Zymeworks Inc. (ZYME) Earnings Call Transcript & Summary

Okay, great. Welcome back, everyone. Most of you know me, I'm Yigal Nochomovitz, one of the biotech analysts at Citi. It's my pleasure to introduce the new CEO of Zymeworks, Ken Galbraith. Welcome, Ken. He's been in the job for, I just learned, 67 days. So before we get started, just as a reminder, it's meant to be interactive, so please don't be shy. [Operator Instructions] I'll be happy to give you the floor and you can go ahead and ask, but in the meantime, I've got my own questions prepared. So Ken, welcome. Thanks for taking the time. Maybe for -- as a starting point for everyone that -- people that are less familiar with Zymeworks, just give us a brief overview of the high-level strategy, the high-level structure of the pipeline, and what are your priorities at Zymeworks for the next 12 months?

No, that's great. No, thank you. Great question to start with. Obviously, Zymeworks has been spending his time on a vision of using multispecific antibody therapeutics and ADC product formats to try and -- treats some -- what have been difficult to treat cancers with some novel agents. They've been working on that for some time frame. I love the vision. I've been a fan of bispecific antibodies and ADC product formats for the last 15 years looking for ways that can be useful to create a clinical benefit in patients that we haven't been able to, to date. Right now, we've got an exciting lead programs, zanidatamab, which is in 2 pivotal studies right now. 1 in BTC that will fully enroll this year and 1 in first line GEA that will fully enroll next year. So that's a pretty exciting time point to step into a company as new CEO. Behind that. We've got our trastuzumab ADC format, ZW49, which is in Phase I clinical study, right -- has been, and we're looking forward to finding a pathway to move forward in Phase II later this year with that agent and trying to determine the right dosing regimen and the right clinical indication study for that agent. So I've got 2 great clinical assets, which I think are definitely both active, definitely should have a place in the HER2-expressing tumor space. And right now, it's about generating clinical data, forming the right partnerships to develop and commercialize those agents and find the right commercial strategy to compete with the characteristics agents that we have. Behind that, I've chosen to focus on 2 specific research themes in our early-stage R&D group. One is around our next-generation ADC platform, which is topo based, which we'll talk more about as the year goes along. And second is exploring the next-generation bispecific, which is really a trispecific. So looking at how we go beyond where we have been with bispecific to look at multi-specific antibody therapeutic formats and trying to find even more novel ways and indications to pursue the appropriate engineering skills that we have. So from the pivotal stage product right through to early stage targets we're working on right now, I think it's a pretty exciting time to be stepping in as CEO and trying to build the company from here with the vision that has been applied by the prior founder and CEO for the last 18 years.

Okay. Very good. We'll get into more details on zani and ZW49, but you did mention some of the new initiatives, the next-gen ADC and the next-gen bispecifics. So just help us understand, does this mean you're going to go beyond the HER2 world? Or are these next-gen assets also in the HER2 space?

No. I think we're open to looking at different targets and are working on different things. I think, rightly so, a number of years ago, the company committed to looking at trying to create novel agents in the HER2 space because it was a need for innovation, it was a need for clinical benefit to do better for these patients beyond what was currently available. So we, like others, looked at different formats that might improve clinical utility in these patient population. That's why we came up with the biparatopic trastuzumab antibody, which is zanidatamab, and also an ADC format, which is ZW49, and that was the focus of the company's clinical development at that time. I think there is a host of other targets and indications where our next-generation platforms would be ideally suited both in solid tumors and in hem/onc. And so we'll be talking more about those as we go ahead. We're talking a little bit about that next week at a corporate conference. And later on this year, we'll have a fulsome R&D day on the early-stage pipeline, with our new leader, which we're searching for right now is a new head of research with a full some idea of what targets we're working on, what indications, what strategy, what are the platforms, how do they differentiate from others and why we think we'll be successful. I think the company has not talked a lot about that area. It's been in pretty much stealth mode. And I think it's getting to a place now where we should talk more about it so that investors understand what we're working on and what we're putting capital against and why we think that will be the next leg of value for Zymeworks in the years to come.

Okay. So let's dig in then to, zani. Let's maybe start with the breast cancer trial. So you have a first-line trial for zani plus chemo. And then you have a third-line trial for the triplet of zani plus Ibrance plus fulvestrant. Obviously, it's a very important readouts, both I believe, are coming in the first half of the year. So help us understand what do you want to see in those studies in the way of both efficacy and safety to feel good about advancing those regimens into more advanced studies?

Yes. I think as a new CEO, you do get the chance to reflect, and I've kind of done that on all the data we've generated to date. So I think we're quite comfortable with the BTC and GEA clinical studies that we have going on now in both studies. I think we're active in that patient population. We're recruiting those studies as quickly as we can to get data readouts. I think those are really good initial applications for zani. I think there's a lot more to zani brand that we could do for patients beyond BTC and GEA. Obviously, breast cancer is one of those that we've done a lot of work in to date in multiple settings, multiple different combinations. I think we'll hopefully have some additional data to present upcoming at ASCO, subject to getting our submissions accepted, and that will give us additional data to inform where to go next. I think we've got really good data to support a place for zani in breast cancer settings, either early or late and some of the combinations we're working on have been well suited to where we think zani's characteristics are. It seems to, in combination, add synergy to every combination we put into in terms of efficacy, and it's a very tolerable antibody. So I think it doesn't seem to add any additional side effects or things that we worry about in tolerability from the combinations that we've done. I think the data we have is encouraging. I think for us, it's trying to find the right commercial pathway to find a meaningful benefit for patients that doesn't exist right now, either in the market or with other things we're going to compete with in the future. And those settings, again, are much more competitive than in a pre- and HER2 world. So I think a part of this is based upon our strategy of looking to form collaborations and partnerships in every aspect of the business, but primarily with zani as well. We have a very important partnership with BeiGene in the Asia Pacific markets, including Korea, China and some others, and that's allowed us to do clinical development in some of those markets in some of the other indications and they'd be a great commercial partner for us in those markets. I think what we've been spending a lot of time on is reading our data, looking at impeditive environment, looking at clinical settings and trying to find the right one in the breast cancer setting. And I'm hoping that at ASCO we'll have more to say about exactly what that might be. Beyond that, we've done a lot of work in colorectal cancer, more than I realized before I got here as a CEO. That's a really encouraging data. And I think there's also a good commercial opportunity for us in colorectal cancer to build on the gastric cancer indication we're working on right now. So that's definitely another possibility for us to pursue. Beyond that, we've done some interesting work in non-small cell lung cancer, both with zani and also with ZW49, which we haven't talked a lot about yet, we will later this year. So I think there's definitely opportunities for us to have an active agent, which can provide a benefit in a breast cancer setting. We're just trying to find the right commercial strategy. I think our data is encouraging. It's active. I think it's competitive. I think zani's well -- getting better understood every time we get additional data. We just got to find the right commercial strategy to compete against what else is out there and make sure we're providing them a setting that's broadening a benefit for patients that they don't currently have. That's likely in the breast cancer setting earlier stage than later stage because it's better suited to zani's characteristics.

And are you still thinking about -- earlier on and when I first started following the company, there was a thought that you would differentiate by focusing on the HER2 low population, given the activity of the antibody being a biparatopic antibody. Is that still the case? Or have you kind of moved away from that thought?

No. I think it's one of the exciting things for patients in the HER2-expressing tumor spaces. The whole classification of HER2 and intermediate and low is we're being informed by data every day about what that means and how we could expand the potential applicability of agents to that patient population. And I think it's a perfect setting for zani, which is a great tolerable agent, works well in combination with others, and has productivity across all the tumor types that we've looked at. So I think in terms of treating patients early in disease or patients who might be intermediate or low, that's a place that zani should participate. And that's a part of our strategy, again, is how to have something which could appeal to patients in those settings is definitely going to be -- if we can do that, we can definitely expand the potential patient populations that could be applicable to these new trade agents like zani.

Okay. Well, let's get into a little bit more detail then on zani and the gastric cancer program. So for everyone listening, could you just review with us the design of the pivotal first-line gastroesophageal study and the time lines and to the extent that you can comment on how you've powered this trial?

Yes, absolutely. So we initiated last -- late last year with our partner, BeiGene, pretty major global registration study, over 700 patients, more than 35 countries, more than 300 sites. We chose to do that all outside the United States just because of the accelerated approval from KEYNOTE-811. We thought it was just easier to run the study that way. We took good regulatory advice ahead of that, both in the U.S. and outside, about the structure of the study, the actual design of the study, statistical design of the study which we haven't talked about yet, but we will later on. And that study is a pretty unique 3-arm study. So we're comparing ourselves with the current standard of care, which is still the case even though KEYNOTE-811 got accelerated approval in the U.S. The standard of care is still looking at trastuzumab plus chemo, and we're going to compare that to 2 different regimens, one is looking at zani plus chemo, which builds off the results that we presented at ESMO last year, which were pretty encouraging in that patient population. We added a third arm, which -- and that third arm is compared back to the comparator for trastuzumab plus chemo, and that's adding BeiGene's PD-1 tisle, zani, chemo combination, so those are all -- those 2 arms are -- those active arms are evaluated on their own against the comparator of tislelizumab plus standard of care's chemo. So we think it's powered to provide a result which could show that zani plus chemo is better than trastuzumab plus chemo in that patient setting, and also that adding tisle could also be helpful to that. So those are independent determinations that are based -- structured around PFS and OS in a very standard way. So there's nothing magical in that. But based on the ESMO results we had, were pretty interesting. We're hoping to have some results at ASCO with the triplet, including tisle, which BeiGene's generated, which we think justifies putting that arm in the study. So we think it's sized appropriately to show the benefit we think we need to in this patient population. It could be that both of those arms, with the doublet and the triplet, both end up being better than the comparator. It could be that one or either one does. So we think that's a pretty interesting study to support commercial launch based around a benefit of zani plus chemo with or without tisle potentially for these patients in first-line GEA. So we think that's -- the data we have to date and the data we presented at ASCO justifies the design of what we've done and the clinical investment we're making, and we think that zani can make a real difference in this patient population. And that's why it's a truly global study of a pretty sizable patient population, as I said, in more than 35 countries around the world.

Okay. No, that makes a lot of sense. So I was going to ask you about this. So BeiGene is running the zani plus chemo plus tislelizumab in first-line GEA. Now as you know, zani plus chemo in the Phase II was very impressive with a 75% ORR and I believe a 12-month PFS. So that being said, how much more do you think you can add with addition of tislelizumab to the mix?

Yes, I think that's something we need to study. I think if we got a chance to present our data at ASCO, which we hopefully will soon, I think that data will inform why we decided to have that arm as a part of the study. And I think we don't know yet what the results will be. It's obviously the purpose of running the study. Adding tisle could add somewhat to efficacy, although zani plus chemo is a very good regimen with the doublet. It could be that adding tisle provides longer duration of benefit. We don't know that yet, but it is possible, so we should study that. It could be that in certain populations within GEA, certain patients might respond better with having tisle added to their regimen as opposed to not having add. But again, the study is designed to have potentially a positive result in both the doublet and the triplet. And if that was the case, that would be great news because we could offer zani plus chemo to patients and the option to add tisle to a regimen if the physician thought that was somehow going to provide a different type of benefit for their patient population. So I think when we see the data at ASCO that patients generated will definitely confirm why we have that in the study. And I think we'll just study the patient populations in the way that we're doing, and that will inform us as to justifying regulatory approval for one or both regimens. And based on that, that will determine a little bit, I think, adoption in where you might see it in specific patient populations.

Okay. And I'm just going to say tisle from now. It's a little bit of a tongue twister, to say the least. So let's say, let's just hypothesize that the triplet with tisle looks really, really good at ASCO. Is there a situation where you could stop enrolling in the zani plus chemo in the pivotal or you would keep going with that? I mean just more patients in the triplet, if it's really looking promising?

Yes, I think it will keep going. I mean obviously, the purpose of a Phase III study is to do a fulsome study of a patient population in a randomized setting of a significant size to get to a statistical answer. So I think the data from both the doublet with zani we put on ESMO last year is pretty encouraging. I think the data with tisle is also encouraging. I think at this point, we need to study both of those regimens in a sizable patient population of randomized manner to understand what we might learn about response rates, duration of response, factors that might indicate tisle is beneficial to add to a regimen versus not be necessary to add to regimen. So the data on zani and chemo at ESMO was pretty encouraging for us. We obviously need to replicate that in a randomized significant clinical study, which is what we're doing. And it could be that both the doublet and the triplet have benefits in patient populations beyond the current standard of care, and that would be fine as well.

And then just on time lines, everyone that's a biotech investor loves to know when the data are showing up. To the extent that you can comment any rough sense as to when the first-line GEA trial might read out?

That's a really good question. I think with respect to clinical execution, so the BTC study is going to fully enroll this year, and we're giving guidance of midyear, and we're working really hard on that study. The GEA study started late last year, and we and BeiGene are working extremely hard on getting that enrolled into 2023, which is our guidance. Earlier is better than later in 2023. So we're working hard on that. It's obviously a PFS OS study. So PFS will be dependent upon events. So I don't think we'll forecast that yet. But I think once we're finished enrolling the study and we get a better sense of it, we can provide some better timing at that time frame. It will be traditional PFS OS study in that patient population. And we're working hard on recruiting a high-quality study that's global in nature and doing as quickly as we can to then get that result and then go from there.

Do you anticipate disclosing the number of PFS events that would trigger the analysis? I ask because we've developed some software that can predict clinical trial outcomes and knowing that number would be rather useful.

Yes. I think as the studies -- the study just got initiated late last year, I think as the study gets initiated, we've got lots of opportunities in peer review settings to talk more about the clinical trial design, which we are this year and other factors. I think as we get closer to that, we'll be able to provide some more fulsome information before the data is available.

Okay. Sounds good. So then zani and biliary tract, that's obviously a tough disease. What do you see as the bar in your second-line registrational -- this is a single-agent study. What do you need to achieve there to be competitive?

Well, I think it's an important study. Again, first, it's the largest clinical study we've done with zani so far. And I think in, at least in the BTC population we chose to go for, I mean it's monotherapy, so it's a chemo-free regimen for patients in BTC. So I think it has more importance for us than might be indicated maybe by the market, the potential market size there. So we're working really hard to get that study recruited. It's the primary point, again, is on response rate. So it's not a long time frame to get that data. I think it's going to be an important potential market entry for us and BeiGene around the world in that marketplace. Our monotherapy data that we published previously in late-line patients was pretty good. Response rates for 40%, PFS is 7 months. Compared to current standard of care for these patients, that's a huge improvement. It's pretty consistent with what you might have seen out of TOPAZ-1 with Durva which, again, is treating a broader patient population than we are. But the response rates were a little under 30%, I think, PFS about 7 months, that's just the top line data. We haven't seen all the data yet. So I think we're expecting that for zani, we can make a big improvement for patients beyond what they currently have. And I think we're encouraged that in monotherapy in a chemo-free regimen, we can provide some good response rates for patients, even who have failed in earlier line of therapy. So I think we're pretty interested in this result even beyond the market size comparison. Obviously, GEA is a much bigger market potential for us in breast cancer and colorectal are much bigger for zani, but we're going to learn a lot about zani from this study, and this gives us an early market entry point in BTC. And I think we can provide some -- hopefully provide some clinical benefit for patients beyond what they currently have now standard of care or other therapies which are emerging in the market.

Okay. And then assuming the second-line study works, how are you thinking about first-line biliary? Obviously, the landscape has gotten a little bit more complicated with the TOPAZ-1 data that you referenced for the triple combo of Durva and GemCis. Do you believe there's a path forward for first-line biliary with zani?

Yes. Obviously, we'll evaluate that. I mean, for me, it's another indication for zani I've got to evaluate against clinical development investment in other indications as well, early line breast cancer setting, colorectal cancer, lung cancer. So we're trying to broaden out the application with zani to help the broadest group of patients we can with this brand. So we're going to have to evaluate the first-line opportunity the same way we would other clinical development investments that we can make. And I think as we get the second-line data, we'll have more to say about what that means for broadening out the indication potentially among other patients with biliary tract cancer.

Okay. And then you mentioned colorectal earlier in the discussion. You're in a Phase II there in first line. Time lines for data and, again, what would be compelling to take that forward?

Yes. I don't think we've given a specific time frame yet for data. So I think once we're more confident about that, we will. Obviously, we have a first-line colorectal cancer study enrolling. I'm pretty encouraged by what we're seeing with zani there. I think it's an excellent fit for the agent. In colorectal cancer, combination therapy is extremely important, and zani has shown its ability in other settings, especially in breast cancer to work well as a combination agent in synergistic efficacy and not bringing a lot of baggage and tolerability or side effects. So I think it's pretty interesting. We've just set up a pretty substantial global Phase III infrastructure to run our GEA study. And many of those physicians are -- who are enrolling gastric patients are also enrolling or looking at colorectal patients as well. So I think that's interesting for us to think about. I think we can be competitive in colorectal with response and durability and tolerability. And I think there's definitely a commercial opportunity there for some improvements with novel targeted agents like zani. So I think it's a pretty interesting space. Our decisions are data driven. So I'd like -- I'm like everyone, I'd like to see a little bit more data to inform our next clinical development decision, whether it's in breast or colorectal or lung. And as soon as we have that data, we'll make a decision and then release that data to inform the justification rationale for that decision, same what we're doing for GEA coming up soon.

Okay. Let's try to squeeze in some questions on ADC ZW49. [Operator Instructions] So ZW49, it's been a while since we've had an update on this one. So you have guided to a data update in the second half of the year, I believe. What will that include? And is this going to be used to determine a go, no-go decision on this program?

Yes. I think having taken a look at ZW49 since getting here 67 days ago and looking at the work the company has done since last January, where they made a pretty fulsome disclosure of the current status of the program. I'm pretty encouraged. ZW49 is a really differentiated ADC. I think the company obviously struggled early on in Phase I with some unexpected tolerability issues around managing keratitis. And managing that keratitis required some dose interruption. And I think that's always difficult to run a clinical development program when you have that happening. I think it's obviously based on seeing efficacy around the agents. So I think we've been working with different dosing regimens both in the Q3-week dosing regimen where the company started, but also more frequent dosing. So there's a weekly regimen that we're working on now. And I think we just, we need to find two things. One is we need to find a dosing regimen that we believe can get us the exposures that we need with this agent to get efficacy and find a way to manage the keratitis, so that we can reduce the likelihood of having to do dose -- discontinuations or interruptions in a big clinical development program, which is, makes things more complicated. If we can find that, then I think this drug has a place to be utilized. And I think the second decision for us is just trying to find a place then to match the characteristics of this agent with the competitive environment that exists for HER2 ADCs right now. But there are some characteristics of ZW49 that make it, I think, ideally suited for certain indications. I think a tolerability profile, if we can manage the keratitis with a good dosing regimen that we can select then. I think the rest of the profile I've seen on tolerability is pretty good with this agent and consistent with what we thought it would be when we designed it. So I think there are some indications that would be well suited for an ADC with ZW49's characteristics that maybe not are as well suited with what might be available currently in clinical development. I'm really interested in looking at non-small cell lung cancer as a potential, and obviously, in the HER2 mutation space, that's an interesting area for -- potentially for a ZW49. I think there's other indications we could certainly look at and are looking at. So I think what we'll hope to be able to present in the second half of this year to a peer review setting is the full Phase I work that we've done on zani, including the work we're doing right now, which will provide the rationale for the dosing regimen we would select to go forward and some indication of the efficacy data that we've seen in certain clinical indications, which provide the rationale for the Phase II study, we would select to start with or with ZW49. So I'm encouraged by the data we have. We just have to find a solution to be able to run a clinical development program without a fear of substantial dose interruptions with keratitis that can't be managed and hoping that we'll be able to find that route.

And you mentioned the next-gen ADC in your opening remarks. You said that was, topo was, summary space, I believe. Is that one also a HER2 parent antibody? Or is it going to be something different?

It will be something different. So again, we've made 2 big investments in the HER2 space, which I think was appropriate a number of years ago when there was room for some innovation in that space. And we've got 2 agents, which I think will provide some of that for patients. I think there's a host of other areas that we can go and use our appropriate engineering skills to solve some issues which are difficult to treat cancers that we'd like to get on to. We decided to do that with an updated next-generation ADC platform based on topo, which was not the basis of ZW49. And I think what we've come up with inside our early research group is pretty interesting. I think it's pretty leading edge. And I think we need to carefully pick targets and indications and try and move forward quickly on a broad group of potential targets and indications to keep what we think has some competitive advantage to ourselves over what you're currently seeing in clinical development. So I think we're thinking carefully about it. We're working on multiple targets. I like to work in collaboration with some others on this, so we can move more quickly with deeper resources and speed that we might be able to do with just our own investor capital. And I think as we talk more about that starting next week and throughout the rest of the year, I think people start to understand what we've adopted to inside the company for a next-gen ADC platform beyond ZW49 and why we think that's very compelling and competitive. And then as we get towards the fourth quarter this year, and we talk a little bit more on our R&D Day, we'll give a more fulsome description of targets and indications and strategy and the technology capabilities of that platform we think has to generate a whole host of pipeline of potential compounds out of that as well as the multispecific antibody technology platform we've developed.

So speaking about platforms, one of the core strategies of the company over the years has been developing a nice array of pharma partnerships to bring in non-dilutive capital and also demonstrate the power of the platform. Is your philosophy on the partnership front basically the same as the prior leadership? Or are you changing the way you think about how that's going to work?

Yes, I think we'll do that a little bit differently. I think in the early days. And I was on the board of the company when we did our first deals with Merck and Lilly and others. And I think those were great ways for us to validate our technology platform, normally using other people's targets, not requiring a substantial amount of investment but allowing them to move those products forward into the clinic. And there's 4 products that came out of our pipeline that are now in clinical studies, which is great. I think going forward, I think we would like to find a way to retain more ownership in the programs going forward, continue to provide co-investment along the way. We'll obviously look for funding from potential partners to fund multiple programs forward, but I think we'd like to find a way to co-invest, keep more ownership in those as they go forward, keep co-development opportunities, keep commercialization or cocommercialization opportunities available for those. So I think we'll do it in a different way. I think we'll also, in the early days, we did a lot of one-off or two-off license deals. And I think for both the next-gen ADC and the multi-specific antibody therapeutic platform. Both of those would benefit from a partnership that was in a more substantial multi-target way as a good anchor partner to move a lot more things forward in parallel in conjunction with a partnership like in both of them. So I think we'll do it a little differently. I think we'll do in a way that puts our capital to work in the right way and keeps economics and rights to those programs a little bit more than maybe we did before with some of the earlier licensing deals that -- when the company started.

Interesting. And while we're on the subject of capital, just help us with the -- just the operational details. What is the current runway for the company? How much did you extend the runway with the recent decision to downsize a little bit?

Yes. So we've taken our cash runway into the second half of 2023, which is good for now. I mean, we did a lot of work early on with, as you know, in equity financing, rightsizing the cost structure pretty quickly. I mean more than half the management team left in the first week that I was here. 30% of the company was involved in a [ RIF ] in the first 45 days I was here. We've also prioritized R&D down to 2 themes. There's a lot of things that we're not working on that we were before that I just don't think were going to provide a good return on investor capital. So I didn't want to spend it. So I think in terms of even the priorities, we're much more focused on fewer things, and we're much more focused on executing on those goals. So I think you'll see over time, especially next year, you'll see our burn rate go down pretty materially, I think, just given this year is pretty heavy in clinical development and CMC investment for zani. So I think taking our runway out in a comparable zone. I think we have other things that are within our control that we can execute on. We've got some good preclinical assets that we're looking to monetize with others. So I think we've got some things we can do that would extend that cash runway even further in 2023. So without issuing another share or without having to complete any major partner transactions, we've got a pretty reasonable cash runway. And obviously, partnering and collaboration is key to our competition strategy. It's key to our development strategy, it's key to our future funding strategy. So completing one or more of those partnerships this year will just put us in a much better financial position to be able to work on the opportunities that I find inside the company, inside here.

Okay. Well, best of luck as you embark on the new role. Thank you so much for taking the time. Hopefully, next year, we'll be able to do the bus tour in Vancouver, it'll be fun. So thanks again.

No, thanks very much for your time, and I really appreciate having the opportunity to talk to you today.

Welcome. Bye.