Zymeworks Inc. (ZYME) Earnings Call Transcript & Summary

Great. Good afternoon, everyone. My name is Frank Tang, and welcome to the Morgan Stanley Healthcare Conference. This is the fireside chat for Zymeworks. I'm joined on stage by Chairman and CEO, Ken Galbraith; and CFO, Chris Astle. So, before we get started, I'd like to read a quick disclaimer. For important information -- for important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. So, Ken, to kick things off, it would be great if we could spend a few minutes at the beginning for you to give us a high-level overview of Zymeworks and the pipeline and platform.

Okay. That's great. Thanks for the invitation to be here to present at Morgan Stanley for the first time as Zymeworks' CEO, and in the ballroom. Thank you. So, again, Zymeworks is a company that's a little over 15 years old, and it was originally designed around a computational biology platform that was very useful in designing advanced biologics like bispecific antibodies. And for the first part of its history, it did a lot of great work in creating novel bispecific antibodies using that platform for pharmaceutical partners, and a number of those are currently in the clinic. Janssen has 2 in clinical studies now, BMS has 1 in clinical studies, and we have a range of other platform collaborations. After that, the company decided that they would try and design some molecules for themselves and decided that we would build not just bispecific antibodies, but biparatopic antibodies and biparatopic ADCs. So we work in both of those fields now. We have a platform around multispecific antibodies, both bispecific, biparatopic and beyond that, the next-generation bispecific, which is a trispecific or beyond. And we also have an antibody drug conjugate platform within the company. So we do both within the same company, which give us a broader ability to look at a therapeutic target and decide whether a multispecific antibody approach might work or an ADC approach. The company has 2 clinical stage assets, 1 is zanidatamab, which is a biparatopic HER2 targeting antibody, which is currently in 2 pivotal studies, 1 for biliary tract cancer second-line patients where the pivotal data will read out before the end of this year, which is fantastic, and we're looking forward to that. We also have a very substantial Phase 3 clinical trial ongoing now, looking at zanidatamab plus chemotherapy in first-line GEA patients, which we expect will be fully enrolled by the end of next year, and PFS interim OS readout would be around mid-2024. So, we're excited for looking at the potential of what zanidatamab could be as a great HER2 targeting therapy in treating patients as the first HER2-targeted therapy in biliary tract cancer and the potential to treat first-line patients in GEA. And we think we can make some significant developments in not just response rate for patients, but ultimately overall survival, which is our goal. Beyond that, we took zanidatamab as a biparatopic antibody and made an ADC platform, [ another ] format out of it called ZW49 or zanidatamab zovodotin. This is a Phase 1 clinical study. We just had a recent data at ESMO last week, this week in Paris and they gave an interim update on where that agent was based on the data we have in future development platforms. Beyond that, we have 2 other agents, 1 is at ADC, 1 is a multi-specific antibody that are headed towards the clinic by 2024. And also, those 2 strong platforms, which have the capabilities of building the next-generation ADC or the next-generation multispecific, which we hope to be able to exploit for more than even just the next 2 going to 2024.

Great. That's a super helpful overview. Maybe digging a little bit deeper, could you give us a brief overview of zani's unique dual HER2 binding MOA, as well as kind of the broader market opportunity for that asset?

Yes. So, I think, the company made the decision to get into the HER2-targeted space around 2015, so about 7 years ago. And I think you saw the same thing that Daiichi Sankyo and others saw that we had some tremendous products that were approved in the HER2-targeted therapy, trastuzumab, pertuzumab, Kadcyla, who had got some great patient outcomes for HER2-targeted therapy, mostly in breast cancer, but also a little bit in gastric cancer. And I think we saw the need to go to the next level. So let's creates some differentiated agents with completely different mechanisms that might have the ability to create better patient outcomes, focused on oral survival even beyond breast cancer and to some of the other HER2-expressing tumors. So, we started zanidatamab in the basic premise was, if we could create something that was biparatopic as opposed to bispecific, so 2 different binding sites -- 2 different epitopes on the same target. Would we see a difference than just combining trastuzumab and pertuzumab together? And what we found is that we created an antibody that had a completely novel mechanism of action because of the ability of binding on those 2 epitopes. And it ended up being a tremendously internalizing antibody, very potent, very tolerable. And then we started to understand where those might be best positioned. Our preference is always for the first-line or second-line opportunities for patients, because we think those are the places that we can have the biggest benefit. And so, we looked at gastric cancer as initial indication, which we're pursuing BTC and GEA. We've done a little bit of work in colorectal cancer as well as a potential follow-up. And we've also done a number of earlier clinical-stage clinical studies in different breast cancer indications, both early line and late line. So, I think, the mechanism for zanidatamab is very different from anything else that we see in the HER2-targeted space. There is a publication on the mechanism of action coming out before the end of this year. And I think people understand exactly how that works and why that could be important in creating outcomes we haven't seen for those patient populations before. Our basic premise also with our agents is that combination therapy probably has the best potential to get long-term responses, which have some good duration and get 2 magic OS points. So, for zanidatamab, we've studied that very carefully in combination with standard of care chemotherapy and also with PD-1, because there seem to be some synergy. [indiscernible] of PD-1 with ZW49 will do the same thing. So we think the answer to getting these long-term durable outcomes [ related to OS ] is going to be done by combinations of our novel agents with current standards of care.

Okay. Yes. Great. That's super exciting. And I know, so zanidatamab has -- is being explored in breast cancer, stomach, biliary, colorectal, maybe we could focus on the ongoing pivotal trial, specifically in GEA and biliary. Could you give us some of the highlights of the data you guys have presented so far in GEA maybe?

Yes. So we presented some data previously at ESMO around looking at the combination of zanidatamab and chemotherapy, and we're able to generate response rates around 75%, which is fantastic for that patient population. And we've recruited more patients than we presented last time. We have a lot more longer-term follow-up, including OS. And we're looking forward to putting that data in a peer-reviewed meeting in the first half of next year. And I think that will be -- we also obviously have a randomized study going on, looking at that combination. So, we need to finish that randomized study and look at the data. We're also studying and we've published some data with our partner, BeiGene, looking at the combination of zanidatamab, chemo and a PD-1 from BeiGene and trying to understand that, that can provide some benefits in longer duration, better overall survival or something specific for a subpopulation. We're adding a PD-1 of the combination may be beneficial. BeiGene put up some data on that recently at ASCO. And that's obviously a part of our Phase 3 randomized trial as well as a separate arm. So I think we'll get a little bit of insight about the potential of zanidatamab. And then, the best thing for us to do is recruit that randomized study as quickly as possible, look at the PFS and interim OS by mid-2024. And that will give us a good indication of where that might fit as a potential treatment for those first-line GA patients and how much above the current standard of care we might be able to achieve.

It's great to hear, that's the first line as well. Okay. So, moving on, I guess, it would be great to hear a little bit about the HER2-positive BTC data as well?

Yes. So, I think, we've obviously looked at breast cancer, which is a much more crowded space. It was crowded before and HER2 came along. It's more crowded now within HER2 [indiscernible], tucatinib. It's the place that people start, it's the place where HER2-targeted therapies had the biggest benefit for patients previously. So, again, we've been doing some earlier stage clinical sites trying to understand how zanidatamab can be differentiated in that marketplace. Where can we really help a patient population that's not being well served by things that have come along and revolutionize the treatment of HER2-targeted therapy. At ASCO, we put out an early line study looking at zanidatamab plus docetaxel, which seems to provide, in a small population, a pretty significant response rate of 90% versus the current standard of care being around 80% of the early population. That's a really interesting opportunity for us. It's something that's probably beyond our own capabilities to fund and execute. So that will be something that we would discuss with a future commercial partner that we'd like to have for zanidatamab and that we're working on right now. We've also looked at some later line therapy populations in breast cancer. We have a study going on right now with zanidatamab and palbo plus fulvestrant, which we hope to report on in the fourth quarter of this year at a peer-reviewed meetings. We look forward to sharing some of that data. So we think even in later lines of therapy, which is using our preferences first or second-line opportunities. Later on to therapy, we see some underserved populations that maybe we can potentially have a good outcome for that others can't. But I think that's something that we look at pursuing, provided the opportunity to make a difference for a large enough group of patients to justify the investment to do that.

Yes. Zanidatamab has been explored in kind of -- you guys have a pretty big breadth of clinical data on the asset. It's quite impressive. Are there any other ongoing trials that you'd like to highlight?

I think the most important one to look out for catalysts are, again, reporting in Q4 this year on our later line study in patients, again, the HER2-positive, HR-positive patient population that I mentioned with the combination of zani and palbo and fulvestrant. I guess it's an interesting one to watch for. I think update on the first-line GEA data for zanidatamab plus chemo, which will be in the first half of next year, I think, is interesting. On our Phase 1, we did see single-agent activity across the spectrum of HER2-expressing tumors. It's just hard for a company that's about our size to explore all of that at the same time. But we are working on a publication of the data from our Phase 1 on zanidatamab in the other cancers. So, beyond the big 4, breast, gastric, CRC and non-small cell lung cancer, and I think that might give some good indication of other places that zanidatamab could be used either alone or in combination to be effective for those patients and look forward to presenting that manuscript publicly and understanding a little bit more of where zanidatamab could expand to next.

Great. Perfect. So, I guess, moving on from zanidatamab, maybe if you can give us an overview of ZW49 in that approach?

Yes, absolutely. So, ZW49 is our ADC product format with the same antibody backbones on zanidatamab. So we believe zanidatamab is the best HER2 antibody available today. It's an excellent internalizer. It's got a great tolerability profile on its own. So, without making the ADC platform -- ADC format of that antibody could give a differential mechanism than zanidatamab as an antibody itself and might be better in certain situations. We designed that ADC to be used with our thought of combination therapy. So it's a very targeted agent. There's no bystander killing effect. It's a DAR of 2 with a very potent payload and a very great internalizing antibody. So, what you see from ZW49 or zanidatamab zovodotin is strong on-target efficacy and a tolerability profile consistent with the targeted agents. So, we put out some single-agent activity in our Phase 1 study at ESMO earlier this week on Monday. And from what we saw, we saw single-agent activity of at least 30%, which is kind of our benchmark for using combination therapy. We saw it across the spectrum of HER2-expressing tumors, which gives us a little bit of flexibility over which indications to pursue next. And we saw a tolerability profile that was well characterized with our major adverse events being Grade 1 and Grade 2 keratitis at the dose that we studied the most, which was 2.5 mgs per kg every 3 weeks. The keratitis seems to be all characterize as Grade 1 and 2, very mild, very similar to what you see with ImmunoGen's MERS. And so we think that's manageable through clinical development and commercialization. Most importantly, of all the HER2-ADCs, we've looked at with clinical data, it has the least severe adverse event profile in terms of the severity and also breadth. So we don't see neutropenias. We don't see neuropathy. We don't see any signs to-date of any pulmonary toxicity, pneumonitis ILD. But I think in terms of a differentiated ADC, we'll find them as very different, and the tolerability profile allows us to do combinations with a PD-1 or chemo regimens that are currently standard of care without overlapping toxicities. And we think that zanidatamab in those combinations will bring something to the combined efficacy that we might see in those combinations. So we laid out that data. We're still doing additional Phase 1 work. We laid out potential development plans for that agent at ESMO. And I think we look forward to reporting on future development plans and additional data publications on that in 2023. But for me, I think ZW49 or zanidatamab zovodotin certainly has a place to compete and participate in the very crowded HER2 ADC space. And that may be as the second choice, HER2-ADC, behind in HER2, but that's still a really good place to be from an opportunity and ability to help patients who progress or have to come off of in HER2 because of toxicity. And physicians that we talk to are looking for that second choice. They love ADCs in the HER2 space. They can see the power of them. They're looking for the next one. And so, one with a well-characterized tolerability without pulmonary talk and with the ability to be treated in combination with PD-1 and chemo agents as opposed to monotherapy, the way that others might be approaching is something that we think is going to be attractive. And we need to generate the route to regulatory approval and clinical indications that will matter to those physicians. And I think we see a path for that for ZW49 right now.

That's great to hear. What's the next key catalyst for ZW49 or when?

Well, we just have one Monday, but -- yes, but it's coming up. So we will have some additional data that was not able to be published at ESMO from our Phase 1 study. So we look to put that in another peer review meeting next year. We're expanding our current Phase 1 study to enrich our patient population for some of the indications we're interested in. And I think in 2023, you'll hopefully see some stuff on clintrials.gov, announcing what our next clinical study is, and it's going to be in looking at combination therapy with likely with PD-1, first followed by some chemo regimens with ZW49 specific indications of interest to us.

Great. Okay. That's exciting. Moving on beyond the 2 clinical assets, maybe if we can kind of focus on the platforms and collaborations a little bit. So if we look at your technology, you can obviously expand into a lot of different indications, different assets. And in terms of partnerships and collaborations, you have many of them. If you -- could you focus a little bit on any of the key highlights you'd like to discuss with us?

Yes, sure. We've done tremendous work for our partners in developing bispecific antibodies. I think they're really pleased with our engineering skills and the ability to create opportunities for them to advance the standard of care with their agents. We just like to do more of that for our own shareholders. So, we have these platforms, which I think are very much best-in-class right now. We like the flexibility of having the ability to do a multi-specific antibody versus ADC. Our ADC platform has been completely rebuilt in the last 18 months. The focus of it is, yes, the TOPO1 payload, but we're also great antibody developers. So we develop what we think are world-class antibodies. And what we've recreated in terms of how the linker payload and antibody go together, I think, is great, and we're looking forward to seeing what products that platform can generate. Our first one, ZW191 will go into clinic by 2024, and we'll talk more about that at our early-stage R&D Day on October 20 here in New York City. I think beyond that and looking at our multi-specific platform, we think the next-generation bispecific is a trispecific -- 3 or 4 different mechanisms built into 1 antibody structure as opposed to multiple combinations of different agents is the way that we might have to go about trying to treat some of these difficult-to-treat tumors that still have extremely low overall survival rates on the long-term. So there are some of these indications we've just not been able to help yet with additional approaches. And we think complex cancers might need complex biologics with more than one mechanism built in. And we think developing it as one structure as opposed to multiple structures in combination has some advantages in development and commercialization. And so, we're looking forward to exploring that platform beyond bispecifics. And we have a platform now that allows us to build in multiple mechanisms that work in concert with each other in a way that we probably couldn't think about 5 years ago. And so, our first one of those, ZW171 is a little bit more traditional 2-plus-1 T-cell bispecific but with a very novel CD3 aspect. So it's a little step forward on our platform. And beyond that, we'll probably go to something that's a little bit more around the next-generation bispecific, which is 3 or 4 mechanisms built into an agent for a specific clinical indication. And so, we're quite excited to talk about this on October 20, because we never seem to get a chance to talk about our early-stage pipeline with zani and ZW49 being in the clinic. We've never had disclosure of -- in such detail about the platforms themselves, the products arising from them, the scientific vision and strategy to keep them best-in-class and our new CSO, Paul Moore, we'll be able to lay that out all publicly on October 20 here. And we look forward to being -- having a chance to do that.

That's great. And you basically took check my next question out of my hand. But, I guess, in addition to that, anything else we should kind of look forward to for the R&D Day, in addition to the pipeline?

Yes. I think, beyond getting more information about targets and preclinical information around the 2 things that we've given numbers to, we'll talk about the other things that we haven't given numbers to yet, at least publicly. And I think there's a tremendous medium- and long-term value in our ability to use both of these platforms around specific difficult-to-treat cancers in a way that hasn't been done before. And I think Dr. Paul Moore is the person who's going to have that vision and push those programs along. So, I think, understanding how he expects to do that in a way that's different and hopefully best-in-class over others trying to do the same thing will be important for people to understand and then follow our progress towards that vision next year and the year after that, and the year after that.

Okay. Great. That's all I'll had on the data side of things. Maybe if we can just cover one more question on the corporate side of things. If you can give us kind of an overview of the cash position of the company and kind of the runway and then -- I know we've talked a lot about catalyst, but maybe a summary of the catalyst to come and the main ones like investors and everyone to focus on.

You want to talk about cash runway, so I get it right.

Yes. So, yes, as we look at our operating plan and have a look at the cash that we have on board, which was supplemented by the equity raise we did earlier this year. And you look at the reduced burn from our workforce reduction that we executed earlier this year, we have cash through to the second half of 2023 and potentially beyond. We have multiple avenues that we can pursue to achieve our corporate goal of strengthening our financial position, whether that is through partnerships, whether that's through additional platform collaborations, other monetization of deprioritized assets or synthetic royalties. And as progress comes on those sides, we'll be looking forward to update on an updated cash position in the future.

And if I can just say on our partnerships, so we -- since I've been in the last 8 months, we've talked about a strategy of integrating additional partnerships and collaborations into our product portfolio from the early part right through to zani. I think we have an excellent relationship with BeiGene in the Asia Pacific region, excluding Japan, for commercialization of zani -- codevelopment and commercialization of zani, we're quite happy with that relationship. We've been trying to figure out beyond -- outside of the APAC regions that BeiGene will commercialize, what's the right commercialization strategy for zani and the company and how do we evaluate that, look at different opportunities that might exist with different partners to do that? And it's a real focus of the company right now to actively find a way to bring that process to conclusion and try and solidify the commercial relationships will have on zani that will work with BeiGene and ourselves. And obviously, we're [indiscernible] that we've got pivotal trial data coming up on our first indication that could be registerable and a launch opportunity. So we're mindful of that event. And so, we're hopeful that we'll be able to complete something that's the right option for zani and the right option for the company and will move us forward on that basis. And we still continue to have discussions around the rest of the portfolio of opportunities to work with partners, which will provide capital, maybe lower cost of capital and equity, but also give us ability to broaden out our programs and work on more things in a more accelerated fashion with a more competitive advantage and working with someone else as opposed to just on our own. And whenever we see opportunities that we think are right for the drug and right for the company and with good partners on good terms, we'll also execute those. So, I think you should look forward to in our company, integration of multiple partnerships up and down the portfolio, which provide good capital, provide ability to go faster, but still retain the value downstream from those products that we spend capital and risk around the innovation. That's what we like to hear.

At this point, I'd like to just briefly open it up to see if we have any questions on the floor.

Do you feel that your trispecific products, trispecific kind of efforts are kind of comps at all to Dragonfly Therapeutics?

That's a good question. Again, I try to draw comparisons because we need to be different. So we go about our own way with our own sense of how this works in the best way. I think, Paul Moore has a good history in antibody development bispecifics and going beyond that both in cancer and in autoimmune and inflammatory conditions. I think he brings a lot of experience to that piece of it that we'll count on. I think the fact that we're good antibody engineers, but also good multifunctional therapeutics, that's an ADC on a biparatopic antibody or thinking about a great bispecific or beyond the 2-plus-1. I think there's things that we can do it. Our approach is to think about how do we improve every particular component of multifunctional therapeutics to optimize it. So when we think about an ADC, we just don't think about -- we better use the most recent payload that seems to do well. We think about the best antibody with the right payload, with the right linker, and every part works together to generate efficacy and hopefully acceptable tolerability. On the multifunctional antibody side, I think we see the -- we think about the same thing. So, every mechanism of design into a structure has to work optimally on its own and together with the goal of achieving a clinical outcome. We haven't seen before. So we'll talk a little bit more on October 20, about the 2-plus-1, which is going to step that way. But then we'll talk also about other options of things we want to target. It doesn't always have to be a T-cell engager. There's lots of other things that we think might be interesting in certain cancers to drugs, we'll talk about that. We'll talk about whether those will be things that might be bispecific also, so there might be 2 blocking antibodies because of some situations that might be preferable. And also, there might be things that you might want to add into the mix because trying to affect the tumor microenvironment might be beneficial as well. So, I think, on October 20, we'll spell out some of those things where we think we're going, what different options we're looking at. And I think the one thing that Zymeworks has been very good at is having flexibility in our approaches to try and treat some of these indications. So you should expect we would have a multi-specific side, a range of different structures and ways of dealing with difficult-to-treat cancers. And we'll explore that full range. It's always been one of the best things about the company is our ability to work in a very flexible manner and even made a company that does ADCs that we think are world-class and multifunctional antibodies are world-class. And having both in a small biotech company just gives us a broader ability to be successful, we think. So just because you see one type of multifunctional antibody, you shouldn't assume that, that's the only approach we'll take. We'll take multiple approaches with all the tools we have in our toolbox to create really differentiated multi-specific and multifunctional therapeutics for that specific cancer indication or that patient population.

Maybe we have time for one more. All right. If not, I think we can bring to close. So, thank you, Ken and Chris, for spending time with us today, and we look forward to your continued progress.

Yes. Thanks. Really appreciate the opportunity to present here at Morgan Stanley for the first time as Zymeworks' CEO. Hopefully have me back. And we just want to thank everyone for their time and attention on Zymeworks. And I would stay tune because I think we've got some really exciting things in the weeks and months and year ahead, and we look forward to reporting on progress that's really fundamental for patients and hopefully successful for the folks doing the work, our employees, and also our dedicated and patient investor base. So, thank you.

Thank you, Ken.