are no currently approved HER2 targeted agents, led us to what we call our fast-to-market strategy. The data you see here are from patients who have no other approved treatment options. When treated with zanidatamab monotherapy, the majority of patients experienced tumor shrinkage and 40% had a confirmed partial response. Importantly, these responses were shown to be durable with a median duration of response of 7.4 months, when typically, in this setting, patients progress on palliative chemotherapy in just a few weeks. When we shared these data with the FDA last year, zanidatamab was granted breakthrough therapy designation, and we quickly launched our first pivotal clinical trial for zanidatamab, HERIZON-BTC-01, which we are now enrolling globally with our Asia Pacific partner BeiGene. We expect to complete enrollment of this trial this year, and we are on track to file our first potential BLA in 2023. Building on the biliary tract cancer opportunity, gastric and esophageal cancers, collectively known as gastroesophageal adenocarcinomas, or GEA, these represent a much larger market opportunity. We initially evaluated zanidatamab as a monotherapy and in combination with chemotherapy in late-line GEA where we again saw robust antitumor activity. Unlike biliary tract cancer, Herceptin, a well-established HER2-targeted agent, is approved to treat first-line GEA and, combined with chemotherapy, has been the standard of care for many years. This gave us the opportunity to evaluate zanidatamab in a similar setting to test whether we had truly built the best HER2-targeted antibody. In September of last year, at the ESMO conference, we were excited to share our data in first-line GEA, highlighted by the waterfall plot you see on your screen. In the setting where Herceptin plus chemotherapy results in an objective response rate of approximately 50%, zanidatamab plus physician's choice of chemo resulted in an overall objective response rate of 75%. And all but 1 patient experienced a decrease in the size of their target tumors. Moreover, in the specific chemo regimen, we chose to advance into pivotal trials, the objective response rate was 93%. Perhaps even more important was the durability of response we observed, with some patients on treatment for close to 2 years and the median duration of response of 16.4 months overall. And these data continue to mature today. As you can see by the arrows on the end of many of the bars on the swimmer's plot, most of these patients were still on study at the time of our data cutoff. Now to put these data into perspective, it's helpful to understand the trials that led to the current standard of care in first-line HER2-positive GEA and where the field is headed. A trial called ToGA, sponsored by Roche Genentech, was the key to establishing HER2 as an important target for GEA. ToGA resulted in the approval of Herceptin with chemotherapy based on an objective response rate of 47%, median progression-free survival of 6.7 months and overall survival of 13.1 months. Genentech then went on to evaluate whether the addition of another HER2 antibody, PERJETA, to Herceptin plus chemo, a combination which has recently been approved for breast cancer at the time, would improve the standard of care in gastric cancer. Unfortunately, this trial did not meet its endpoints and PERJETA was never approved for GEA. And so Herceptin and chemo remain the standard of care for many years. Recently, however, Merck published the KEYNOTE-811 study, evaluating the addition of pembrolizumab anti-PD-1 to Herceptin plus chemo. An interim data cut has shown promise, with early results demonstrating 74% response rate and a 10.4-month duration of response, leading to an accelerated approval of this combination in the U.S. With that backdrop, you can now see why the 75% response rate we observed with a 16.4 month median duration of response and 12-month progression-free survival of zani plus chemo without a PD-1 inhibitor has given us the confidence to pursue a registrational path. In addition, given the potential of PD-1 inhibition demonstrated by the KEYNOTE-811 study, along with our partner, BeiGene, we have been evaluating the triplet of zanidatamab, chemotherapy and anti-PD-1, which will read out in the first half of this year. This represents an important upcoming milestone for the program and for our company. Taken together, these data gave us the confidence to initiate our second pivotal trial. HERIZON-GEA-01 is a 3-arm study evaluating zanidatamab in combination with standard of care chemotherapy with and without tislelizumab for the treatment of first-line HER2-positive GEA. There are 2 experimental arms, patients enrolled into arm 2 will receive zanidatamab plus physician's choice of CAPOX or FP chemotherapy, and those enrolled into arm 3 will receive zanidatamab plus tislelizumab and chemo. Both experimental arms will be evaluated compared to arm 1, the current global standard of care regimen of Herceptin plus chemotherapy. A total of 714 patients will be randomized equally into the 3 arms and the primary study endpoints are progression-free survival and overall survival. Beyond GI cancers, recently at the San Antonio Breast Cancer Symposium, we presented new data in third-line plus breast cancer for zanidatamab in combination with several different chemotherapies. These data presented promising results compared to the standard of care in the setting. This is the first of 3 breast cancer data sets, each in different settings, which will inform our development path as we move forward in this important indication. As we've covered several of the key data sets that have led to the advancement of zanidatamab into 2 late-stage registrational clinical trials, I want to make sure to highlight the important data we plan on presenting in the next few months. For zanidatamab, we expect to present results from 3 new studies: Phase II data in the first-line GEA setting, evaluating the triplet combination of zanidatamab plus chemotherapy with the anti-PD-1 agent tislelizumab; Phase II data evaluating zanidatamab plus chemotherapy in first-line breast cancer, a setting typically treated with the combination of Herceptin plus PERJETA and chemo; and Phase II data evaluating zanidatamab plus Ibrance and fulvestrant in third-line plus HER2-positive hormone receptor-positive breast cancer. For ZW49, we expect to present the results from our Phase I dose-escalation and expansion cohorts at a medical meeting later this year. In closing, we're confident that Zymeworks is well-positioned as a late-stage clinical biopharmaceutical company and the leader in the development of next-generational multifunctional therapeutics. We have a novel and proprietary suite of therapeutic platforms that are creating value and, more importantly, that are delivering on our mission of enabling patients to return home to their loved ones. We're achieving this both through our partnerships with leading pharmaceutical companies and through our own clinical pipeline across a broad range of HER2-expressing cancers. As we head into 2022, we anticipate multiple readouts for zanidatamab, our novel Azymetric HER2-targeted bispecific antibody, as well as providing updates on both ZW49 and our collaborations. In short, we're excited about our prospects with new and revitalized leadership and look forward to providing further updates on our progress throughout the year. Thank you.

Great. Thanks for that presentation. [Operator Instructions]. Maybe just to start, Neil, you outlined 3 data updates for zani that could come in the first half. Any chance that you could put those in a chronological order for us?

Great question, Jess. But at this time, we're limiting our guidance to medical conferences in the first half of this year. So you'll have to wait and see.

Okay. You guys recently kicked off the pivotal study in HER2-positive gastric cancer. With the 2 experimental arms, can you help us better understand the possibilities for a successful readout from that Phase III trial? Like what are success scenarios given, I guess, the possibility that either one or both arms could hit?

Yes. Great. Well, as we stated, HERIZON-GEA-01 is a global multi-arm pivotal trial, evaluating zani plus chemo and, as you said, with or without tislelizumab as first-line treatment for HER2-positive GEA. The study is open-label with disease assessment occurring by blind independent central review, and it covers the entire GEA spectrum, gastric esophageal and GEJ. As we mentioned, we've randomized the arms 1:1:1, current standard of care, tras plus chemo, zani plus chemo and zani plus chemo plus tisle. The study currently has dual endpoints of PFS and OS and was designed to show contribution of parts and to really allow for the approval of either cohort 2 or cohort 3, so zani plus chemo or zani plus chemo plus tisle. This was a really important part of the study design and one that we took seriously, and we were really happy with the outcome of study design.

Just to dig into that a little bit further, and not saying this is, like, the likely scenario, but in the A scenario in which the triplet arm hits and the zani plus chemo arm doesn't separate, is it enough to just show some trends, some contribution of effect for zani relative to the control arm? Or is that -- what does it say for zani if that arm doesn't hit?

Yes. Unfortunately, as much as I'd love to, I can't speak for the FDA because it really depends on what we see when the data reads out. we're confident in our bio stats on this one, and we believe that the data will support zani plus chemo as we move forward, as we've seen from the precursor studies that we're looking at. And as I mentioned, we're excited to give the Street a first look at zani plus chemo plus tisle at a conference in the first half of this year. So it's a bit of wait-and-see on that one.

Okay. Maybe switching to breast cancer. You mentioned we could see our first look at a frontline zani plus chemo breast cancer data in the first half. What type of data or level of detail should we expect when those results are released?

At this point, there's all possibilities on the table. I really don't want to get a preview as we're still writing up abstracts at this point. So our preference isn't to give a sneak peek. We are definitely looking at ORR and trying to give The Street a sense of durability and we're excited about sharing these results later this year.

I guess to the extent we are looking to that data set to see some initial signs of potential differentiation from Herceptin-PERJETA chemo in the front line, what elements of the profile should we look to, to see that differentiation? Is it response rate? Is it durability? Is it depth of response? So which of those metrics would you focus people on?

Frankly, we think that both are really important reads on this one. Depth is going to be critical for this one as well as ORR. So it's hard for us to segregate one of the 2 indicators at this time.

Okay. Is there a certain bar in your mind in first-line breast cancer that once you hit it, you'll be convinced that the upstream opportunity is really viable for zani?

Yes. Great question. Historically, as you know, that bar was established by CLEOPATRA, which demonstrated that the combo of tras plus pert and chemotherapy, in that case docetaxel, gave an 80% ORR and a median PFS of 18.5 months. Given our recent published data in gastric cancer and biliary tract, if we read through, we believe zani has the opportunity to be superior to tras and pert in breast cancer as well. The first-line breast cancer data we plan to present in the first half of this year, as you've no doubt guessed, will be key in informing this decision to move into these earlier lines of therapy.

Okay. Kind of gets to the next question I had, which is, is it still a strategic importance for you to eventually run a frontline breast cancer study with zanidatamab? Or has the focus moved towards the later-line setting?

Yes. Great question. We're definitely going to let the data drive our decision-making as we move forward in this. There's no question we were encouraged by the late-line breast cancer data that we presented at the San Antonio Breast Cancer Symposium in December. And we remain focused on gathering data from the first-line study as well as evaluating -- as our study evaluating zani plus Ibrance and fulvestrant in HER2-positive HR-positive breast cancer. I think that together, really, these studies will continue to inform our decision-making and the registrational path that we'll be looking at in breast cancer. We'll definitely be sure to inform the market once we present these data and provide an update on our strategy.

And I guess assuming promising data in that frontline study coming up, what would be the sequence of events from there? Would you seek a strategic partner before starting a frontline study? Or is it possible to move forward independently and maybe partner later?

Great question. Frankly, we're focused on generating great data at this point in time. And with that, I think as we know, all possibilities remain on the table. We'll be in a better position to discuss next steps once we see the data and once we've presented it. But yes, really, everything is on the table at this point.

Okay. I guess maybe if we think to the later-line settings of breast cancer where you recently had some data, how should we think about the next steps and regulatory path there? Is this a setting where you would need a controlled study for approval?

Yes. Great question. Like I've mentioned, our results at SABCS were really promising, but we're still gathering data from the study as well as other late lines, zani-Ibrance combos, which will inform some of our decision-making in the near term and ultimately, the labels that we'll pursue with the corresponding regulatory path. The upcoming data presented at a first half 2022 conference will help inform our decision-making here. So unfortunately, stay tuned. The data's coming shortly, and we'll be able to talk about it more after that.

Okay. For BTC, what's the latest timing for the readout of that pivotal trial and potential filing?

Yes. This is an important -- or important study for us, one that we have a lot of focus on internally. The HERIZON-BTC-01 study continues to enroll well and we expect to complete enrollment with top line data in the second-line study reading out in early 2023.

Okay. Maybe switching to ZW49. What have you learned so far from the dose-escalation study? And where do you stand with expansion?

We know that everybody is excited to learn more about ZW49, no question. To date, we've shown that ZW49 is an active drug with a unique and differentiated safety profile compared to other HER2 ADCs. We're currently evaluating 2 different dosing regimens, once every 3 weeks and once weekly, in order to determine what provides the best therapeutic window to potentially advance into Phase II. We recently provided an update on the program status where we said we had merely completed enrollment in the every 3-week expansion cohort. And frankly, we're close to selecting a dose for the weekly regimen.

Got it. And which tumor types are you evaluating an expansion? And when could we see expansion data?

Well, right now, we're focusing on HER2-positive breast cancer and GEA. But we have a few others enrolled across various solid tumors, ovarian, endometrial, CRC and a couple of others. We plan to present these data at a major medical meeting later this year, second half.

What is the dose you chose for expansion? And what's the rate of keratitis at the recommended Phase II dose?

Great question. We haven't publicly disclosed our recommended Phase II dose yet. The ongoing Phase I studies are meant to inform the RP2D and other decisions around that. The expansion cohorts are currently evaluating 2.5 mg per kg every 3 weeks. We haven't yet disclosed any safety or efficacy data from the expansion cohorts, but we plan to submit the data, as I mentioned, to a conference later this year.

Got it. And I guess if we zoom out a little bit, what do you aim to achieve during dose expansion? And in breast cancer, in particular, what type of data would convince you that the benefit/risk profile for ZW49 is competitive in this kind of rapidly evolving HER2 space?

Yes. Our goal is pretty simple with ZW49. Right now we're focused on determining the most optimal dose and regimen for ZW49 and as a starting point to evaluate safety and efficacy in several different indications, including breast cancer as a single agent and potentially in combo with other targeted agents. We'll have these data in hand, as I mentioned, later this year. And we'll be able to assess how it compares to some of the competing molecules you're referencing in this rapidly evolving landscape. We're going to be super data-driven in the back half of this year, especially with Ken at the helm. And we look forward to presenting more updates as we move forward and the data matures.

Maybe switching to your earlier-stage pipeline. We noticed you highlight a couple of early-stage assets at AACR. I think it was an IL-12 asset and a 4-1BB asset. Where do you stand with those programs?

Yes. As with all of our preclinical programs, we're super excited about their potential future development. I don't have a specific update at this time. Speaking of preclinical development, though, we're also really encouraged to hear that our partner, J&J, has advanced their second program using Azymetric bispecific technology into the clinic. That was announced late last year. And as I mentioned recently that Exelixis announced that it was excited by the early data from XB002 which, as we mentioned, was the former ICON-02 asset, an ADC developed using our ZymeLink ADC technology. We're really proud of the work being done by our R&D team in the preclinical setting. And we look at these programs as proof of concept that our platforms and teams are continuing to innovate and develop new therapeutics.

And then, I guess, lastly, how should we think about the cash position in the current runway at this point?

As CFO, this is squarely in my wheelhouse. At the end of the third quarter, we actually disclosed cash, cash equivalents and short-term investments of approximately $308 million and provided guidance to The Street that based on our current operating plan, these resources, combined with collaboration payments that we anticipate receiving from our collaborations, enable us to fund our planned operations until late 2022 and potentially beyond.

Great. Well, thanks so much for the presentation and thoughtful responses. And thanks, everyone, for listening in.

Great. Thank you, Jess.