Zymeworks Inc. (ZYME) Earnings Call Transcript & Summary

Good day and thank you for standing by. Welcome to the Zymeworks Delaware Redomicile Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jack Spinks, Head of Investor Relations at Zymeworks. Please go ahead.

Good morning and welcome, everyone. Thank you for joining. My name is Jack Spinks, Associate Director of Investor Relations here at Zymeworks. Before I turn the call over to Neil Klompas, our Chief Operating Officer, who will speak to you today about this morning's announcement of Zymeworks' plan to become a Delaware-domiciled company, I would like to first briefly remind you that during today's call, we will be making forward-looking statements. Forward-looking statements can be identified by words such as should, would, will, continue, may, potential, initiate, look forward to, expect, believe, plan, anticipate, enable and similar words. Forward-looking statements are based upon our current expectations and various assumptions and are subject to the usual risks and uncertainties associated with companies in our industry and in our stage of development. In this webcast, forward-looking statements will also include statements about the anticipated benefits of the proposed redomicile, the anticipated timing to complete the redomicile, anticipated tax impacts to Zymeworks and to shareholders, the impact of the proposed redomicile on Zymeworks' ability to achieve its strategic objectives, anticipated operational expansion in the Asia and EU, and statements about the anticipated development of our business and accomplishment of our strategic priorities. For detailed information about the risks and uncertainties faced by Zymeworks, please refer to the Risk Factors section in the registration statement on Form S-4 to be filed by Zymeworks Delaware Inc. with the SEC and on SEDAR as well as our other SEC filings as found on our website at www.zymeworks.com and as filed with the SEC. As a reminder, the audio, slides and transcript from this morning's event will be available on the Zymeworks website later today as well as on file with the SEC. I will now turn the call over to Neil Klompas, our Chief Operating Officer.

Thanks, Jack, and good morning, everyone. Thank you for joining. This morning, Zymeworks announced our intention to change our domicile to Delaware, subject to the receipt of necessary regulatory and shareholder approvals. On today's call, I would like to take this opportunity to highlight to you, our shareholders, the strategic rationale for the proposed redomicile as well as some information about the process. This process is an effort to further increase long-term shareholder value, and we believe by consummating this proposed redomiciling, we will better position the company to grow and create significant value through the implementation of our key strategic priorities as announced in January of this year. As you will see today, redomicile is not only compatible with but we believe is accretive to our current corporate strategy. For these reasons, Zymeworks management and our Board of Directors strongly believe that redomiciling to Delaware is in the best interest of our shareholders and the logical next step in our corporate evolution. We believe the proposed redomiciling will provide multiple benefits to the business. First, we believe the redomicile will enhance alignment with both our current shareholder base and future investors, and importantly, allow for the potential expansion of our U.S. institutional investor base. Majority of our current shareholders are located in the United States, which is also a significant source of potential future institutional investment. Currently, as a British Columbia corporation, some U.S. institutional investors and certain state-level investment vehicles are prohibited from investing in our common shares or size of such investments are limited or capped. Similarly, in some cases, the limited understanding of British Columbian corporate law by such entities may create a barrier to investment. By redomiciling, we would potentially expand our institutional investor base and would be governed by Delaware corporate law, thereby providing further opportunities to increase the value of Zymeworks common shares and further alignment with the majority of our shareholder base. Second, we believe redomiciling will allow the expansion of our current passive investment base. By redomiciling as a Delaware corporation, we may be eligible for inclusion in leading indices, such as select Russell and S&P indexes, which could increase demand for our common shares through passive investment by those index-linked funds. Third, we believe that redomiciling will reduce complexities related to our future operations. For example, given the United States will be a key geography for commercialization and that a significant portion of potential partners are located in the United States, redomiciling would potentially allow for increased ease of commercialization, partnering and monetization of zanidatamab and future clinical candidates, if approved. The proposed redomicile also potentially reduces cross-border legal, regulatory and tax complexities associated with such efforts, therefore, providing the potential to reduce overall administrative costs and improving our ability to successfully partner and commercialize our therapeutic candidates and platforms. Fourth, Delaware law provides Boards with additional tools for negotiating with potential acquirers, which may assist the Board in seeking to maximize value to shareholders from any proposed future strategic transactions. Finally, it's important to highlight what will not change as a result of this proposed redomicile. Zymeworks will not change its name, its brand or its ticker symbol, and we will not be moving operations or employees away from Vancouver or Seattle. While Zymeworks would be incorporated in the state of Delaware, Vancouver will remain an important hub for our employees and operations, and we expect no significant change to employees currently working in Canada. Since being founded in 2003, Vancouver has been an important part of who we are as a company and will remain so following the redomicile. However, we believe that redomiciling overall will benefit our employees and shareholders alike and will not restrict our ability to continue accessing important medical, scientific or technical talent and expertise through important markets. In addition, we are also in the early stages of expanding our operations to Europe and Asia to ensure operational execution on global activities. These planned operations in the EU and Asia will not be affected by the proposed redomicile. I'd now like to turn to the expected process to affect the proposed redomiciling. Today, Zymeworks' wholly-owned subsidiary, Zymeworks Delaware Inc., plans to file a preliminary proxy statement/prospectus on Form S-4 with the United States Securities and Exchange Commission for the purpose of registering the issuance of securities of the new U.S. parent company. This document, which the SEC has not yet declared effective, describes the process through which Zymeworks will conduct a share exchange. Pursuant to this share exchange, each common share of the current Canadian entity will be exchanged for either a share of common stock of Zymeworks Delaware Inc.; or for eligible Canadian shareholders who so elect and subject to an overall cap, an exchangeable share of a newly formed subsidiary of the Delaware entity which would be exchangeable for a share of common stock of Zymeworks Delaware Inc. at the time of their choosing. Eligible Canadian shareholders may also elect to receive a mix of shares of Delaware common stock and exchangeable shares. The proposed redomiciling has been designed to make the transaction as tax-efficient as possible for both Zymeworks and our shareholders. With the help of professional advisers and based on current operating assumptions, we do not anticipate Zymeworks will incur corporate-level Canadian or U.S. federal income tax resulting from the planned redomicile. We also believe that this redomicile transaction would generally not create a taxable event for our U.S.-based shareholders. For our Canadian shareholders who elect to participate in the exchangeable shares, we expect that they will be able to elect to defer all or part of any Canadian capital gains tax that would otherwise arise on the exchange of the common shares. Additionally, certain Canadian shareholders may be able to benefit from recognizing Canadian capital losses on the exchange shares. However, we strongly encourage you to contact and discuss your personal tax situation with your tax advisers and to consult the information found in the preliminary proxy statement/prospectus on Form S-4 to be filed with the SEC by Zymeworks Delaware Inc. I think it's worth highlighting here that the exchangeable share structure as outlined today and the overall mechanism for affecting the redomicile to Delaware is a well-known and established administrative process that has been successfully used by other Canadian companies to redomicile to U.S. jurisdictions. This structure helps minimize the overall tax exposure to our shareholders. And as we noted earlier, we're privileged to have received advice on this process by seasoned legal and tax advisers on both sides of the border. Furthermore, under the Business Corporations Act of British Columbia, the process we are proposing will require a special meeting of Zymeworks security holders to approve the share exchange and redomicile to the U.S. This will require the approval of 2/3 of votes cast at a special meeting as well as approval by the New York Stock Exchange and relevant Canadian courts of law. Upon receipt of an interim order from the court and upon the S-4 becoming effective, we will mail you a proxy statement/prospectus and call for a shareholder meeting. Exactly when this meeting will take place is uncertain at this time and will largely depend on the SEC's review process for the S-4. However, we hope that it will occur within the next few months and that we can count on your support for the transaction at that time. Completion of the redomicile is expected to occur in the fourth quarter of 2022, pending an affirmative shareholder vote and relevant court and regulatory approvals. Everything described today, while largely administrative in nature, is part of a process beginning January of this year to rebuild Zymeworks with the goal of resetting, focusing and building a leading biopharmaceutical company around a renewed organization. Ultimately, everyone at Zymeworks is working towards creating sustainable long-term value for our shareholders and an exciting and expanding pipeline of product candidates with the potential to make significant difference for patients around the world with difficult-to-treat cancers. We have been making great progress towards these goals to date on our way to fully realizing our key strategic priorities. We have reduced our operating costs and improved our financial position through a capital raise and a continued focus on identifying efficiencies and reducing our expenses and operating costs. We have continued to aggressively pursue and make progress towards new partnerships and collaborations and other non-dilutive sources of financing. We have fully recruited our HERIZON-BTC-01 pivotal trial in second-line HER2-amplified biliary tract cancer ahead of target. We have presented promising data for zanidatamab in GEA and breast cancer at ASCO with additional exciting data for zanidatamab, ZW49 and our early R&D programs to be presented later this year. And we continue to work every day towards accomplishing the remainder of our key strategic priorities as we laid out earlier this year. We believe that all of these steps are pivotal to accomplishing our goals and believe that redomiciling into Delaware, as proposed today, is a natural next step in the direction of building a better Zymeworks and enhancing long-term shareholder value. With that, I'd like to thank everyone who listened in on this call for their time, and importantly, everyone behind the scenes who has worked tirelessly to bring us to this point. I look forward to providing subsequent updates in the future. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.