Zymeworks Inc. (ZYME) Earnings Call Transcript & Summary

Good morning, everyone. Thank you so much for joining us for a session at the 41st JPMorgan Healthcare Conference. I'm Brian Cheng. I'm one of the senior biotech analysts here at the firm. Presenting next is Zymeworks. And I'll turn over the stage to Zymeworks in a second, but the presentation will be followed by a Q&A session, and the stage is yours.

Thank you very much. Good morning, everyone. Welcome to late Thursday morning on JPMorgan Conference and certainly appreciate the opportunity to present to you here. I know all of you have sat through a whole host of presentations this week just to get to this one, appreciate your patience in getting to this one. And I'm going to try and keep this light and flowing for you to the end and then leave a lot of time for questions, and I thought we got a good informal situation here to answer questions. So with that, I'll proceed. This is our legal disclaimer. Again, please refer you to our website and filings with the SEC because we will make forward-looking statements, and I encourage you all to read these statements. So here's who we are a little bit. I want to tell you a little bit about where we're going forward as a company, but this is what we do. So at Zymeworks I've been here for a year now. This is the focus of the company going forward. We're intentionally focusing on the most difficult-to-treat cancers where we have not seen meaningful improvement in long-term overall survival rates. And I think that's the place for complex biologics like we design. And we do it in 2 different ways. We not only design next-generation antibody conjugates to try and solve some of those complex problems. We also have in our history and still continue to design multispecific antibody therapeutics, which up until now have been bispecific antibodies, but we'll go in our next stage to trispecific Out of those 2 platforms, we generate a whole host of products, we're seriously targeted on first and second line therapies where we can make a significant improvement in overall survival rates, something very meaningful, which is I think where we need to go with these biologics, which we're able to engineer. We seek to use accelerated approval pathways wherever possible around the world so we find something that makes a meaningful difference, we can get it to patients as broadly as we can, as quickly as we can. Not only we practice what we think is world leading science, but we do it with our financial parameters in mind so that when we are successful with an R&D product, we're also successful financially for our business and also our shareholders is an important component of being a biotechnology company. This is our corporate value framework, worked really hard over the last year as CEO of the company to accomplish a long list of things that were necessary to put us in a position to take advantage of the opportunities that are in front of us. First and foremost was to transform our financial position, which we did with a number of initiatives last year but capped off with the collaboration we announced with Jazz Pharmaceuticals, which I'll talk about. I think in the current environment of current financial markets, it's really important to protect the R&D opportunities that you have to be able to fund great opportunities, and we've done that. So we have a cash runway through 2026, which allows us to take advantage of all the opportunities coming out of our R&D platforms and make sure we can develop those new therapies for patients who are desperately in need of something new and novel to make a meaningful difference in their lives. Last year, we also had the chance to deliver the first top line data from our first pivotal study of our lead program, zanidatamab, which I'll talk about. And that data for us when we saw it unblinded it was just astounding and unprecedented. And I think we're very much looking forward to discussing that with regulatory agencies and discussing the path forward for patients who are in need of a HER2-targeted therapy for which there's no approved therapy now around the world. We were extremely excited when we were able to turn over that data card. We also unveiled our earlier-stage platform opportunities in an extensive R&D Day in October last year in New York, talked a little bit about that. We were able to advance our second clinical stage asset, which is our ADC product format of our zanidatamab antibody, which I'll talk about. We also did a number of things here that I thought were necessary to put us in a position to take advantage of the opportunities we have in front of us, redomiciled moved to NASDAQ, also reset the organization around a very focused approach to how we're going to build products and build the business in the future. I feel very happy about our progress last year. We're very focused on execution of this plan this year and trying to do the same thing we did in 2022, which has set out a clear list of objectives, which I did last week and ensure that we can meet or exceed expectations on every single one of those things that we outlined. And that's the type of performance we need to have in this company. The way we look at our business now going forward is there's 5 very unique and different elements of enterprise value as we see it in the company. And our objective with 2023 is to progress every single one of those elements forward, so that they're more valuable and more advanced by the end of 2023 compared to the beginning. So that sets the stage. I did set out these objectives last week for both 2023 and 2024, just to give you a good forward-looking statement that's more than 1 year. We're very focused on every single one of these priorities because I think they're all important to build the type of business that we'd like to build. I truly believe after 2022 and having been here for a year, there's something really special about this company's products, our experience and what we've done so far in applying that to develop a whole range of products in a portfolio from both our ADC platform and our multi-specific platform especially around trispecifics to really generate a fantastic oncology portfolio that I think if we focus it on the most difficult-to-treat cancers, first- and second-line approaches and meaningful differences can really build a portfolio that we'll be proud of in this company and ensure that we're financially successful for the business and our shareholders. Beyond that, we're mission-driven, as I talked about. The key for us is to have focus. So we have a very innovative approach to how we use our ADC and multi-specific platform together in an integrated fashion. I'll talk a little bit about that as we go along. I believe we have the opportunity to truly improve patient outcomes for these difficult-to-treat cancers, as I talked about. And for us, that's the focus of where we should spend our time. It is the most difficult. It is scientifically the most challenging, but I think it's the most rewarding for us if we're able to solve problems that we have not been able to be solved before. And I think some of the structure and the things that we're creating inside, we'll be able to do it. Right now, I have all the capital, talent and opportunities I need to be successful. That's a very unique and special position to be in, and we're going to ensure that we do not squander that opportunity. And hopefully, in 2023, you'll see that we're making the most of the opportunity for patients and for ourselves and for our shareholders as we move forward. So we have a number of technology platforms for -- or shown here. These are novel and unique platforms that we've developed over our time in the company. We've applied these specifically for our partners' products through our history. Most of it is based upon the original Azymetric platform, which is kind of a validated, unique, multi-specific antibody platform that allows us to create both bi- and tri-specific antibodies with IgG1-like biophysical properties. We did most of this early in our life as a company for other people's products. And we still have a range of those in development. Our intention and focus going forward is to apply this for our own portfolio, more so than for other partners. This is the same platform that's been key to the generation of our 2 lead programs, both zanidatamab, which is our biparatopic bispecific HER2 antibody and zanidatamab zovodotin, which is our ADC product format of the same antibody. As mentioned earlier, our other area of focus is on the ADC platform, where we have worked very hard over the past period of time to select a novel, brand-new, proprietary TOPO1-based payload for ourselves, still using our unique linker thoughts and also designing what we hope are best-in-class antibodies to provide those linkers and payloads the ability to do what we would really like them to do. We also have the ability to utilize immune modulation or tumor-specific co-stimulation in order to better address the targets and indications we're working on. I think what's key here is our approach is slightly different than maybe companies who are focused solely on ADCs or solely on bispecifics or multispecifics. We start with target indication and then apply which of our platforms we think might get us the highest probability of a meaningful difference in outcomes. So we have the ability to design multiple structures and approaches around a target or indication of interest as opposed to just apply the platform that exists within the company. And I think that will hopefully truly be an advantage in creating extremely noble and valuable products in the future. While, not on the stage, because hiding in the front row, our Chief Scientific Officer, Paul Moore, has been very helpful to define the strategy you see here, and he was brought on mid-last year, hosted our early R&D Day. And I think we're already starting to see in our R&D portfolio, his contribution. Again, as you'll notice on the slide, we're going to utilize both of these key focus areas, multispecifics antibody drug conjugates, hopefully, in a very equal way. So our portfolio over the next few years will be balanced between products generated by both of those platforms. And they will be significantly differentiated and clinically validated therapeutics as we're building them. I think we're going to try and use these platforms to develop 5 new INDs in 5 years, of which I hope all 5 of those are very exciting, differentiated and useful and meaningful therapeutics. We will continue to do -- utilize some additional candidates for partnerships beyond those 5, which we would like to keep unencumbered and full rights to over the next few years. But those additional partnerships, which we look to form starting this year, will help to fund the development and progression of the programs beyond our own capabilities of the 5 new ones over 5 years. So we have a growing list of potential best-in-class therapeutics, which will grow. Our first product candidate you've seen here zanidatamab which was the global license agreement that we have with Jazz Pharmaceuticals announced this year to complement our partnership with BeiGene and also announced the first of 2 ongoing pivotal studies in top line data, the other was announced in December. And we're going to look to continue to grow the value of the brand, complete the additional clinical study, which is ongoing in first-line GEA, seek our first ability to make a regulatory filing with the BTC data in markets where we can. And we will continue to look to grow the brand with our partner, Jazz and BeiGene beyond the initial pivotal studies in BTC and GA. Not mentioned here, but I just want to highlight that zanidatamab was recently selected for inclusion in the I-SPY platform trial with patients with HER2-expressing tumors in the neoadjuvant setting of localized advanced breast cancer, and Jazz mentioned this on Monday in their presentation. It's a really exciting development and I think an opportunity where I think zanidatamab has the potential to be beneficial, and we're really excited that Jazz has seen fit to put that forward into that platform. And we're really excited to look at what the results might be from that. Now I just want to talk beyond zanidatamab about some of our exciting R&D efforts. Again, we have a unique ability to develop antibody-based therapeutics in 2 different modalities. As I said, when we look to generate a candidate, we first looked at the areas of highest unmet need, as I said. Then we look to see how our technology platforms can be utilized around that target indication of interest. We have 2 different platforms, but we also have different tools in our toolbox that we can apply in specific situations where we think we can generate additional efficacy and a meaningful difference from standard of care. It's all done on a fit-for-purpose basis so we designed specifically using those tools around each target or indication. It's not a plug-and-play situation or platform. And fortunately, we have the internal capabilities and experience to be able to do that in a meaningful way, both in antibody drug conjugates and in the multi-specific side of our business, which for a small emerging biotech is very unusual and unique, and we want to take advantage of that for ourselves and also potentially for partners. Next slide. This is just again the circle of how we look at opportunities. So things that are in this circle are the areas of the highest unmet need but we still have -- we've not made a meaningful difference. So when we look to apply our technology, this is the patient population that we're seeking out. It is the most difficult. These are the problems that have been the longest unsolved from our sector to date, but this is where we believe these unique and complex biologics that we can generate should be applied to try and solve these problems. But those are the areas that you'll see future clinical candidates come from in those indications. First I focus -- I want to talk a little bit more about our MSLN program. Again, we have multiple avenues and ways to use this. As you can see here, as noted, our lead multi-specific candidate ZW171, which you'll hear more about as it makes its way towards IND. We believe that moving beyond biparatopic antibodies towards trispecifics which target multiple tumor-associated antigens and the same antibody is kind of the next step. So we truly believe the next bispecific will be something that is a trispecific and that's where we want to move to next with our experience and our technology. So we're working to develop the next generation of trispecific candidates to potentially address and maybe get mechanisms that have not been seen before, which might generate efficacy and breakthroughs in those difficult-to-treat cancers, as I mentioned. We have the ability to utilize these platforms to build different types of trivalent antibodies. We can utilize co-stimulation where we think that might be beneficial or checkpoint inhibition with PD-1 to help to address the problems of earlier T-cell engaging antibodies. So this is our first one. ZW171 is a 2 plus 1 format of a bispecific T-cell engaging antibody. Mesothelin is really -- has always been an interesting target. It's validated also by folks who weren't successful in being able to work in this target, but it's a high area of unmet need when you look at all the indications that mesothelin might be in its target for. Our antibody utilizes a very unique geometry that drives high avidity binding and a unique CD3 receptor that redirects our body T cells towards cancer cells and will potentially address previous issues seen with cytokine release syndrome. So there are several aspects of what we're designing the ZW171, which would be unique and differentiated to us. We've extensively assessed the different formats and geometries for numerous antibodies using our Azymetric platform, and the result is something that we believe will provide the optimal activity level and safety profile to address mesothelin as a target, and we're rapidly approaching an IND in 2024 to then prove that in the clinic. Next slide. As mentioned, we have the ability to utilize ADC's strategy for indications that we think is an appropriate approach. We think it's very unique to us. It does involve right now, our novel TOPO1 proprietary payload. But as we move forward, we do have the ability as we have before, to look at other novel targets, novel linkers and novel payloads, and we'll continue to build and regenerate the platforms as we move products forward from those platforms. On the ADC side, our lead preclinical product ZW191 is a folate receptor alpha targeting ADC that utilizes our novel TOPO1 payload. Folate receptor, as you saw this week, is a clinically validated target with the potential to address a range of tumors, both gynecological, lung, triple-negative breast and other solid tumors. Where we think we're able to differentiate is with a novel antibody, which improves internalization, payload delivery and tumor penetration. So we think the antibody is one of the keys to this ADC, which we're developing now. And we think it will potentially address lower levels of folate receptor alpha expression in tumors in order to be able to reach all the patients, which might possibly benefit from something that targets folate receptor alpha. Further, we do want to utilize our bystander activity with our TOPO1 payload and our protease-cleavable linker to drive potent efficacy, and we're very much looking forward to getting this in the clinic in 2024 as well. As I mentioned before, our goal is shown here. We're moving quite rapidly from being more of a platform company to more of a product-specific company. Over the next 5 years, we hope to move 5 great innovative molecules in the clinical studies. Speaking about our commercial collaborations, one of which is new. So again, there are around zanidatamab, which is our lead clinical biparatopic antibody in the HER2 space. In December of this year, hopefully, some of you noticed we did sign a great license agreement with Jazz is a fantastic partner for zanidatamab. I think the financial terms of the arrangement for us were fantastic. But I think they were relative to the value that both Jazz and we see in zanidatamab. And that's what this deal reflects. Not only do we get a substantial upfront payment to transform our financial position but as of October 19 last year, all of the ongoing costs related to development of zanidatamab are being taken care of by Jazz, which obviously provides us additional ability to use our cash runway on the rest of the pipeline and not zanidatamab itself. We're still continuing to manage all the ongoing clinical studies and Jazz will take responsibility for anything new in developing zanidatamab for here. But we're so excited to have Jazz as a partner, and we're working really hard right now with the data which we got in December and working hard on seeing how we can find a path forward to market with that. In 2018, we had our first zanidatamab relationship formed with BeiGene for Asia Pacific territories not including Japan, but also including Australia and New Zealand. And BeiGene has been a fantastic partner for us in codeveloping zanidatamab, and we're looking forward to utilizing their commercial expertise with Jazz to commercialize zanidatamab as we seek approvals. As I said, we have 2 pivotal studies ongoing. One, we reported top line data in December, we'll report out the full data set in a peer-reviewed forum in the first half of 2023. And our GEA pivotal study continues to go on, and our expectation is that we will have data from that study available in 2024 on a full approval pathway, not accelerated approval pathway. Next week, in San Francisco, if you're sticking around, we will have the ASCO GI Symposium, and we'll have a really encouraging update from our Phase II study of zanidatamab plus chemo in a first-line GEA patient population and we look forward to reporting those results with Jazz next week here in San Francisco again. Zanidatamab zovodotin is our HER2 ADC product format of the same antibody. We retain rights to that. It's not included in the Jazz license agreement. So we're looking to push this forward from our Phase I data into a number of different cohorts to study this HER2 ADC uniquely in combination with standards of care and not as a monotherapy where we would generally look to position ADCs. We think there are a number of interesting indications in the HER2 space that we can test as a basket of indications as well as continuing to explore interest in the HER2 low population and also as looking at a positioning of what happens for patients who failed TDXD, which is now becoming commonly prescribed for many cancer, but also breast cancer primarily. So we look forward to generating additional clinical data over this year and next year. And our goal will be to use that data to hopefully attract a partner who'd be willing to work with us starting in 2025 to work in a registration pathway outside the U.S. while we retain U.S. rights and move forward and hopefully, more than one of these indications towards approval. Seen that one. We also still have a number of licensed -- platform license agreements out of our legacy platform concept where the company started. This does provide capital to us. It provides insight to us as to how to others use our platform. So these still all exist in the company, and I think will provide some cash flow for us in '23 and '24, and we look forward to these partners advancing these programs in the clinic or from preclinical to clinical studies. So to wrap up, we have a very strong position financially. I think it's really important in the current biotech equity markets. At the end of last year, we had $490 million in cash plus not counting an additional $30 million in reimbursement from Jazz. We expect for Q4 R&D costs with zanidatamab. We gave guidance last week that we expect to provide an operating cash burn of around $90 million to $120 million of that cash burn. And it provides with a cash run out through at least 2026, if not beyond. So I think, as I said, we put ourselves in a position where we are financially strong enough to take advantage of all the opportunities that come out of our R&D engine. And that might be a unique position in today's environment and where everyone would like to go, I think it's very important to find a way to finance the good opportunities that come out of it and not have to shelve them or delay them. Key expected milestones are shown here for 2023 and 2024, and I think we had a very full agenda last year of some great milestones. I think 2023 is going to be as fulsome and active in driving every aspect of our business forward and advancing it, and we look forward to explaining the first of those key milestones next week with our data at the ASCO GI Symposium here in San Francisco. So this is the last investment highlights. As I said, I'm in a very unique position as a CEO of an emerging biotech right now. In that, I have all the capital I need to drive R&D programs forward and drive value into our business. I've got all the talent inside the company I need right now to be successful in that. It's a very experienced group, who are the group which brought zanidatamab, and zanidatamab zovodotin into the clinic and towards approval, so I feel comfortable with that. And I think more importantly, we have a wealth of opportunities in our platforms right now of targets of interest, indications of interest and additional partners who'd like to work with us around the core. And I feel very comfortable that we'll be able to show some advancement of success in 2023 in a way that hopefully exceeds expectations that exist now for the company. I look forward to reporting that progress to you during the course of the year and happy to answer any questions right now.

Great. We'll switch over to the Q&A session. I'm joined by Paul Moore, their Chief Scientific Officer. Well, we also have mike runners on the stage for those of you who are in the live audience. For those of you who are joining on the conference sites, please feel free to submit your questions through the question portal. So maybe just to kick start our discussion today. Maybe -- you've got a strong balance sheet now from your Jazz deal. You're turning a new page on your R&D portfolio. Maybe just talk about -- it'll be great to talk about just how you think about the next step forward. What are some of the key learnings that you've got from developing [ zani ] to passing on to Jazz and how do you use that learnings and apply it to the R&D portfolio as you're moving forward to the INDs filings in 2024?

Yes. Great question. I think there's a lot of learning from the experience that we have as an organization from developing zani and ZW49, which we did from concept stage right through to advance clinical studies and eventually through to hopefully approval with zanidatamab. I think there's things we learn along the way that are unexpected. I think one of the things that we've noticed now having seen clinical data from a pivotal study with zanidatamab is there's something unique about the mechanism in that product that we think is related to the biparatopic binding, which is more than predicted. I think when the company started out with that concept, it was repeating the mechanism you might see in Herceptin, PERJETA in a single antibody. But there's something about the biparatopic binding aspect of that, that creates a unique mechanism that's driving what we think are these unexpected and unprecedented results starting with what we saw in BTC, and I think people will see it again next week when they look at our GEA data. There's something going on that wasn't what we expected we would get. And fortunately, it's better than we thought. And so that makes us want to explore that more. What is that mechanism, what's happening. We do have a publication on this coming out, I think, in the next month to describe the mechanism that we've seen with zanidatamab. But now that we're seeing clinical data, it's not really a thesis. We think that's driving the consistent deep responses we see with zanidatamab in every patient population that we treat. And that consistency and depth turns into durable benefit, which we hope turns into a much more improved overall survival of the patient populations in our studies. And we'll get an indication of that next week as the direction of the overall survival we're seeing in our smaller Phase II program, which is a mimic of what we're doing in our pivotal study right now. So we take learnings like that. And so that makes us want to understand where that biparatopic finding on an antibody or on an ADC might be beneficial. There's not that much clinical experience of people in our industry on pharma or biotech with understanding these bispecific or biparatopic binding mechanisms on antibodies or ADCs. And so when we think about zanidatamab zovodotin, which is our HER2 ADC format, it's the same biparatopic binding. So we're interested to see what do we get at the mechanism that can be translated into a preferential clinical benefit from that. So it'd take those learnings and apply them to how we think about building the next molecules going forward.

Great. And maybe a couple of questions on zani. You reported data -- positive data, Horizon BTC just a couple of weeks ago, Jazz, opted in and you got the second tranche. So you report data also in GEA next week at ASCO GI. So how do you think about the opportunities beyond BTC and GEA? And any expectations on how much zani can do, assuming that it could be approved in the near term? Any expectations on zani?

Yes. So I think obviously, BTC, our top line data clearly indicates. We're providing a meaningful clinical benefit for a patient population where there's no HER2 approved targeted therapy. So that's a really unique and special opportunity for us, and we're looking to see how we can get that available to patients as quickly as possible. The first-line GEA study that's in pivotal studies is a substantial opportunity for us globally. And I think next week, we'll get some other indication data about how competitive and meaningful is our regimen with zani and chemo going to be. So I think next week, that will be good question for after next week when you look at that. I think if you look at the Phase I study that we did with zanidatamab years ago, there was a range of single-agent activity responses we saw in a whole host of HER2 expressing an amplified tumors. We just never had the capability to explore all of those ourselves. We brought BeiGene on as a partner, which allowed us to do a little bit more in Asia Pacific. But one of the benefits of having this Jazz partnership is not just confirm the commercialization arrangements for zani with BeiGene, but also to provide the additional capital and resources to fully explore all the areas where zanidatamab has the potential to get a meaningful benefit. Obviously, those decisions are Jazz's to make, and they're starting to make them such as including zanidatamab in the I-SPY study, which puts Zani in a neoadjuvant setting, which is might be really interesting to see how that happens. And I think there are a number of other opportunities that they could decide to look at for further clinical development for zanidatamab. And I'll wait for them to give guidance on how and when they're going to do that. But it's definitely one of the things that's really interesting about zanidatamab is the ability for it to be broadly applicable across a diverse number of therapeutic indications in oncology in the HER2-targeted space. And I fully expect that Jazz will grab all of those opportunities as they move forward.

Great. Maybe switch gears to some of your pre-clinical assets. So 191 targeting folate receptor alpha. Maybe Paul can opine on this a little bit. How does -- how do you design this molecule? And especially the mechanism is already validated. But there is some differentiation that Ken talked about earlier today. So what are some of the key thinking behind the 191 program? And what are the key components that you manipulate to make it work?

Sure. So first of all -- so it's an antibody drug conjugate. So it's got an antibody and a drug conjugate. So we think both about the drug conjugate and the antibody. So when we looked at the drug conjugate, the payload, that's our TOPO isomers, that's -- kind of be more valid more recently in the clinic. And so we have our own proprietary TOPO platform. So we've attached that to a folate receptor alpha antibody that we selected and benchmarked the antibody itself for its properties to deliver an ADC. So we combined that and then we've kind of characterized the profile of that compared to 2 clinical benchmarks and are very comfortable both with the efficacy profile against the deeper number of folate receptor expressing models. And then also on the safety profile, we're very encouraged by the safety profile that we think can differentiate it from both on the efficacy and in the safety based on the other molecules that are in the clinic.

And as you move into INDs in 2024, what are some of the key gating factors for you to start the studies? Can you talk about the work that you're -- the preparation behind the scene for each of the programs, the 191 and 171?

Yes. I mean it's just time and day-to-day work of taking a biologic into the clinic. I don't think there's anything special about that. It's just the time for manufacturing, the time for [indiscernible], preparing clinical sites, deciding where we do that. I think the approach we decided to take with 171, 191 is a little bit different in terms of clinical development in the early stages where we're going to take a global approach. So I think the one thing we learned is we want to go fast in clinical development, and we need to go fast. You need to be able to access patients early in clinical studies anywhere in the world. So I think you'll see us do something that's not as U.S.-centric as maybe we've done previously. And you'll see early clinical sites in Phase I on a global basis so you can access patients where you're trying to pull out someone with a specific mutation and a specific characteristic. And so you'll see us expand and we talked about this last week in our announcement rapidly into Europe and Asia Pacific to complement the U.S. much earlier in clinical stage than maybe was done before and our company has done. I think that's necessary now in the current environment where clinical trial speed is really important. Clinical studies in the U.S. are slowing down dramatically. And so I think the time and costs related to that, you need to take a bit of a global approach. So that's something different. And we have specific internal targets now about how to go much more quickly from target selection to first regulatory filing. And we're working on every aspect of that. So speed is extremely important to our ability to compete, and you'll see us move nimbly and much more quickly than maybe we've done previously in the company.