Earnings call transcript: Zymeworks Q3 2025 shows revenue growth and strategic focus

Zymeworks Inc. (ZYME) reported a significant increase in revenue for the third quarter of 2025, reaching $27.6 million, a notable rise from $16 million in the same period last year. This growth was primarily driven by a $25 million milestone payment from Jazz Pharmaceuticals. Despite operating expenses slightly decreasing, the company reported a net loss of $19.6 million, an improvement from the previous year’s $29.9 million loss. In the aftermarket session, Zymeworks’ stock rose by 1.5% to $18.32, reflecting investor optimism about the company’s strategic developments and financial health.

Key Takeaways

• Revenue surged by 72.5% year-over-year, bolstered by milestone payments.
• Net loss narrowed significantly, showing improved financial management.
• Stock price increased by 1.5% in the aftermarket, signaling positive investor sentiment.
• Zymeworks continues to advance its oncology pipeline with promising trial results.

Company Performance

Zymeworks demonstrated strong performance in Q3 2025, with a substantial increase in revenue largely due to strategic partnerships. The company’s focus on oncology, specifically antibody-drug conjugates (ADCs), positions it well in targeting underserved cancer indications. The financial results indicate effective cost management and strategic alignment with industry trends, particularly in partnerships with major pharmaceutical companies like Jazz Pharmaceuticals and BeiGene.

Financial Highlights

• Revenue: $27.6 million, up from $16 million in Q3 2024.
• Operating expenses: $49.7 million, a 1% decrease from the previous year.
• Net loss: $19.6 million, improved from $29.9 million in Q3 2024.
• Cash position: $299.4 million as of September 30, 2025.

Market Reaction

Following the earnings announcement, Zymeworks’ stock price rose by 1.5% in the aftermarket, reaching $18.32. This movement reflects investor confidence in the company’s financial health and strategic direction. The stock’s performance is within its 52-week range, with a high of $19.98 and a low of $9.03, indicating stability and potential for growth.

Outlook & Guidance

Zymeworks expects to fund its operations into the second half of 2027, supported by a robust cash position and potential milestone payments from partnerships. The company is focusing on advancing its pipeline, with key developments in its ZW191 and ZW251 ADC programs. Future guidance suggests continued exploration of partnership opportunities and a focus on research and development to differentiate its offerings in the oncology space.

Executive Commentary

Ken Galbraith, CEO, emphasized the value of Zymeworks’ partnership model: "Our partnership-based model continues to generate value today while also providing opportunities for growing potential cash flows." Paul Moore, CSO, highlighted the strategic advantage of their technology: "We think by having the CD28 co-stimulation, it gives us opportunity to do that."

Risks and Challenges

• Regulatory hurdles in clinical trials could delay product launches.
• Dependence on milestone payments may impact cash flow stability.
• Competitive pressures in the ADC market could affect market share.
• Macroeconomic factors, such as inflation, could increase operating costs.

Q&A

During the earnings call, analysts inquired about the safety profile and combination therapy potential of ZW191, as well as the rationale behind targeting hepatocellular carcinoma with the GPC3-targeted ADC. Executives also addressed changes in Jazz Pharmaceuticals’ Horizon GEA 01 trial analysis, underscoring the evolving nature of their strategic collaborations.

Full transcript - Zymeworks Inc (ZYME) Q3 2025:

Conference Operator, Conference Call Operator: Thank you for standing by. This is the conference operator. Welcome to the Zymeworks third quarter 2025 results conference call and webcast. As a reminder, all participants are in a listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To ask a question, press star 11 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and then zero. I would now like to turn the conference over to Serewalla Inamdar, Senior Director of Investor Relations. Please go ahead.

Serewalla Inamdar, Senior Director of Investor Relations, Zymeworks: Thank you, operator. Good afternoon, everyone. Thank you for joining our third quarter 2025 results conference call. As usual, before we begin, I would like to remind you that we’ll be making a number of forward-looking statements during this call, including without limitation, those forward-looking statements identified in our 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 discussion of these risks and uncertainties, we refer you to our latest SEC filings as found on our website and as followed by the SEC.

In a moment, I will hand over to Leonie Patterson, our Executive Vice President and Chief Business and Financial Officer, who will provide an overview of our recent business and partnership updates along with financial results for our third quarter 2025. Following this, Dr. Sabeen Mekan, our Senior Vice President of Clinical Development, will provide progress updates on our phase one programs, ZW191 and ZW251. We will then pass the call over to Dr. Paul Moore, our Chief Scientific Officer, who will provide a brief overview of recent R&D developments. At the end of the call, Leonie, Sabeen, Paul, and Ken Galbraith, our Chair and CEO, will be available for Q&A. As a reminder, the audio and slides from this call will also be available on the Zymeworks website later today. I will now turn the call over to Leonie.

Leonie Patterson, Executive Vice President and Chief Business and Financial Officer, Zymeworks: Thank you, Chanel, and good afternoon, everyone. I’d like to start the call by walking you through recent progress on both clinical and preclinical programs within our wholly owned product pipeline. As you know, our team was pleased to present initial clinical data from the phase one trial of ZW191, an antibody-drug conjugate targeting folate receptor alpha, at the ENA conference in October. Sabeen will provide a recap of the data we presented during our poster presentation later on today’s call. We are encouraged by the preliminary phase one data for ZW191, which provides early clinical validation of our ADC approach, and we are pleased to announce that we have dosed the first patient in the phase one clinical trial of ZW251, a DAR4 ADC targeting GPC3 in hepatocellular carcinoma. Sabeen will talk more about the trial design later on today’s call.

We also continue to present preclinical data of ZW1528, a bispecific inhibitor of IL-4 and IL-13, to address respiratory inflammation at the European Respiratory Society Annual Congress. Additional information can be found on the ERS Congress website, and a copy of the poster is available on the publications page of Zymeworks’ website. Meanwhile, our partnered programs also continue to provide encouraging data at ESMO. Our partner, Jazz, presented a trial-in-progress poster on the Discover Who Pan 206 phase two study of zanidatamab in HER2-overexpressing solid tumors, as well as a two-year follow-up in first-line metastatic colorectal cancer showing durable responses and a favorable safety profile. In addition, yesterday, Jazz announced that the ITT population for the primary PFS and interim OS analysis of the Horizon GEA 01 trial will include the full patient population enrolled in the study of 920 patients.

Also, at ESMO, Jane Day presented translational findings from the first-in-human study of pacritimab in metastatic prostate cancer, linking T cell phenotypes with clinical activity. These updates highlight the strong momentum in our partnered portfolio and the long-term value these collaborations continue to build. With this in mind, I’m pleased to announce that this quarter, we recognize a $25 million development milestone as revenue from our collaboration partner, Jazz Pharmaceuticals, in association with clinical progress of pacritimab, a first-in-class bispecific T cell engager targeting KLK2 in phase three studies in metastatic castration-resistant prostate cancer, which was engineered using Zymeworks Azymetric platform. As a reminder, we remain eligible to receive up to a further $434 million in development and commercial milestones from the Jazz Pharmaceuticals collaboration, in addition to potential mid-single-digit royalties on global product sales.

In addition, this quarter, we earned royalties of $1 million based on Ziihera net product sales by Jazz and BeiGene, and we look forward to pivotal data from the Horizon GEA 01 study expected in the fourth quarter. I’d also like to highlight that as of November 4, 2025, we have completed share repurchases of $22.7 million of the remaining $30 million under our previously authorized share repurchase program, which reflects the leadership team’s confidence in the company’s outlook, the strength of our pipeline, and our long-term commitment to shareholder value. This program was primarily funded from Ziihera development milestones and cumulative royalties received from Jazz and BeiGene related to initial regulatory approvals in biliary tract cancer in both the United States and China, allowing us to efficiently deploy excess capital while maintaining full flexibility to fund operations and growth initiatives.

This action reinforces our view that the stock remains undervalued, and it aligns with our disciplined, balanced approach to capital allocation designed to drive sustainable long-term returns. Turning now to our financial results, total revenue was $27.6 million in the third quarter of 2025 compared to $16 million for the third quarter of 2024. The increase was primarily due to a $25 million non-refundable milestone recognized from Janssen in relation to clinical progress on pacritimab in phase three studies in metastatic castration-resistant prostate cancer, and $1 million of royalty revenues from Jazz Pharmaceuticals and BeiGene. These increases were partially offset by a reduction in development support and drug supply revenue from Jazz Pharmaceuticals and due to a non-recurring milestone from GlaxoSmithKline that was achieved in the third quarter of 2024.

Overall operating expenses were $49.7 million for the three months ended September 30, 2025, compared to $50.2 million for the same period in 2024, representing a decrease of 1%. The decrease was primarily due to a reduction in expenses from ZW220 and ZW251, zanidatamab and zanidatamab zovodotin, and a decrease in personnel expenses. This was partially offset by an increase in preclinical and research expenses for our ZW209 and ZW1528 programs, progression of clinical studies for ZW171 and ZW191, and an increase in non-cash stock-based compensation expense. Net loss was $19.6 million for the three months ended September 30, 2025, compared to a net loss of $29.9 million for the same period in 2024. This was primarily due to an increase in revenue, partially offset by a decrease in interest income, and an increase in income tax expense.

As of September 30, 2025, we had $299.4 million of cash, cash equivalents, and marketable securities, which is a decrease in cash resources compared to $324.2 million as of December 31, 2024. Our cash resources as of September 30, 2025, did not include the $25 million milestone from Jazz, recognized in the third quarter and expected to be received in the fourth quarter. We remain well-capitalized, and based on our current operating plans, we expect our existing cash resources as of September 30, 2025, when combined with the assumed receipt of certain anticipated regulatory milestones, will enable us to fund planned operations into the second half of 2027, which is anticipated to take us through multiple catalyst events on our pipeline. These achievements underscore the strength of our foundational partnerships and the relevance of our platform across multiple products moving into clinical development by our partners.

For additional details on our quarterly results, I encourage you to review our earnings release and other SEC filings as available on our website at www.zymeworks.com. With that, I’d like to hand over to our Senior Vice President of Clinical Development, Dr. Sabeen Mekan, to run through progress on our clinical development programs.

Conference Operator, Conference Call Operator: Thank you, Leonie, and good afternoon, everyone. I’d like to start off by providing a recap of the initial phase one data for ZW191 as presented at the AACR NCI ERTC conference last month. As it pertains to the safety, we’re encouraged by the tolerability profile that we’ve seen. The safety profile for ZW191 allowed us to escalate dose up to 11.2 mg per kg, which is quite high for a topoisomerase payload at this potency, similar to Diraxtecan. Across all treated patients, there was a low incidence of grade 3 or higher treatment-related adverse events, and adverse events leading to dose interruptions or reductions were infrequent. The most commonly reported events were nausea, fatigue, and anemia, which are generally consistent with our expectations for an ADC. Importantly, there were no serious treatment-related adverse events, no discontinuations due to adverse events, and no deaths observed in this study.

These findings support a favorable safety profile, particularly in a population that has been heavily pretreated. Overall, these data give us confidence that this drug is well-tolerated at clinically active doses, providing a solid foundation for ongoing and future studies. Moving now to the efficacy results. This slide shows the waterfall plot summarizing the best change in tumor size across dose levels. What we see here is also very encouraging. There are meaningful reductions in tumor size across multiple dose levels, with objective responses observed at doses as low as 3.2 mg per kg and the majority of patients continuing on treatment at data cutoff. Importantly, these responses were seen across the spectrum of folate receptor alpha expression, an important observation as we think about future development and patient selection.

In participants with gynecological cancers, dosed between clinically relevant doses of 6.4 and 9.6 milligrams per kilogram, we observed an objective response rate of 64%. Taken together, these early data show promising anti-tumor activity across multiple dose levels and tumor types, reinforcing the potential of this program to be a best-in-class folate receptor alpha-directed ADC. Based on the integrated assessment of safety, efficacy, and pharmacokinetic data, we have selected two doses of 6.4 milligrams per kilogram and 9.6 milligrams per kilogram for optimization, with approximately 30 patients planned in each cohort. Enrollment is expected to begin in this quarter, and this will allow us to further refine the balance between efficacy and safety and inform optimal dose registration studies. We expect to share additional data at a future medical conference with a larger and more mature data set.

Overall, early results support ZW191 as a potential best-in-class asset, with promising early activity and a manageable safety profile. We continue to be data-driven in planning further development for registration and expanding into earlier lines of therapy and in combination. As we move forward, our focus remains on disciplined clinical execution while exploring strategic partnerships that could accelerate development and expand global reach. Based on the encouraging clinical findings for ZW191, we are moving forward with the clinical development of our second ADC candidate, ZW251, and are pleased to confirm the dosing of the first patient in our phase one open-label multicenter study of ZW251. This study is actively recruiting and aims to enroll approximately 100 participants across North America, Europe, and the Asia-Pacific region.

The patient populations include advanced or metastatic hepatocellular carcinoma that has progressed after standard of care treatments, regardless of GPC3 expression levels, and with measurable disease as per RECIST. Part one of the study will evaluate escalating doses of ZW251 to determine safety and maximum tolerated dose. Part two of the study includes randomized dose optimization at two selected doses of ZW251 in order to further evaluate safety and explore efficacy according to the RECIST evaluation criteria. I will now hand over to our Chief Scientific Officer, Dr. Paul Moore, to provide an overview of R&D developments.

Serewalla Inamdar, Senior Director of Investor Relations, Zymeworks: Thank you, Sabeen. Yeah, I’d like to just add a few final thoughts on the developments disclosed this quarter for both ZW191 and ZW171. Firstly, the initial data presented on ZW191 provides important translational insights that could help accelerate and reduce risk in the future development of ZW251 and other pipeline ADCs using our CD06519 payload. As you can see on this slide, behind 191 and 251, we also have preclinical stage candidates targeting more novel antigens such as LYSIC2 and PTK7. Also, our NAPI2B program remains IND ready, and we continue to explore next-generation ADCs. Importantly, each of our ADCs has been tailored to factor in target biology by toggling drug-to-antibody ratio and Hep C modifications.

Furthermore, we also ensure to utilize the most optimal antibody to deliver an internalized payload, whether this be a superior monoclonal antibody to benchmark as in ZW191 or LYSICC, or a biparatopic antibody such as in the case of PTK7. Our approach of tailoring these parameters to target biology, patient population needs, and preclinical safety efficacy data aims to ensure optimal therapeutic windows while minimizing off-target toxicities. Secondly, I wanted to touch briefly on our decision to discontinue the development of ZW171 and, importantly, the valuable insights both scientifically and operationally that we took from this experience. Internally, we hold ourselves to very high standards when it comes to our target product profiles. That discipline is important because we have a broad and productive pipeline, and we want to ensure our capital and our focus go to programs with the clearest path to meaningful patient benefit.

Based on the totality of the dose escalation data, we concluded that, as a monotherapy, this program did not fully meet our internal threshold to advance further within our portfolio, as it was unlikely to support a benefit-risk profile consistent with the desired monotherapy target product profile. It was not an easy decision, as we continue to believe there is potential for mesothelin-directed therapies, including ZW171, perhaps in specific subpopulations, in combination settings, or through the right external partnership. We felt it was the right choice to prioritize programs that will closely align with our long-term strategic and clinical goals. Our experience of taking 171 through dose escalation significantly strengthened our understanding of T-cell engager design and provided clinical experience which will aid us in executing future clinical trials for our next-generation T-cell engagers.

For example, we were able to advance 171 safely and efficiently through dose escalation in under a year, which is a real testament to our team and technology. We also deepened our understanding of dosing strategies, routes of administration, and investigator engagement, all of which we can apply to our next generation of prior-specific T-cell engagers. The study also reinforced our hypothesis around the importance of co-stimulation for T-cell engagers, the use of our novel CD3 epitope, and tailoring our candidates for patient characteristics and target biology. Our ongoing portfolio management is a reflection of our discipline, our high scientific standards, and the strength of our portfolio. We will continue to hold ourselves and our target product profiles to high standards of success and remain focused on advancing the programs we believe can have the most impact for patients, partners, and shareholders.

With that in mind, we look forward to presenting three poster presentations at the SIDC annual meeting this weekend, with one showcasing the versatility and application of our innovative Tri-PCE CoSIM T-cell engager platform to enable diverse targeting strategies across different target tumor types, one featuring a next-generation tumor target, Mass Style 12, enabled by Azymetric, and the third covering new research co-authored with NeoGenomics on ADC resistance mechanisms using spheroid models. Together, we believe these presentations showcase our continued leadership in advancing innovative and targeted oncology research. With that, I’ll hand over to our Chair and CEO, Ken Galbraith, to conclude today’s call and open up the call for Q&A.

Leonie Patterson, Executive Vice President and Chief Business and Financial Officer, Zymeworks: Thanks, Paul. Over the last two years, we’ve redefined what this company can achieve by combining R&D innovations, smart partnerships, and disciplined capital allocation to help deliver potential best-in-class therapies while helping to grow shareholder value. Our partnership-based model continues to generate value today while also providing opportunities for growing potential cash flows. We plan to continue leveraging partnerships across our wholly owned pipeline to bring in external capital and accelerate development. We believe this approach allows us to maintain control of our R&D innovation while helping to de-risk clinical developments and to help ensure that every investment we make has the potential to contribute meaningfully to durable value creation. As we look beyond important near-term events for our pipeline and partner programs, our long-term focus is on compounding returns from Ziihera and protecting and enhancing future cash flows that can be reinvested to drive the next wave of innovation.

With this in mind, this quarter, we announced some changes to our board of directors to align governance and leadership with the next phase of our strategy. We welcomed two new directors in August, and three members transitioned off the board effective today. We’d like to thank those three directors for their service design work. In October, we appointed Dr. Adam Šaivec as Acting Chief Development Officer to help advance our portfolio and strengthen our partnership-driven strategy. With this refreshed leadership, we believe we’re well-positioned to translate our scientific innovation into a scalable model that builds durable royalty streams and delivers sustainable long-term value for our shareholders. To close, I want to emphasize that our capital allocation decisions, whether investing in R&D, advancing partnerships, or returning capital through share repurchases, all serve one purpose: to help build sustainable long-term value.

Our R&D priorities remain focused on programs with clear differentiation and strong scientific rationale, and we’ll continue to fund those using partnerships to extend our reach and offset development risk. Those collaborations also provide a meaningful revenue floor through milestones and royalties, giving us the flexibility to invest with conviction and discipline. This is how we plan to sustain momentum through focus, partnership, and the power of compounding. I want to thank you for your continued support, and I’d like to turn the call back over to the operator for the question-and-answer session. Operator.

Q&A Moderator: Thank you. We’ll now begin the question-and-answer session. To join a question queue, you may press star 1 1 on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your headset before pressing any keys. To withdraw your question, please press star, then 2. We will pause for a moment as callers join the queue. The first question comes from the line of.

Call.

Hello. Can you hear me?

Yes, we can hear you.

Oh, perfect. Great. Good afternoon or good evening, wherever you are. Thank you for taking the question and congrats on the progress. Two from me, if you do not mind. First one, we heard it from Jazz yesterday and I think earlier today as well, but wanted to get your thoughts perhaps on the update in the PFS analysis for Horizon GEA 01 to include the ITT rather than the PITT population. Your thoughts here and perhaps what drove that change?

Leonie Patterson, Executive Vice President and Chief Business and Financial Officer, Zymeworks: Yeah, thanks, Charles. I think Jazz provided some guidance on that yesterday in their earnings call and remarks, and I think in question-and-answer session. We do not have anything to add beyond what Jazz has shared other than we are aligned with the regulatory strategy that they have laid out for the readout of Horizon GEA 01 and how to analyze that data. I really cannot add anything beyond that.

Got it. Fully understood. Perhaps for my second question, I want to say congrats on the folate receptor alpha data at TripleMeeting. That was quite impressive. I kind of also wanted to get your thoughts on what does this mean for GPC3, especially when we’re thinking about a DAR4 construct in the liver cancer population. Similarly, if we see anything that comes close or is similar or even exceeds what we saw with 191, what would your thoughts be on potential development in-house versus partnership versus out-licensing of this asset in liver cancer? Thank you.

Yeah, I know. Good question, Charles. Yeah, we’re as intrigued as your question suggests as well, and looking forward to continued recruitment in ZW191 and dose escalation, moving to dose optimization to provide a larger, more mature data set. At the same time, as we announced, we’re recruiting patients now in the ZW251 study. So far, our clinical execution is as good as it has been to date with our prior program. Really looking forward to that. I think in terms of what we think about that, I think maybe I’ll give Sabeen and then Paul both a chance to add their flavor to that because it’s a really, really interesting, intriguing question for us as well. I don’t know, Sabeen, if you want to go first, and I’ll ask Paul to follow up.

Conference Operator, Conference Call Operator: Yes, I can go first. As you know, hepatocellular carcinoma is a population with very high unmet medical need, particularly post-first-line setting. There are not many treatment options for those patients. That is why we think we should be able to create a difference given the construct of our ADC and what we’ve observed in ZW191. Based upon the clinical data that we’ve observed, one of the key concerns with the hepatocellular population is concern for safety because this patient population often is very fragile and they have underlying liver disease. The concern for safety is very important. It is for this reason that we have selected a DAR4 for this ADC molecule.

Given the safety profile that we’ve observed with ZW191, we’re fairly confident that we should be able to have a good safety profile and should be able to have a therapeutic window in terms of treatment for hepatocellular carcinoma patients. I’ll pass over to Paul.

Yeah, no, I think Sabeen really captured the key points. I think the tolerability, I mean, from the 191 study, it was both the tolerability was really what we were hoping for, but we also got the efficacy. We have gone with the DAR4. We know from preclinical studies that we can maintain the same, we can get to the same activity level with that. We were really being careful on just making sure we had the most tolerable molecule to develop in such a challenging cancer indication. I think the data from the phase one sort of supports that we are in the right direction with the way that we selected the payload. We were very careful in how we picked that payload in the space of the topoisomerase inhibitors that it would support a tolerable profile while maintaining our ability to get good dose into patients.

You could see that from our data. I think ultimately, we want these molecules to be combineable with other modalities as well so that we can go up in line. Obviously, at first, we’ve got to establish the profile as a monotherapy. This really energizes us now after seeing the 191 data to really chase after the 251. Thanks for the question, Charles. Got it. Thank you.

Q&A Moderator: One moment for your next question. The next question comes from the line of Yaron Werber of TD Cowen. Yaron, please go ahead.

Right. Thanks so much. And congrats as well on the folate receptor alpha. I got maybe a couple of questions actually on the pipeline. Maybe the first one, while we’re staying on GPC3. BeiGene today on their call said that with their bispecific, the GPC3 41BB, they actually established proof of concept. So they’re moving forward. That’s definitely very encouraging. In terms of the payload that you’re using, it’s Irinotecan and typically, I’m sorry, a topo1 kind of based payload. Are topo1s typically used in liver cancer and kind of maybe give us a little bit of a sense from the preclinical data, what are you expecting in terms of showing efficacy? And then secondly, for the next IND in the first half of next year, the DL03. CD20A tri-specific, we know DL03 is a great target.

We have seen a lot of activity with both the bispecific on the market and the ADC. CD28 has not worked out so far in most other cases. What makes you more optimistic this time around? Thank you.

Leonie Patterson, Executive Vice President and Chief Business and Financial Officer, Zymeworks: Yeah, that’s good. I’ll let Paul talk about the DL03 and then maybe let Sabeen and Paul both comment about GPC3 if that’s okay.

Yeah. So yeah, maybe I’ll take the, yeah, I’ll take the second question first and then. Great question, Yaron, on why do we think we can make CD28 work where others have had challenges, right? I think we do take precedence from the CAR-T space where adding in co-stimulation has shown benefits. Something like CD28 or like 41BB that you refer to in the context of the B1 molecule. A lot of people have chased after that because of the attraction of getting that CD28 co-stimulatory signal to the T cell to maintain or enable activity that you don’t achieve just by having signal one through CD3. I think what the challenge has been is actually getting that timing, that simultaneous engagement of CD3 and CD28 in the kinetics and the timing that you need to get that benefit.

That is what we took the challenge on when we developed the tri-specific so that we knew that when we engage CD3, that T cell could be then engaged with CD28. No one’s really developed a solution until what we think we have the solution for that. That is where we feel we can make an impact based on our preclinical data that gives us encouragement that we’ll see that impact in the clinical setting. It is a little bit to do with just the way we design it. Others have tried doing CD3 bispecific plus a CD28 bispecific. In some cases, that may work. We feel a more precise way is to hit the same T cell with the primary and the secondary signal in a manner that can be done with a single molecule. That is the DL03. Certainly, we’ve presented data.

We’ll show a little bit more actually at CITSI this week, and that really shows the benefit that we can achieve with that above a bispecific molecule, but doing it safely in the preclinical setting. For the GPC3 41BB, and I think also your question was about why do we think a chemo can work there in the liver setting. Certainly, it isn’t a standard of care chemotherapy for liver cancer, but there is precedent for chemo working in liver cancer. It’s just that it just can’t be tolerated. It’s not just well given as a systemic treatment. We think there is precedent there, and we think the way that we can deliver payload or chemo such as a topo inhibitor with our ADC.

Gives us the opportunity to do it in such a way that we can thread the needle and get the right level of payload to the patient that can enable then sustained exposure that will give you the benefit, but still with doing it within a tolerable profile. That’s kind of the preclinical hypothesis or the hypothesis in the preclinical data that we have has shown that when we’ve looked at a scan of different HCC PDX models, we see 8 out of 10 or that sort of range of responses of models responding. We can go up to 100 mg per kg with this molecule in cynomolgus monkeys. We have the safety tolerability profile with the evidence of efficacy with some glimpses that in patient population, they can under certain conditions respond to chemo. We think we can open that window up with the ADC.

Sabeen, anything you want to add from a medical perspective with this patient population and the idea of chemo versus a payload liver with an ADC construct?

Q&A Moderator: Yeah. I would like to say that chemotherapy has been tried in hepatocellular carcinoma with limited success, but there has been some incidents of success there, especially trying localized chemotherapy that’s been effective. That actually makes us believe that giving cytotoxic in an ADC format, particularly with our higher internalizing antibodies and the fact that hepatocellular carcinoma has very high expression of GPC3, gives us confidence that we should have the therapeutic window that is needed in this patient population to be successful.

Leonie Patterson, Executive Vice President and Chief Business and Financial Officer, Zymeworks: Thank you for the question, Yaron.

Q&A Moderator: One moment for your next question. The next question comes from the line of Andrew Berenz from Leerink Partners. Andrew, please go ahead.

Hi. Congrats on the progress. Just a question. I know Jazz is controlling the trial, but I was wondering, would the increase in the, to the intent-to-treat analysis, did they also increase the number of PFS events that are necessary to trigger the analysis? Just trying to put this announcement in context.

Leonie Patterson, Executive Vice President and Chief Business and Financial Officer, Zymeworks: Yeah. No, thanks for the question, Andy. I think. Going to answer the same way I did before. I think Jazz provided all the guidance that’s appropriate around that decision of the patient population that will be utilized for the ITT patient population, both from a PFS perspective and OS. I don’t want to go further than the guidance they’ve provided. Obviously, we’ve been working on this study for four years from a Zymeworks perspective, and proximity to data is very close. I’ll just let Jazz provide that guidance, and we’ll just have to wait for a future announcement and presentation to understand anything further beyond that.

Okay. Thank you.

Q&A Moderator: One moment for your next question. The next question comes from the line of Stefan Wiley of Stifel. Stefan, please go ahead.

Yeah. Good afternoon. Thanks for taking the questions. Just curious how we should be thinking about the starting dose levels of 251 relative to 191. I know obviously different DARs, different target organs, but is there anything you can say qualitatively or maybe even quantitatively about how you’re thinking about pushing dose here? I guess, did that dose escalation schema for 251 change at all as some of the 191 data started to come in? I just have a follow-up.

Leonie Patterson, Executive Vice President and Chief Business and Financial Officer, Zymeworks: Yeah. Good question, Sabeen. Sabeen, do you want to—obviously, we have not disclosed the starting dose yet. We will obviously look to do that probably in a similar way we did with 191. Sabeen, is there anything you want to add about the dose schema for dose escalation for 251 as it relates to the 191 schema that now people have seen?

Q&A Moderator: I would say that the schema for 251 is very similar to 191, although, as you rightfully pointed out, this is a DAR4 as opposed to 191, which is a DAR8. There are differences. Also, with 191, it was our first ADC into the clinic. We were very conservative with our initial starting dose. Now that we have gained some clinical experience, particularly with regards to safety, I can say that we have more confidence in our starting dose, but we are not disclosing that yet. We will be disclosing that later, similar to what we did with 191.

Okay. That’s helpful. Maybe just a question for Paul. Just curious how big the universe of target antigens you think is for a tri-specific format beyond DL03. I know that target has a pretty exquisite expression profile between tumor and healthy tissue that obviously mitigates some of the concerns about amplifying off tumor tox with a signal too. Just curious where and how you might be able to leverage this format to other targets of interest. Thanks.

Leonie Patterson, Executive Vice President and Chief Business and Financial Officer, Zymeworks: Yeah. No, thanks, Steve. Yep. It’s definitely very much in our mind. And actually, I sort of alluded to that we have actually a presentation this weekend at CITSI. And what we’re going to show there is application of the technology to different targets and the way that we design the molecule for the target so that. The base molecule on the context of the CD3, CD28, we know sort of the positions of those molecules. We’re not telling people really the secret sauce there on how they’re in the geometry of the molecule. But what we also can think about is how do you then target the antigen and design the targeting of the tumor antigen in such a way to get that maximal window. We are looking at that. We’re looking at it targets both in solid tumor and in. Hematological cancers.

We can deploy against sort of the two-plus-one strategies. We can think about logic-gated strategies as well. There are ways with the Azymetric, it’s so versatile and flexible that we can put in multi-binding sites to help us get more selectivity in targeting. We can share more of that. We are very much thinking about how do we tailor that so that we can have that therapeutic window. We do not rule out the use of masking. We do have masking technology. We are actually applying that to the IL-12 molecule, and that can also be adapted to our T cell engagers. We have that toggle if we feel we need it as well. We just run it through.

We test all the different permutations of the molecules, let the data drive, and then we have the preclinical models that then allow us to understand the toxicity profile and the therapeutic window. We are very excited about the application of that. Again, looking forward to pushing forward with the DL03 program, but we do have other molecules coming behind as well.

All right. Thanks for taking the questions.

Yeah. Thank you, Steve.

Q&A Moderator: One moment for your next question. The next question comes from the line of Brian Chang of J.P. Morgan. Brian, please go ahead.

Hey, guys. Thanks for taking out the call this afternoon. Just two quick ones from us. In a trial designed for GPC3, we noticed that you’re recruiting patients actively through the patients who have been through standard of care. Just one is, Paul, I’m curious what you saw in the preclinical setting that gives you confidence that GPC3 will be active in the post-IO setting, given that Nevo IP got approved in the first line HCC not too long ago. Just on the biomarker side, I’m curious if you foresee a potential need to develop a biomarker assay near term. Is there a need for it today? Just curious what you think about that front too. Thank you.

Leonie Patterson, Executive Vice President and Chief Business and Financial Officer, Zymeworks: That’s great. I’ll let Paul start on that. I think Sabeen may have something to add also on those, but I’ll go ahead, Paul.

Yeah. No. Thanks. I think from the preclinical setting, your question was, how do we—what’s our confidence that we can go behind other standards of care, right? I think the expression level of GPC3, we’ve looked at that. We don’t anticipate or there’s no proof that that would be modulated by IO treatment. I think the complementary mechanisms and how they work wouldn’t really preclude us going with a targeted medicine that’s going after GPC3. We’ve got preclinical data in different PDX models. Some of those will have been collected potentially after treatment, right? I think just mechanistically, we don’t see that as a barrier. I think one of the—Aaron mentioned there’s encouraging data with other GPC3 modalities that are also going behind—they would be tested behind standard of care from those clinical trials.

We take encouragement from what others have seen with GPC3 targeted therapies using different modalities. We just feel the ADC modality can just give us an additional mechanism that, and the power of that approach can just give us an opportunity for more meaningful differences and benefit there. That would be the thinking there. On the biomarker side, just like we did with folate receptor, we will look at GPC3 levels and make a decision on whether that would be something that we would need as we move forward in clinical development. We’ll collect that data as we go on that. Sabeen can reiterate that or elaborate on that more.

Q&A Moderator: I’m answering a question regarding Nevo IP being approved not too long ago. I don’t think that changes our development plan. If you look at the treatment landscape for first-line hepatocellular carcinoma, the treatment currently includes checkpoint inhibitors and VEGF and also checkpoint inhibitors plus CTLA. Prior to approval of Nevo IP, durvalumab has been approved as well. It’s the same mechanism of action, and it really doesn’t have an impact on how we think an ADC, particularly a topoisomerase ADC, would perform in this setting. I think we remain confident with regards to that. I think Paul answered all your questions regarding the biomarker. We are enrolling a similar strategy to our 191, enrolling patients regardless of expression and be able to ultimately do a correlation of how the expression level relates to clinical activity.

Got it. Thank you. Thanks, Sabeen.

Leonie Patterson, Executive Vice President and Chief Business and Financial Officer, Zymeworks: Thank you, Brian.

Q&A Moderator: One moment for your next question. The next question comes from the line of Manyak Montani of B. Riley Securities. Manyak, please go ahead.

Serewalla Inamdar, Senior Director of Investor Relations, Zymeworks: Yes. Good afternoon. Thanks for taking our questions and congrats on a productive quarter. Can you talk a little bit more about your expectations on durability for 191, just given what you’ve seen at the dose levels you’re at, and at what point you’d also be able to explore combination, obviously important in PROC, but also in other solid tumor types that you may want to explore there? Just kind of put it together when you think you have a sort of partnership-enabling package here. Just your latest thoughts on that. I have a follow-up.

Leonie Patterson, Executive Vice President and Chief Business and Financial Officer, Zymeworks: No, thank you. I’ll just answer the partnership question quickly, and then I’ll turn it over to Sabeen. I think I can answer part one, A, B, and C of your first question. Obviously, we found the data from 191, although early and initial clinical data, very interesting. I think there are others who are interested in other ADCs that are differentiated. We think ours clearly are. We will continue to talk to parties who might have an interest in joining us and moving that forward. That might allow us to accelerate development, might allow us to find a better ability to compete even on a time basis and explore the full potential of ZW191. We will continue to have those discussions. As I think you’ve seen, that data was very intriguing to KOLs and obviously people on this call, and especially to us.

I think there are potential partners where that data was also very intriguing. We’ll continue to let the data mature and to collect more data and have ongoing discussions at the same time. I’ll let Sabeen answer the subparts of your first part of your question, if that’s okay.

Q&A Moderator: With regards to durability of responses, I think some of the key things when you look at efficacy is the number of patients who responded. Our overall response rate looks pretty encouraging, particularly in the doses we would like to take forward, that is 6.4-9.6 mg per kg. Key things that we noted were we have a pretty wide therapeutic index, with responses starting at 3.2 mg per kg. That actually gives us a lot of confidence. If we look at our tumor plot that we shared in our poster, a few things that give us encouragement is that most of the responses, particularly at higher doses, occurred early. Looking at the waterfall plot, the depth of responses, we had a pretty good depth of responses in terms of reduction in tumor size for the target lesions. Even though our follow-up is.

Relatively short, and the vast majority of patients are staying on treatment. Combined with our safety profile, which would hopefully allow patients to stay on treatment for a long period of time, I think that would help us give the durability that we’re going to need to achieve the PFS and OS that would be important in these indications.

Serewalla Inamdar, Senior Director of Investor Relations, Zymeworks: Thank you. On the learnings from 171 to 209, were there any step-up dosing learnings you’re looking to apply here as the DLL3 program gets into the clinic? I know you’re not saying what dose levels you may start at, but I was just curious the therapeutic window. Should be very different consideration given the target differences in mesothelin and DLL3 from an off-target toxicity standpoint. Any thoughts there would be great. Thank you for taking our question.

Leonie Patterson, Executive Vice President and Chief Business and Financial Officer, Zymeworks: Yeah. Thanks. I’ll let Paul talk about just learnings from our 171 program and how they might apply to our thoughts around 209.

Yeah. I think one of your questions was just thinking about the dosing and how we go about thinking about the step-up. What we did for 171 was we used QSP modeling, and we sort of leaned on prior clinical precedents to allow us to really nail what we thought was a good starting dose and then how we could accelerate through the dose escalation. That approach, we’ll use a similar approach for projecting the starting dose and the step-ups for 209. What I would say is that those projections, when we looked at the exposure levels and the PK, they seem to really fit nicely with what we had projected. We are anticipating that we can use that again. Obviously, the target toxicity profile, the safety profile is a little bit different for DLL3 than it is for mesothelin, but we still.

Think there’s relevant learnings from the design of them, from the clinical design. There were also some design features in 171 that we’re also carrying over into 209. I think that also gives us confidence then that we have that human experience with that approach. It sets us up well for 209.

Serewalla Inamdar, Senior Director of Investor Relations, Zymeworks: Super helpful. Thank you, guys.

Leonie Patterson, Executive Vice President and Chief Business and Financial Officer, Zymeworks: Yeah. Thank you for the questions. Thank you.

Q&A Moderator: One moment for your next question. The next question comes from the line of Robert Burns of HC Wainwright. Robert, please go ahead.

Hi, guys. Thanks for taking my questions. Just one, if I may. One of the things that I noticed in the presentation for ZW191 was that you used an H-score categorization. Low negative 0-74, intermediate 75-199, and high 200-300, versus the majority of the competitors are using a PS2 plus method to define high versus low. I was just curious about the correlation between those two different scoring methodologies so we could sort of assess them in a more apples-to-apples comparison.

Leonie Patterson, Executive Vice President and Chief Business and Financial Officer, Zymeworks: Yeah. Thanks for the question, Robert. I think I’ll let Sabeen start addressing that question and then see if Paul has something to add to that response as well. Excellent question.

Q&A Moderator: I would say that H-score is a pretty well-known and very well-validated research method in evaluating expression levels of different targets. It combines both intensity, which is usually measured in IHC treatments for 1 to 2+ intensity, as well as number of patients with positive or number of cells with positive scores. It is a pretty well-integrated method for evaluating the number of cells that express the target. It has had a pretty good correlation with both TPS score, which is often used in certain assays that are ultimately commercialized, as well as IC scores. That is why we use the H-score. It is a composite, and it has a pretty wide range from 0 to 300. That gives us a pretty good evaluation across the range for the expression levels. One of the things that we did also do.

In our poster, we categorize the H-score into three different categories: high, intermediate, and low. Within those categories, the high category that we defined correlates with high expression of folate receptor that is used for treatment with ELAHER. That is a measure where we can evaluate how many of our patients responded who would have been candidates for ELAHER versus patients who were lower or negative and were not candidates for that treatment. Paul, if you want to add something, please go ahead.

Yeah. Yeah. No, I think that’s good. Yeah. No, great, Sabeen, you covered it. I think with the H-score, it just gives us a little bit more granularity across that than using the PS2 plus score. By having the H-score, the score the way that that specimen sample is scored with the test, we can, as Sabeen alluded to, we can also calculate the PS2 plus. That’s doable. We can take that data and analyze it whichever way we want. We felt for this analysis, this was the appropriate way to show the H-score because it just gives people more breadth and understanding of the profile of the patients that we’re seeing.

Yeah. No, I completely understand that, and I appreciate the granularity. Just, if you do not mind, would it be an accurate assumption to say the patients that you defined as high expression per the H-score of 200-300 would fit the category of PS2 plus, greater than or equal to 75%, or would there be some discrepancy between them?

It should be a very high correlation.

I guess last question for me. Given the data that we’ve seen from Rina S as well as the Eli Lilly compound, obviously, they’re using a PS2 plus scoring system. In those non-high patients, how do you think that ZW191 stacks up against those two compounds in the lower expressing or intermediate expressing folate receptor alpha patients?

As you saw from our data.

Leonie Patterson, Executive Vice President and Chief Business and Financial Officer, Zymeworks: Can you do an example of our data?

Q&A Moderator: Sorry.

Leonie Patterson, Executive Vice President and Chief Business and Financial Officer, Zymeworks: Yeah. Go ahead.

Q&A Moderator: As you saw from our data, we showed pretty transparently across a spectrum of H-scores across low or negative that we observed clinical activity across folate receptor expression levels. We’ve been looking at data from which we are pretty confident about, and we’re showing pretty good activity. In our sample size, we had roughly around two-thirds of patients who were low or negative, roughly, which correlates very well to the number of patients who are not candidates for ELAHERE. Comparing our data to the competitors we talked about, Rina S and Lilly, I think we feel pretty confident about our activity in the low or negative patient population from what we’ve observed so far. Obviously, we’re going to continue to follow our patients. We’re enrolling very actively in our study with more patients in dose escalation and longer follow-up, and we’re initiating our.

Part two dose optimization, which will provide us more data at the doses that we would like to move on. I think that would give us a lot of confidence in our activity across the spectrum for folate expression levels, including low and negative.

Awesome. Thanks for taking my questions. I can’t wait to see the additional data for ZW191. Thank you.

Leonie Patterson, Executive Vice President and Chief Business and Financial Officer, Zymeworks: Yeah. Yeah. Thanks, Robert.

Q&A Moderator: One moment for your next question. The next question comes from the line of Akash Tawari of Jefferies. Akash, please go ahead.

Hi. This is Stevie on for Akash. Thank you for taking our question. On ZW191, it looks like a key differentiator between this and other next-gen folate receptor alpha ADCs is safety, specifically on grade 3 cytopenia. Can you talk about the importance of this difference in terms of potential combinations, maybe in earlier treatment lines? Thank you.

Leonie Patterson, Executive Vice President and Chief Business and Financial Officer, Zymeworks: Good question, Leah. I think we see a number of potential differences, differentiating factors between ZW191 and data we’ve seen from others. I’ll let maybe Sabeen talk specifically about the tolerability profile we’ve seen so far in our dataset.

Q&A Moderator: With the tolerability profile, we’re very pleased, particularly with our safety event rate. Most of the safety events that we saw were pretty expected, as we mentioned, which were mostly nausea, vomiting, cytopenias. Our cytopenia rate is actually, we’re very pleased with that rate because this is something that you would expect very typically from a topoisomerase ADC. And the rates that we observe for anemia, neutropenia, and thrombocytopenia are well within expected for an ADC, particularly for the fact that we’re going at relatively high doses compared to other ADCs with similar payload. With that, we are confident that that would help us drive efficacy. At the same time, the safety profile with cytopenias helps us combine with treatments in earlier lines of therapy. As you know, in ovarian cancer, earlier lines of treatment consist of a combination of platinum, taxanes, and bevacizumab.

That gives us a lot of confidence to combine with all of these treatments going in earlier lines of treatment, particularly some of the pitfalls that we’ve seen with other ADCs. Cytopholate with combinations in earlier lines is neutropenia, and that oftentimes leads to reduction in doses to the point that it affects efficacy. We’re hoping with our safety profile, and particularly the lower rates of neutropenia that we’re observing, ZW191 should be able to be combinable with the platinum agents at a much more efficacious dose. That’s one of the key areas. The other thing that we’re thinking about in earlier lines of therapy from a tolerability perspective, obviously, is the ability to treat patients for much longer, particularly in the maintenance setting. I think these are all areas where we can differentiate.

Great. Thank you.

Leonie Patterson, Executive Vice President and Chief Business and Financial Officer, Zymeworks: Thank you for the question.

Q&A Moderator: One moment for your next question. The next question comes from the line of John Miller of Evercore. John, please go ahead.

Leonie Patterson, Executive Vice President and Chief Business and Financial Officer, Zymeworks: Hi, guys. Thanks for taking my question. I’ll follow on a question on the DLL3. I guess we’ve seen some really great data from other T-cell engagers there, even pretty recently. I’d love what do you think are the key places where you’d hope to differentiate? What would make your molecule a best-in-class molecule, in your opinion? Where do you think you can target that? Then I’ve got to follow. Okay. I’ll follow on that. Yeah. No, I think absolutely. I mean, DLL3, a lot of excitement. It’s a trackable target in solid tumors. We’re getting encouraging response rates. For sure, we think there may be patients that could still benefit from that, that do not respond, that do not have the T-cells that can really mount a response or mount a prolonged response. That’s really what we’re trying to do here with our molecule.

To really change the game and really get the next level of response and durability of response is really what we’re hoping for. We think by having the CD28 co-stimulation, it gives us opportunity to do that. There may also be some benefits in the mechanism that can lead to thinking about the duration of response and the way that we dose the molecule. They could also be intrinsic in the design and the fact that we have that extra T-cell response. That will await further analysis. It is really more patients responding and longer responses. Again, that’s the goal, Jonathan, and our data suggest that we can, or from a preclinical, we have a chance to achieve that. Fair enough. I guess since you were talking earlier about being almost finished with your repo, I am curious, given the...

Expected upcoming milestones from Jazz and BeiGene on the GEA readouts. What is your expected use for future milestones? Should we be expecting that repo will make a return when you have cash inflows in that response, or is that money spoken for for your internal programs? No, really good question. I think. As we started this last year, we do want the ability to always have an authorized stock repurchase program that then gives us the ability to allocate capital to reducing share count at what we think is attractive prices to boost TSR. I think we always want to have that optionality. I think you should expect that we will always have an authorized stock purchase plan in place. We get to decide when and how we use that for shareholder benefit.

I think you should just expect, as we’re getting to the end, that we should always have one in place to be able to do that. It’s not the only place we’ve been allocating capital over the past period of time. We have been allocating capital to R&D programs that make sense for us. And when the data justifies it, continuing to move forward with additional investment as we are with ZW191. We’ve obviously talked a little bit about our strategy of maybe creating another area to allocate capital as capital comes in from milestones and royalties from Ziihera and hopefully eventually pacritimab. Having the ability to then decide to allocate that capital back into a royalty portfolio, given that those royalty portfolio we have right now, it earns very attractive annualized rates of return, we think, from holding it from development through commercialization.

Having the ability, as some of those gains are realized through payments from our partners, to put that back into an attractive royalty portfolio that could generate really interesting rates of return is another piece of the puzzle and strategy that we have talked about putting in place. We will talk more about this in the weeks and months ahead. I think you should see us in the future be disciplined with capital allocation. I think we will obviously have a stock repurchase plan authorized. We have obviously shown that we would like to use it to generate TSRs. We will allocate capital into R&D where we think it is differentiated and productive and data justifies it. I think we will develop the capability, infrastructure, strategy, and interest.

To consider putting some of the cash flows that come out of our licensed product back into a royalty portfolio with potentially other licensed products. We will talk more in the future about the strategy and differentiation of how we think we can accomplish that. I think all three of those together, having the optionality to allocate capital to those resources is important for us. Getting the mix right is important for us. I think if we can do all three of those in the right way, at the right time, and the right mix, we can generate some very interesting long-term TSRs in Zymeworks. That is what we have been working on and we will continue to work on as our licensed products move from development to commercialization. Great. Thank you.

Q&A Moderator: One moment for your last question. The last question comes from the line of Yigal Novkomovich from Citi. Yigal, please go ahead.

Leonie Patterson, Executive Vice President and Chief Business and Financial Officer, Zymeworks: Hi. This is Siouan on for Yigal. Thanks for taking our question and congrats on the progress. Maybe just a quick one from us. You spoke on it a bit already, but just wondering if you could provide additional color on potential timelines of third-party milestones beyond what might be expected from Jazz. Thank you. Yeah. We have not, as a practice, provided much guidance in that regard. Obviously, we have tended to wait until we have earned or received milestone payments, as we did this quarter with the $25 million that we earned from Johnson & Johnson with respect to pacritimab moving into phase three studies. For right now, I think we will keep that guidance. I think as we move forward, especially with Ziihera into commercialization, we might provide some additional guidance around milestones from both Jazz and BeiGene as they become closer, more proximate.

More probable, just so people understand a little bit more about capital that might be realized in those licensed products, and then obviously where that capital might be allocated to. Until then, you just have to wait and see, but not too long, I think. Got it. Thank you. You’re welcome.

Q&A Moderator: This does conclude the question-and-answer section. I would now like to hand the call back over to Chair and CEO, Ken Galbraith. Ken, please go ahead.

Leonie Patterson, Executive Vice President and Chief Business and Financial Officer, Zymeworks: That’s great. Thanks, everyone, for your time and attention and questions on today’s call. Obviously, back in 2021, we designed and initiated a really important clinical study. It was zanidatamab, the Horizon GEA 01 study. We’re really pleased that Jazz continues to be optimistic and confident of reporting out the top-line data in this quarter. We’re as interested as anyone in understanding that dataset and what the potential is for zanidatamab to be practice-changing in this patient population. We’re very pleased that we won’t have to wait that long to understand that. Please stay tuned and look forward to talking about that further with our partners, Jazz and BeiGene, as appropriate. Thank you very much for your time, and we’ll talk to you all very soon.

Q&A Moderator: This concludes today’s presentation. You may now disconnect.

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