Zymeworks Inc. (ZYME) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Zymeworks Fourth Quarter and Full Year 2022 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Jack Spinks of Investor Relations for Zymeworks. Sir, you may begin.

Good afternoon, and welcome, everyone. My name is Jack Spinks, Head of Investor Relations here at Zymeworks. Today, we will discuss our fourth quarter and full year 2022 financial results as well as provide an update to our ongoing business. Before we begin, I'd like to remind you that we will be making a number of forward-looking statements during this call, including, without limitation, those forward-looking statements identified in our presentation slides and the accompanying oral commentary. 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 at our stage of development. For a discussion of those risks and uncertainties, we refer you to our latest SEC filings, as found on our website and as filed with the SEC. Later in this call, Chris Astle, our Senior Vice President and Chief Financial Officer, will be discussing our financial results, including certain non-GAAP measures. A description of our GAAP measures and a reconciliation to the most directly comparable financial measures as determined in accordance with GAAP are described in detail in our press release, which is available on our website at www.zymeworks.com under the Investor Relations tab. As a reminder, the audio and slides from this call will also be available on the Zymeworks website later today. Now I will turn the call over to Chris, our Senior Vice President and Chief Financial Officer. Chris?

Thanks, Jack, and thank you, everyone, for joining us today for our fourth quarter and full year 2022 earnings call. As a reminder, I'd like to note that while I'll be presenting the prepared remarks today, Kenneth Galbraith, our Chair and CEO; and other members of our executive team will be available for Q&A following this portion of the call. With that, I'd like to begin today's call with an overview of our financial results, followed by a few recent developments and noteworthy updates across our business before we open the lines for Q&A. This afternoon, Zymeworks reported financial results for the fourth quarter and year ended December 31, 2022. Zymeworks' net income for the year ended December 31, 2022, was $124.3 million or $1.90 earnings per diluted share compared to a net loss of $211.8 million for the year ended December 31, 2021. The swing from an annual net loss to net income was primarily related to revenue received from our collaboration agreement with Jazz, partially offset by increases in expenses incurred in 2022 relative to 2021. As reported, our revenue for 2022 was $412.5 million compared to $26.7 million for 2021. Revenues for both the year and most recent 3-month period ended December 31, 2022, primarily related to the $375 million in upfront payments received from Jazz as a result of the completion of the zanidatamab licensing agreement, combined with approximately $24 million in reimbursements from Jazz for expenses incurred for zanidatamab between October 19 and December 31, 2022. Research and development expense for the year ended December 31, 2022, was $208.6 million compared to $199.8 million for the year ended December 31, 2021. This increase of $8.8 million or 4% from the prior year related primarily to higher manufacturing and clinical trial expenses for zanidatamab in 2022 and due to the restructuring exercise undertaken in the first quarter of 2022. These were partially offset by a decrease in expenses related to reduced preclinical zanidatamab zovodotin-related expenses in 2022. As of October 19, 2022, Zymeworks entitled to reimbursement from Jazz for all zanidatamab-related expenses related to ongoing studies under the terms of the collaboration agreement finalized in Q4 2022. General and administrative expense for the year ended December 31, 2022, was $73.4 million compared to $42.6 million for the year ended December 31, 2021. This year-over-year increase of $30.8 million or 72% was driven primarily by severance and other expenses related to our reduction in force and R&D reprioritization program that occurred in early 2022 and an increase in consulting and professional fees primarily related to the company's redomicile to become a Delaware corporation, the Jazz licensing agreement and other nonrecurring project-based expenses. During 2022, the company's workforce was reduced by more than 1/3 through the reduction in force and voluntary attrition from 450 full-time employees to less than 300 full-time employees. Our cash resources consisting of cash, cash equivalents and short-term investments were $492.9 million as of December 31, 2022, largely driven by the receipt of the upfront payment from Jazz totaling $375 million in the fourth quarter. Our cash resources as of December 31, 2022, did not include $24 million in reimbursements associated with zanidatamab-related expenses from October 19 through year-end 2022. Our licensing and collaboration agreement with Jazz completed a series of financially beneficial transformation initiatives in 2022, which we believe will fund our planned operations through at least 2026 and potentially beyond. We completed an equity offering in January 2022 comprised of a combination of common shares and prefunded warrants for gross proceeds of $115 million, which included the exercise in full of the underwriter's option to purchase additional shares. As of March 3, 2023, we had approximately 65.25 million shares of common stock and prefunded warrants outstanding and shares issuable pursuant to our Canadian exchangeable shares. We did not issue any shares of common stock under our ATM facility, either during 2022 or as of March 7, 2023, for the current year. In January of this year, we also issued financial guidance related to our net operating cash burn for 2023. Given the significant change in our overall net cash burn, we expect to experience this year due in large part to the reimbursement of zanidatamab-related expenses under our collaboration agreement with Jazz. We continue to expect our net operating cash balance for 2023 to be between $90 million and $120 million, including planned capital expenditures of $15 million. This cash burn guidance as well as our cash runway guidance includes forecasted expenses that are primarily related to our early R&D programs as well as incremental expenses to support our planned Phase II clinical development programs as zanidatamab zovodotin. For additional details on our quarterly results and for a description of our non-GAAP financial measures and a reconciliation of GAAP to non-GAAP measures, I encourage you to review our earnings release and other SEC filings as available on our website at www.zymeworks.com. Now I'd like to spend a few minutes talking about our early R&D portfolio, followed by a brief discussion on zanidatamab zovodotin and zanidatamab, our most advanced clinical product candidate. We reprioritized our R&D strategy early in 2022 and had an exciting and productive year with substantial progress on executing this new R&D strategy. To quickly recap, we recruited Dr. Paul Moore as our new Chief Scientific Officer in June of last year and hosted an early Research and Development Day in October, where we previewed preclinical product candidates emerging from both our antibody drug conjugate and multi-specific platform technologies designed to overcome limitations of existing therapies. At that same event, we disclosed our 2 lead candidates for INDs by 2024, ZW171 and ZW191, both of which are on track to be submitted next year. Additionally, we set an ambitious target of progressing 5 novel and differentiated preclinical product candidates, including ZW171 and ZW191 into clinical studies by 2027. We believe that our pursuit of this goal, along with our scientific vision and path forward in the ADC and multispecific antibody space will help generate a diverse and valuable oncology product portfolio of wholly owned product candidates. In addition to developing our own internal oncology pipeline, we anticipate additional preclinical product candidates derived from our ADC and multispecific technologies to progress with resources available from potential partners and collaborators. We are continuing to evaluate opportunities to form additional collaborations and partnerships around both our publicly disclosed and confidential preclinical product candidates. This partnership strategy is important as it can help us to accelerate development and advance potential opportunities without the use of Zymeworks' shareholder capital to complement our wholly owned product pipeline. We hope to announce the completion of additional collaborations and partnerships before the end of this year for multiple preclinical product candidates. In helping further this objective, we are excited to announce the acceptance for publication of 11 abstracts at the American Association for Cancer Research or AACR to be presented in mid-April in Orlando, Florida. These abstracts will be made publicly available by AACR on March 14. At AACR, we will be able to share with you additional progress and preclinical data on the announced preclinical product candidates that we spoke to at our early R&D day last year as well as continued progress on our technology platforms for generating additional ADC and multispecific antibody therapeutic candidates to add to our preclinical product pipeline beyond 2024. Subsequent to these presentations in Orlando, we will also plan to host our conference call to discuss the results and strategic impact these new data will have on our path forward. In addition to our in-house development efforts, we continue to have multiple active licensing agreements with key pharmaceutical and biotechnology partners. This portfolio of legacy platform partnerships, which consist of partnerships where we are required to expand little, if any, capital to advance the programs, represent a significant source of past and potential future non-dilutive funding. To date, we have received approximately $180 million in upfront and milestone payments, not including any amounts received for zanidatamab or zanidatamab zovodotin. Further, throughout 2023 and 2024, we expect to earn additional milestone payments under existing agreements as product candidates continue to be advanced through development stages by our partners. We also retain the ability to monetize all or a portion of the future cash flows from these agreements, pulling forward the value of future cash payments to provide an additional source of nondilutive capital should it be needed. Here on Slide 6, we can take a moment to touch on zanidatamab zovodotin or ZaniZov for short. As you likely noticed from our earnings release issued earlier this afternoon, we are planning to continue with a data-driven development program for ZaniZov and advance into selected patient cohorts in Phase II clinical studies. This will appropriately move this product candidate forward by studying ZaniZov in combination with other approved agents, especially checkpoint inhibitors with incremental clinical investment and predetermined benchmarks. Previously, we had anticipated a protocol expansion of our ongoing Phase I clinical study. However, after careful evaluation and a better understanding of both time lines and what we believe will be the most valuable to any potential future partner, thus building potentially meaningful value to our shareholders, we have chosen to proceed with separate Phase II studies to be conducted. One evaluating ZaniZov in combination with PD-1 inhibitors in non-small cell lung cancer and another in patients with breast cancer after progression on T-DXd and HER2 low patients in combination with PD-1 inhibitors. With this design, we believe we can obtain the clinical data necessary to both enter into a registrational path for ZaniZov before the end of 2025 and attract an appropriate partner to assist with ex U.S. development and commercialization, which is something we currently expect would be required before moving forward into a registration pathway. We continue to consider other areas of interest for clinical development in evaluating ZaniZov with the current standard of care in HER2-amplified colorectal cancer patients, HER2 expressing gynecological cancer patients and HER2-positive gastroesophageal adenocarcinoma or GEA. We anticipate that our Phase II studies for ZaniZov will be implemented using a Simon's 2-stage study design. This allows us to clearly designate and define hurdle rates and stage our investment in ZaniZov going forward. We expect that the conduct of these Phase II studies will be expanded geographically to additional clinical sites in Asia and Europe to both improve the speed of patient recruitment and lower the overall clinical development cost of patient recruitment. Our newly formed regional hubs will help us provide the appropriate support for this geographic expansion of our clinical development program for ZaniZov. We continue to believe that the Phase I clinical data presented last year at ESMO at 2.5 milligrams per kilogram dosed every 3 weeks shows that ZaniZov has a differentiated tolerability profile relative to other HER2 ADCs and acceptable single-agent activity in a range of HER2-expressing tumors. The keratitis seen in our Phase I study is well characterized and primarily low grade being grade 1 or 2, which is both manageable and reversible. An appropriate dose reduction management strategy was effective in managing any patients effective with keratitis in our Phase I study without any significant discontinuation from the clinical study. Importantly, we did not see other tolerability signals of concern, common to other HER2 ADC products and consequently, an attractive part of what we believe ZaniZov can offer is the potential ability to combine with other agents currently used as standard of care in areas where we see the patient need and where we may be able to improve upon current efficacy seen with existing standards of care. Incremental investment in these Phase II studies, which are planned to begin enrolling patients in 2023 is warranted based on the clinical data generated to date and our recent interactions with KOLs and potential partners. While this [ plan ] represents a small component of our anticipated net cash operating burn guidance of $90 million to $120 million for 2023. We think that ZaniZov represents an important and investable opportunity worth pursuing as a differentiated HER2 ADC in post-T-DXd patient population and could provide the company with the ability to retain development and commercial rights in the U.S. while working with a partner in ex U.S. markets. Finally, on ZaniZov, while we have continued to enroll and follow patients on our Phase I study treated at the recommended Phase II dose of 2.5 milligrams per kilogram every 3 weeks of monotherapy. We will be closing the weekly cohort in order to eliminate any future additional costs associated with keeping this portion of the study open. We expect to be able to present further data before the end of this year on that weekly data as well as additional monotherapy data generated since the data cut off for the 2022 ESMO presentation. However, going forward, we will be focused on opening the initial 2 Phase II studies and generating combination data as quickly as practicable. Finally, before we open things up for Q&A, I will briefly touch on zanidatamab as we still have an exciting year ahead of us and recently presented important data at ASCO GI this January. At ASCO GI, we presented updated data from our Phase II trial evaluating zanidatamab in frontline HER2-positive metastatic GEA. These data included a first look at zanidatamab's overall survival data, which showed an impressive 84% overall survival at 18 months, with the median overall survival having not been reached. Further, the data included an overall confirmed objective response rate of 79%, including 3 complete responses and median progression-free survival of 12.5 months and a median duration of response of 20.4 months after 26.5 months of patient follow-up. The regimen was manageable, tolerable and consistent with the observed safety profiles reported for other standard regimens for patients with HER2-positive GEA. We are working closely with Jazz and BeiGene to continue enrollment of patients in the Phase III randomized clinical trial, HERIZON-GEA-01, evaluating zanidatamab in combination with chemotherapy, plus or minus atezolizumab as a first-line treatment for HER2-expressing metastatic or advanced GEA. We continue to expect top line results from this pivotal study to be available in 2024. Additionally, last quarter, Zymeworks reported positive top line data from our Phase IIb open-label, single-arm clinical trial, Horizon-BTC-01, studying zanidatamab as a monotherapy in patients with previously treated HER2 amplified and expressing [ biliary ] tract cancers. With a confirmed objective response rate of 41.3% and a median duration of response of 12.9 months in patients with HER2 amplified and expressing or IHC 2+ and 3+ disease. These data represent a potentially important step for HER2 amplify patients with BTC because zanidatamab has the potential to be the first HER2-targeted therapy in this indication. It represents a chemotherapy-free treatment option for patients who would otherwise receive standard of care chemotherapy in second line, which typically elicits overall response rates of between 5% and 15%. Further, we expect the full results from these data to be presented at a major medical meeting in the first half of this year and look forward to confirming that presentation as soon as practicable. We remain very encouraged by these positive top line results for zanidatamab as well as the recently presented results at ASCO GI, including the first look at overall survival data for zanidatamab in our Phase II. With our partners, Jazz and BeiGene, we continue to work towards the potential regulatory path forward with the relevant regulatory bodies in various countries where the BTC data may support an accelerated or full approval. We will continue to work with our partners who will provide guidance at the appropriate time for any regulatory filings. While the initial development path and global regulatory interactions will be focused in BTC and GEA, the 2 most advanced indications with ongoing pivotal trials. We and our partners continue to evaluate the development path in other indications beyond BTC and GEA. We have ongoing clinical development in additional indications and remain excited about the broad potential of zanidatamab in indications outside GI cancers. To this point, zanidatamab is currently being used in the I-SPY platform trial for patients with HER2-expressing tumors in the neoadjuvant treatment of locally advanced breast cancer. This and other ongoing development efforts for zanidatamab will help determine the path forward in these indications. Last year was an important year for the company with numerous ambitious goals that were set in January of 2022 to reset the company's strategy. As we reflect on the past year, we were able to make significant progress across multiple aspects of our business, including on the nonscientific front, where we successfully completed a redomicile to Delaware, resulting in positive inflows due to index inclusion in U.S.-based indices as well as a stock exchange listing change from the New York Stock Exchange to the NASDAQ stock market, where we better align with peers in the biotechnology sector. As we look towards 2023, we have identified 5 important pillars of value, our enterprise value framework, that we will look to advance in order to continue generating value. These 5 pillars are 2 zanidatamab collaborations with BeiGene and Jazz, our early research and development programs, zanidatamab zovodotin and our legacy platform licensing portfolio. From a business and financial standpoint, we believe we are well positioned for success with our new strategy. We have sufficient cash to pursue our planned development activities with a significantly reduced net cash burn, a focused clinical program with planned Phase II studies for zanidatamab zovodotin and a number of exciting preclinical product candidates that we are working to progress to clinical studies with a specific focus on development of a mix of antibody-drug conjugates and multispecific antibodies. We believe this focused investment and moderated future spending when combined with the scientific expertise and people working hard behind the scenes makes for a very compelling opportunity going forward. As we remain focused on our operational goals, we will also stay true to our vision to discover, develop and commercialize novel medicines that can make a meaningful difference in the lives of patients around the world impacted by difficult-to-treat cancers and other serious diseases. To all of those who have been with us through what was a challenging 2022 for everyone investing and working in biotech. Zymeworks now looks forward to the future from a strong financial and scientific footing, and we expect to continue delivering upon these results, generating long-term value for our shareholders and ultimately improving the lives of patients by generating antibody-based therapeutics with the potential to dramatically improve on current standards of care in difficult-to-treat cancers. With that, I'd like to thank everyone for listening to our prepared remarks. And I'll turn the call over to the operator to begin the question-and-answer session. Operator?

[Operator instructions] Our first question or comment comes from the line of Yigal Nochomovitz from Citi.

So on the ZW49 now called ZaniZov, you mentioned that you're going to stop the Phase I, I believe, except for one of the cohorts. So can you just go into a little bit more detail as to the thinking behind that to why you're moving into those 2 Phase IIs, one in the non-small cell, one in the metastatic breast cancer, to get a better understanding of the shift in strategy there.

Yes, sure. And I don't think it's as much a shift in strategy as more form over substance. So I think there was a clear preference from a regulatory perspective to initiate new combination cohorts in a Phase II format. So again, with we're trying to do a few things here. One is we're trying to reduce the patient clinical development costs because our prior costs were too high. We're trying to improve the speed of patient recruitment because I think we've been too slow. I think we need to improve the access to quality patients that we can screen for these clinical studies. And there's a number of things we've been doing about that for ourselves in that position. The #1 thing is to try and expand sites globally because the Phase I were done in the U.S., Canada and Korea, but not beyond. And I think going internationally gets to some of those points I talked about. But clearly, if we're doing filings in new countries, starting fresh for the Phase II study as opposed to amending a Phase I study is preferable. I think some of this we did over the early-stage development group, which we reorganized, definitely bring down the internal costs for these clinical development costs. And the same people in that group are preparing for 171 and 191 it needs to be followed next year in clinical trials to be commenced. And also, we're reviewing the CRO, which we have for the Phase I, [ decided ] we want to move forward in Phase II. And I think we could definitely accomplish some of the costs as we objectives by potentially reviewing that contract deciding it. So with all that being said, I think it's a clear preference from a regulatory perspective that we do this as Phase II. It's not going to make a difference to the size of the studies or to the timing of execution. There's also some benefits of moving forward. If we're able to generate some great data in combination with ZW49 in these multiple HER2 indications that we've already identified. I mean, [indiscernible] product profile. That's our value proposition. We'd improve that. We can move much more quickly forward to a registration pathway in conjunction with a partner, as we've mentioned before in exit markets by starting in Phase II now. So I think there's some forward thinking that if we are successful and being able to move to ZW49 forward after these phases forwards, then we'll be in a better position to that even more quickly. Beyond that, we're comfortable with the advisory board and other work we've done around non-small cell lung cancer to move forward. I think with the breast cancer cohorts that makes sense. Our entire product profile to show the ZWB4 in combination with standard of care, can provide some meaningful clinical benefit in several indications with a specific focus on those patients who have progressed after GST. So those cohorts and those indications [ get us out ]. I think we're still going to continue to collect some additional bid in Phase I in our GEA cohort monotherapy, which I think will be useful. I think in the ovarian and in [ rectal ] cancer indication as we mentioned before, we did mention, I think, when we talked about this last year or earlier this year, we were waiting some view on the clinical data from the [ pan-tumor ] 02, especially in ovarian. And we understand that the standard of care that we're looking at is going to evolve or not. And obviously, that data internet will be forthcoming, which will be great. I think in the colorectal the HER2 amplify population, that's a really interesting patient population for us with ZW49. I think right now, we're continuing to confirm the [ Epi data ] around the size of that patient population because the published data has a pretty wide [ standard deviation ]. And also I think we're trying to make sure we understand the clear combination [ of the kind of care ] that we would move ahead with so we could execute a clinical development plan to get some very good data. So I think we're continuing to evaluate some of those areas, but feel comfortable moving forward with a non-small cell lung cancer cohorts and the breast cancer cohorts in both the HER2 low and in the TFC progress or field population. And Phase II, I think this is a better basis to do that in the international expansion and could provide some benefits moving much more quickly later and it does impact the timing right now.

And just on HERIZON-GEA-01, how much have you said there in terms of the powering of the trial? And also what is the primary comparison? Is it the doublet versus [ receptive ] chemo or the triplet versus [ receptive ] chemo? If you could just comment there.

Yes. So we did publish the atypical design and other features of the study in August of last year, and that's available on our website. We'd like to take a look at this. So, we did a more secure publication, so we did put on our websites available. So there are more details which are available there. But each of the 2 arms are independently compared to [indiscernible] chemo. So that's the way it works. We did describe that in the publication so I encourage you to read that. We did also disclose there that at the point where we're going to get a PFS that we'll do an [ interim ] [ gall-estro ] at the same time and then decide what to do with that data. And we still believe we're on track that the top line data for that study will be available in 2024. And the extent that we can sharpen that guidance, we'll do that in conjunction with both Jazz and BeiGene as we move forward. And sorry, just to add that we are continuing to follow the patients in the study that BeiGene has presented some initial data on last year on the triplet. So this is the Phase II study, the patient was running. In [ first-line ] GA patients with zanidatamab chemo and [ Tile PD-1 ]. So we did have some data last year. We've obviously recruited more patients in that study and is a much more mature-- Much longer follow-up, which means the data is much more mature. So obviously, at some point, we hope we'll see an update on that data set, which will hopefully give some further guidance as to how that triplet might be useful in patient populations, but we'll await guidance from BeiGene when that data set might be available, and they're also still continuing to follow the Phase II study in first-line breast cancer with zanidatamab and Docetaxel, which we also talked about, presented last year. And obviously, we have more patients enrolled in the longer follow-up. So we'll be looking for BeiGene to guide on when those 2 data sets might be available, but specifically the triplet in Phase II with more mature data, longer follow-up, may be better understanding or guidance of where that might be useful in this patient population. So we'll wait the guidance of BeiGene.

Our next question or comment comes from the line of James Shin from Wells Fargo.

A quick question on the Horizon GEA study. I'm looking at a comparator KEYNOTE-811. Where they -- it looks like they really enriched for PD-L1 high and HER2 3+ patients. Can you say anything on whether Horizon GEA will have a more even mix of PD-1 and HER2-positive patients? And then I got a follow-up.

Yes. Well, again, for one, we're not enriching for PD-L1 status. So it will hopefully be a more recruitment, more of a perspective of real world how these patients show up for gastric acid junction and esophageal patients that are in our study. And we'll obviously break that out as a prespecified subpopulation to understand what the impact is on patient populations on [ VA ] status with the PD-1 is involved. We haven't seen that as the K11 data, but eventually, we'll hopefully see that we can -- KOLs can understand the impact of that patient population. It does look like it is skewed a little bit, of a way with once that has been [ IC3 + ]. I'm not sure how that happened or was that will be the case when you see the full patient population versus the cohort of patients that was published to support the accelerated approval.

And then for the ZW49's breast indications, what are the potential [ cabo ] partners that you would explore with ZW49 or is that still sort of under wraps?

Yes. It's still under wrap. I think we're -- we said probably all we can about the non-small cell lung cancer and breast cancer indications. We want to get those studies up and running and get more details up on [ controls.gov ] as soon as we can. I think once it's up there, then we'll be able to answer additional questions. We're obviously looking to use ZW49 in combinations where we can. And that will be beyond [ pembro ] where we can. So I think we just have to wait until [ control.gov ] but we think that's the value proposition now that ZW49 [ BD, HER2 ADC ] of choices in combination potentially after progression on TDSC in multiple indications in a meaningful way in a number of those indications. And that's what we're targeting. That's the value proposition. That's our target product profile. So we define ways to test that hypothesis. And you [indiscernible] efficiently from a cost perspective we can. And if we see something that's going to be [ meaningful ] there then be able to partner quickly and move forward with the registration strategy for is we can.

Can I ask just one question on the ISP addition of zanidatamab. It's a really interesting study design where treatments get added and removed based on their efficacy. So and it's in [ enlargement ], is this something that's being handled by Chad and partners? Or is that something that you guys were working on prior to handing the zanidatamab?

This is a separate study group testing, obviously, multiple different agents. It's a really -- it's a -- we were having some discussions last year, about doing that. We obviously waited until we completed the Jazz collaboration to allow Jazz to apply on that decision. And it's the first thing they did after the collaboration, so probably tells you a little bit about maybe some interest. But I think it's a really -- I think we've always hypothesized that zanidatamab's best application was in the earliest treatment cycle that we can find specific populations. And I think you've seen that in our data with BeiGene last year and is [ Zaniprostal ] for first-line breast cancer with the over 90% for more. So pretty interesting. And I think we're interesting to see what comes out of this [ neoadjuvant ] study. I think it's this platform that they have an is [ i52 ] now. It was a pretty interesting way to test multiple agents in a way that I think can provide some interesting data back to a sponsor to then decide what to do with that data from a registration strategy.

Our next question or comment comes from the line of Stephen Willey from Stifel.

Maybe just another quick one on the projected Horizon GEA disclosure in '24. Are you still planning on completing enrollment before the end of '23? And I think in the European trial register, there is a suggestion that the primary PFS analysis is expected to occur within a month of the last patient being randomized. I guess, is that a description something that you would characterize as still being accurate?

Yes. I think you've seen a change in our guidance since the Jazz Partnership, which is not unusual. And Jazz does like to guide on availability of top line data versus patient enrollment. So our guidance will be the top line data will be available in 2024. And to the extent that we can sharpen that guidance with Jazz and BeiGene, then we'll do that to be more specific than the calendar year. But that's the guidance right now. We won't give anything beyond that. I think you will see [ infant ] trial in European registry, a number of different other data points around PFS or completion study. And we just won't comment on that further than just sticking to the -- We're on track right now to get top line data in 2024 from that study, and that's really great, and we're working to do that as quickly as we can.

And then maybe just a question for Chris with respect to just clarity on [ Zane ] related R&D spend in '23. I know the quarterly numbers here have been fairly lumpy. I guess, if you look at the last 3 quarters, specifically, is that lumpiness something that we should expect to continue into 2023? Or have you guys done some of the necessary manufacturing work such that, that should kind of smooth out a little bit as we get into '23 with respect to just thinking about how the R&D reimbursement flows to the top line.

Yes. Thanks for the question. So yes, we did have some lumpiness through 2022 as we were undertaking some of the manufacturing run. A lot of that kind of expense is behind us now. As we go into 2023, there will still be some ebbs and flows. We won't be guiding on specific numbers for each individual quarter. But it's worth noting that as we incur expenses within a quarter, the reimbursement from Jazz will actually come back in the following quarter. So there'll be a mismatch between the P&L and the cash flow from quarter-to-quarter as we advance through 2023. So there will still be some quarter-to-quarter shifting that we can anticipate as we go forward.

Okay. So that Jazz reimbursement comes a quarter in arrears that?

That's correct, yes.

Okay. And then maybe just lastly, I guess, does the disclosure of HER2 [ CLIMB-02 ] data, which is looking at Tucatinib/Kadcyla and, I guess, mostly second-line patients, but I think a lot of the KOL conversations we've had would suggest that that's maybe a regimen that gets institutionalized post in the HER2 if that data looks good. Does that data set at all kind or change your thoughts around ZW49 in breast cancer?

I'm not sure entirely it does yet. I mean we obviously look at all data and evolving data and what impact it might have on commercial opportunities or development pathways or regular pathways for the program. [indiscernible] and ZW49, -- and I think you need to pay tech to that and try to react. I think from our perspective, our value proposition and our target product profile, ZW49, I don't think is any different, which is we need to show the ability to combine with better care and show meaningfully clinical meaningful benefit in more than one indication, some multiple indications, several in this case. And I think in breast cancer, we still need to see what that data looks like. We need to see how it looks like in HER2-low population, and we need to look at what it looks like specifically in the patients who progress post [ TXD ] and hopefully, in a quality of patient that doesn't have 11 or 12 or 13 prior therapies as we did in some of our Phase I data. So I still think it's a pretty interesting indication for us in breast cancer even with some evolving data, you have done enough advisory board work with KOLs, but we understand where the bit could be for ZW49 as agent. I think we've done enough potential partnering discussions to know what value will be paid for data generated. I think for both non-small cell lung cancer and breast cancer, those are just keep core cohort of patients that we think to prove our target product profile ZW49. We have the opportunity to do that with additional indications inside the envelope of how much investment we want to make in the time frame we have to make that under, then we'll do that.

Our next question or comment comes from the line of Brian Cheng from JPMorgan.

It seems that you have a couple of presentations coming up at AACR next month. So what should our focus be there from your presentation and your call? Maybe you can give us part of the view on just expectation, that would be great.

I think everything. That's a positive. I think from our perspective, there's some -- I think we're trying to showcase both the next products that will come out of the clinic next year, so that's really important for us as well as continuing to show what the platform is capable of doing for products beyond that because we're going to pick our targets and our products that we're going to file in 2025 this year. So we want people to understand both the next product coming in and the pocket itself. We've got additional new data we've generated since our R&D Day presentation in October. So we'll try and highlight the new and additional data, which has been developed, which I think adds hopefully to folks understanding of what we're doing that's differentiated and why we're doing and why we think we'll be successful with the product formats and the targets that we've selected as well as the platform's ability to continue to generate these 5 new INDs in the next 5 years, including [ 179.9 ] next year, that will all be novel diversified on both sides of the [ RV ] portfolio, both [ multi-cabine ] therapeutics and ADCs as well as all the will be differentiated and meaningful assets that we can keep unencumbered and [ for sale ] as long as possible. So I think there will be a whole lot of things there between products and the 2 platforms that we're working right now. There's also 1 on ZW49 and there's one that's unrelated to that. And those will be as abstracts in a little over up week so I think by AACR. So we'll be able to answer more of that question as those abstracts are released. And the next week or so. And then beyond that, obviously, we'll have more sustained information available on the posters for all of those.

And maybe just one follow-up on the ZaniZov side. You talked about how the importance of partnership to this program. And it seems that you are already in discussion with a couple of potential partners. When do you think that it will be a good time to bring in a partner for ZaniZov? Is there a bar that you need to hit for the Phase II that you're doing in NSCLC and also metastatic breast that you need to hit before these partners jumping in?

Good question. I mean, obviously, we do not have clinical data in combination with other spend of care. So that's a big part of the value proposition for ourselves and partners as we'd like to generate that data. Obviously, having early part of the discussion is great because it helps design the [indiscernible] program. So we like doing that. I think our current investment thesis around 249 is it's a strategic asset, it's not core to the 5 and 5 strategy, but we think it's still be viable assets that we'd like to invest incrementally in at this Phase II clinical development stage. The goal after that is to get an ex U.S. partner to work with us. If we get clinical data, which shows that the data should go forward. We'd like the terms of that deal to be valuable enough to fund the potential for us to retain the U.S. commercial rights and develop that further to market off of the partnering deal and not off our balance sheet. So we have that data that supports a partner being able to have a transaction, which is valuable enough to be able to undertake that as well as have clinical data to business ourselves that it's a reasonable undertaking to retain the U.S. rights for further development and commercialization of standings ourselves. And so we also have to convince ourselves. There is a potential that we could do a global licensing deal with one party if that was attractive to us because again, ZaniZov doesn't affect the 5 and 5 strategy we have for the non-HER2 assets that we're generating behind [ Zani ] and ZaniZov, so to get that, I believe we need some indication as I mentioned, that it will ZW49 can be effectively combined with better care in indications that matter and show some interesting signals of efficacy to show there's a registration pathway for that agent to be a second-line agent or via second choice HER2-ADC, behind TDSP, which is very commercially attractive, especially in non-small cell lung cancer and the breast cancer indications as well as some of the other ones that were still evaluating. So I think some of that combination data is going to be necessary to convince a partner on the value that we'd be looking for, but also to convince ourselves, that's a worthwhile asset to retain the U.S. rights.

Our next question comment comes from the line of Charles Zhu from Guggenheim Partners.

My first one, perhaps on zanidatamab in front-line gastric cancer. I'm kind of wondering, given that you've had that recent ZaniZov chemo data earlier this year as well as what we saw from ASCO of '22 last year from Beijing. I guess with the potential update from the single one Phase II later this year, any color around like how much more confidence we could obtain around the potential additive clinical benefit of layering on a PD-1 on top of your regimen?

Yes. I mean, the easiest way to answer that question would be to complete the Phase III study is going on now, which is fully randomized to 1:1:1 [ tetris ] chemo, does any chemo doublet and the triplet including making [ Tempo ], so the best way for us to answer that question is to incur all the patients finished the study, redose TFS and interim OS look at the subpopulation analysis that exists in the study that's prespecified to be able to answer that question. That's what we're working towards as expeditiously as we can. Obviously, the data we put in January, it's pretty encouraging to KOLs and ourselves and Jazz and BeiGene on the doublet. Hopefully, we'll get a chance for an update on additional data from the triplet that BeiGene put out last year and get some more understanding of what that looks like. You have more -- there's going to be more patient numbers than that. It's a long-term follow-up. So it might be something more to read into that. But obviously, the reason we're doing a large multinational, randomized study is to try and provide clarity on the answer to that question that you have.

Got it. Great. And maybe one more question on ZaniZov, perhaps a bit of a follow-up as to something that's already been kind of asked a bit. But during your prepared remarks, I think you had mentioned something about the predetermined benchmarks that could justify further development beyond the Phase IIs and lung as well as post-and-HER2 breast cancer. Any additional color around what those could possibly be? Or how -- what was your thinking was in generating some of those benchmarks?

We've obviously like to start with some creative termination of what does clinically meaningful data look like in combination in the indications that we're in study. So we have some data that we've predetermined that we think would be meaningful and would be encouraging to attract next to a partner and would be encouraging for us to think about retaining the U.S. rights to any to further development with the proceeds from an ex-U.S. partnership and use that as our first commercial on-trade in the U.S. So we're pretty proven that ahead of time, which is a really good process to work through. It's obviously totality of data matters and quality of patients and quality of data matters. But those are all predetermined the same way that others will do. And I think once we generate that data will have some ideas of what we think about moving forward or which indications makes the most sense to move forward. We've done a lot of work since I got here a year ago on looking at the indication, the commercial market research, the ad boards. We just did one recently in Japan in January, which we weren't able to do earlier because of Covid. So I think we have a pretty good sense from potential partner discussions and our KOL interactions of where ZW49 would have to generate data to be a fit for moving forward past.

[Operator Instructions] Our next question or comment comes from the line of Andrew Berens from SVB Leerink.

A couple of questions for me on the [indiscernible] combination strategy of Checkpoint. Can you share any preclinical data that you have to support combination strategy? Do you have any concerns that keratitis could be exacerbated by immunotherapy as [ ocular tox ], a known side effect with checkpoint inhibitors? And then what do you think the regulatory strategy will eventually be demonstrate that GW Board now will be added to the background efficacy you would see with checkpoint inhibitor load.

Yes. Good question. I think you've disclosed any of the preclinical data we would have on the combination. We don't believe there will be any , as you said, any further impact on Keratitis but it's one of the reasons you run combination studies in cohorts and [indiscernible]. So we'll do that to be able to confirm that. Obviously, one of the benefits of ZW29 is a HER2 is that the tolerability issues that we have to deal with are limited to grade 1 and grade 2 keratitis, which don't cause a significant discontinuation of patients under clinical study and don't provide a substantial amount of dose reduction. Beyond that, we don't have [ drug neuropathy or drug pneumonitis ] or we haven't seen any signals of that. So obviously, we think the tolerability profile means that you can provide an effective combination without overlapping toxicities. And we think there may be some synergies between P1 and ZW49 with the [ Oristano ] payload and that might be from a mechanism standpoint. We will have one abstract at AACR around some initial thoughts around the mechanism of ZW49 that might provide some additional information to that. Obviously, moving forward in non-small cell lung cancer, I think you wanted to use there in a variety of different indications, including with the known alpha mutations. So there's some good data already on existing around the use of those agents that indication. We obviously have to show that adding ZW49 to that if we want specifically [indiscernible] the population provides a benefit for partners. So that's a part of what we're doing in the design of the cohort that we have in both the HER2 expressing amplifier 2 mutant population in non-small cell lung cancer. In addition, on the breast cancer side, P1 not been very effective in indices indication study in breast cancer, but down to see if there is a [ benefit to e9PD-1 ]. And if you want to be more useful and education because of this critic effect that might occur with the rates and PD-1. We'd like to explore that well for that clinically and look at that data to see if that's accurate or not.

Our next question or comment comes from the line of David Martin from Bloom Burton.

First question, regarding the Phase II indications for ZW49, when you presented Phase I data at ESMO last year, I think there was one lung cancer patient there were relatively few in HER2 failures and a few HER2 low patients. Post that presentation, did you then kind of focus your recruitment on patients that the Phase II characteristics? And will we see larger cohort or larger groups of those patients in the updated data later this year?

Yes, David. That's accurate. So obviously, after the cutoff for as when we continue to recruit the Phase I study in monotherapy, both to test the weekly dosing, which we were doing, which we will report out on, but also to continue to recruit additional patients on monotherapy at the recommended Phase II dose of 2.5 mg per kg every 3 weeks. And we focused on enrolling patients that were closer to our strategy going forward in combination. So hopefully out of that data set, which will put out, we haven't even guided yet for this year, but we'll do that as soon we're able to be specific. You should see additional monotherapy data and inactivity was going to be ZW49 in some of those patient populations where it would have been nice to see more before the ESMO cut off. And obviously, that leaves a little bit of our thinking going forward into looking at the combination strategy of just making sure we've got reasonable contribution, single-activity and the highest quality patients we can track in the [indiscernible]...

Great. And will the Phase IIs be randomized, -- like I assume there'll be a dose escalation single arm initially, but then will be each turn into randomized trials.

Yes. We haven't given any specific thought about the core design. We won't do that in all its up on control.gov. Obviously, we're trying to go quickly, recruit the right patients in the right cohort to answer the question as to whether we have a value proposition with ZaniZov or not. And if we do, then be able to move really quickly into a registration pathway. And so there's a lot of factors we're considering how we're designing and executing these studies. So I think once on control start out, we're happy to answer those questions about why we designed it the way we did.

I'm showing no additional questions in the queue at this time. I'd like to turn the conference back over to management for any closing remarks.

That's great. Well, thank you for your attention today and for your questions. We have here a lot of progress last year in Zymeworks. And I think for 2023, we've got really good momentum across the business. We're really looking forward to having a great AACR coming up in April, and those abstracts will be available publicly soon. We're very [ proud ] to have 11 different abstracts accepted for this meeting. Last year, we had 0. So we're really looking forward to having a fulsome disclosure of the products and platforms in the early R&D group in the 5x5 strategy that we have and talking more about that. We look forward to doing that very quickly. So thank you for your time and attention to look forward to reporting more progress as we move forward through the year.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.