Good afternoon, everyone. Thanks so much for being here. My name is Laura Kahn. I'm a Vice President in our Healthcare Investment Banking Group, and I'm joined today by Ken Galbraith, CEO of Zymeworks. Ken, thanks so much for being here. Let's go ahead and dive right in. It's, of course, been an exciting year at Zymeworks, a ton of progress with BTC approval in November for zanidatamab and significant progress made on continuing to advance the pipeline. Certainly a lot going on. Maybe could you start by giving us an overview of kind of the strategy overall, key focus areas for Zymeworks, especially as you think about having the commercial stage asset that's partnered out and then this earlier stage pipeline behind it?
Yeah, absolutely. Thanks for having us here again this year and not having a monsoon in the middle of a conference. That's great. Yeah, Zymeworks started life as a protein engineering company, really focused around the thesis that multifunctional therapeutics, which means designing more than one mechanism of action into a single biologic structure, might be able to deliver some clinical responses you couldn't see with more traditional antibodies or small molecules. That led us to focus on bispecific antibodies, and ADCs, bispecific ADCs, now trispecific antibodies, almost entirely in solid tumors, but now a little bit more breadth into looking at our bispecific structures and autoimmune, our first agent outside of that, next year going to the clinic for COPD, and also in hematological tumors.
We really believe that multiple mechanisms of action being designed in a single biologic structure might unleash some additional mechanisms which drive clinical responses you can't see with other agents. We started our first experiment with that by designing a bispecific or biparatopic HER2 antibody called zanidatamab. That's the first agent we made. It's the first product we put in clinical studies. Of course, right now we're on a 100% track record because that agent was approved last year by FDA for second-line biliary tract cancer. Really exciting for us to see a validation of what we thought scientifically, that you would see different responses in these patient populations that you couldn't see because of the nature of the way we designed and engineered multifunctional therapeutics.
The combination of what we designed with zanidatamab provides clinical responses in HER2-expressing patient populations, at least what we've proven in biliary tract cancer and what we hope to prove in gastric esophageal adenocarcinoma with our phase three reading out this year that you just hadn't seen before. We're so delighted that our first product that went into clinical studies was approved. We definitely took a different approach to the commercialization of that agent. We decided we would find partners to commercialize that as opposed to continue to develop the business to commercialize our own agents. We brought in BeiGene as an Asia-Pacific partner a number of years ago, and in 2022, brought in Jazz to commercialize in the rest of the world. We don't have a commercial presence with zanidatamab now that's approved.
With the structure of the arrangement we have through milestones and royalties, we've been able to keep a good share of success for our shareholders from that innovation without the risk and cost of capital of the commercialization approach. We still think that's a really valid business model for biotech. We're quite excited, obviously, to see the results of our phase three study reading out this year, the HERIZON-GEA-01 study, which could be extremely important for patients, could be practice-changing for this group of patients with gastric esophageal adenocarcinoma that's HER2-expressing, as well as financially important for both BeiGene and Jazz, our commercial partners, as well as ourselves and our own shareholders.
We also have a really innovative R&D portfolio behind that of our own agents, which are all unpartnered at this point, trying to find a way to keep our 100% track record alive, if that's possible in our business, of only putting products into clinical studies which really have a differentiated response and improving that in the clinic and then trying to get that to patients as quickly as we can again.
Yeah, we'd love to see the 100% success rate going forward. Maybe just double-clicking on Ziihera for a minute. Recently, Jazz presented long-term outcomes from the phase two study of DNA plus chemo in first-line GEA at ASCO. Data looked very impressive. It was a median OS of 36 and a half months, I believe. Very exciting. Could you talk about that data and how you think about it with the upcoming phase three Horizon study and maybe touch on kind of the bar for success with PFS and OS?
Yeah, I mean, it's a couple of years ago now, but I remember sitting in the offices of Zymeworks in the fourth quarter of 2022, looking at the readout of our first registration study in second-line biliary tract cancer where there wasn't a HER2-indicated medicine for patients. That was the first time that it really hit us that we just saw clinical evidence of a completely different response from zanidatamab than any other HER2 agent that had been utilized before. That's the first time we saw that this might be something that might be more promising than maybe we had contemplated at that time. Since that data announcement, we've continued to report additional data sets in multiple tumor indications, either as monotherapy or in combination with other agents with zanidatamab.
Every time we do, we get even more and more confidence about this differentiated clinical response that is different than the standards of care that you might have seen in the HER2 space for some time period or even things that are developing now. At ASCO, we saw this again with our longer-term follow-up in biliary tract cancer, where we just see that data getting better and better. We just see extended survival time. We see amazing quality of life for patients. We see it as a tolerable therapy that patients can continue on with to maintain a response. We have, obviously, a significant phase three clinical trial readout coming up in the second half of this year in the GA patient population, which is the second largest opportunity, I think, in the HER2 space beyond metastatic breast cancer.
We just have such confidence from the continued disclosure of our data sets. We're very optimistic about what that clinical readout might mean for patients. We also think it's going to be significant for our partners, Jazz and BeiGene, and for ourself. I hope it's a really positive catalyst for the sector in what can occur when you do really innovative and scientific work with emerging tools and develop those in the right way to get them to patients. I think that will just be validation of everything that's good in biotech. It's going to be financially important for our company, but it's not the end of what we're doing. I think there's additional clinical studies in Ziihera that are ongoing, which might find even a broader presence in the HER2 space.
We're still working on our own innovative portfolio, which has now reached clinical stage to see if we can do that again with different types of approaches, again, of multifunctional therapeutics. At the same time, we had a great disclosure at ASCO by one of our early-stage partners, Johnson & Johnson, J&J Innovative Medicines, as I'll call them, who put out the first phase one clinical data on their KLK2-CD3 T cell engager in prostate cancer, very novel target. That's something that we designed with them using our Azymetric platform of making bispecific antibodies. That data was extremely impressive. I know that they've indicated publicly they're going to move quickly forward into multiple registration studies with that.
That is another validation of our approach of how we think about engineering multifunctional therapeutics, but also financially rewarding for us because of our involvement with it. We have a strong financial stake in the success of that program. We are really excited that might give us another approved product eventually that came from our Azymetric platform.
I mean, you touched on this briefly, but maybe could you talk a little bit more about kind of economics to Zymeworks with the upcoming readouts and potential approval in GEA and maybe other indications down the road given the partnerships?
Yeah, I think our approach that we took was that I think we were better positioned to have someone else try to commercialize zanidatamab as our first agent. We had BeiGene already as a partner in Asia-Pacific, and we brought on Jazz as a partner in 2022. We felt maybe that was the right step, but we wanted to make sure that we were compensated appropriately for the innovation that we made. We structured arrangements with both Jazz and BeiGene, which let them do the great commercial work that they're able to do, but ensure that we shared in the success of zanidatamab in commercial markets. I think we've been able to craft an arrangement through payments we've already received, but also future milestones and royalties, which should provide a pretty healthy projected future cash flow for us.
When you add to it something like KLK2-CD3 T cell engager by Johnson & Johnson, which also will provide a stream of milestones and royalties, we start to think that a part of the company then, because we're not commercializing our own innovations to start with, looks more like a royalty company inside Zymeworks. We are going to try to embrace that because I think that might be a really good way to create value for shareholders without having to make an evolution to commercialize our own products at some point and all that goes with that. We think that financial model we've generated for Ziihera and potentially other agents actually is not a bad model for generating shareholder returns, especially shareholder returns when you think about them on a per-share basis, which is usually a problem in our sector.
Really excited about what that might bring to us. Obviously, the GEA readout in the second half of this year can provide a pretty good source of revenue potential for BeiGene and Jazz and obviously our share of that. Really excited about that near term and really excited about the other clinical studies that are currently underway by Jazz and BeiGene to continue to broaden the potential of Ziihera in a way that's probably beyond what we would have been able to do as a biotech company if we had maintained that ourselves.
Yeah, maybe switching gears a little bit to the five-by-five pipeline. It's been a lot of innovation. Very exciting to see the continued advancement there. Two programs entered the clinic this past year. 191 was the folate receptor, also ADC, and then 171, which is the mesothelin bispecific T cell engager, both entering increasingly crowded spaces in terms of competitive landscape. Could you maybe start by discussing the design and strategy for both and then also kind of touch on the differentiation?
Yeah, back in 2022, we decided we would put this five-by-five strategy in place. Again, we do have a strong belief that biotech should build a broad portfolio around their scientific platforms. We decided to do that with five different agents, three antibody drug conjugates, which we thought were the next generation of antibody drug conjugates, and then beyond that, our T cell engager approach, which has now gone from bispecific to trispecific. We just believe this broad R&D portfolio and trying to invest across that portfolio is the right approach. As we move these into clinical studies, I think clinical data will tell us where there should be attrition in our pipeline.
It'll also give us some partnering opportunities created by positive clinical data catalysts, but trying to think about managing a portfolio from our scientific platform as opposed to focused on an individual asset. We started that process back at the end of 2022. So far, we've moved two of those programs into clinical studies, which are ongoing now. A third one is on its way very quickly. We have two more behind that. I think it just allowed us to build some diversity in the portfolio because we are developing antibody-drug conjugates and T cell engagers at the same time. I think we have some diversity of patient populations in that portfolio as well.
We just like what the value of that portfolio could be in the future, where it may transition from being unpartnered, where it's all of our capital right now, to being a mix of partnered and unpartnered programs where we're then utilizing other people's capital and looking at freezing our investment in things and looking at it as more of a return analysis the way we did with Ziihera. Beyond that, we've already started to think about where we go next. In addition to the five-by-five solid tumor program, we did also develop our first autoimmune asset, which is a bispecific against IL-4 receptor, IL-33, together in COPD, which we think is really interesting. Same technology platform, same scientific premise, same great protein engineering skills, just a different patient population that happens to be outside of oncology.
We managed to move six things forward where we only intended with five, and that is just because of the productivity that we had and the ability to reach into our preclinical portfolio and find quality products to move forward. Behind that, we have been able to develop a really great productive R&D group who has a pretty good substrate of additional preclinical programs underneath that with more diversity, more novelty, more breadth outside solid tumors. I am really excited to think about those as well. We did start to present some of those at AACR earlier this year.
Most of the focus of the company is in continuing to move forward and develop the five-by-five plus one, as we call them now, and just understand how we can drive those to clinical data catalysts, which will then tell us these should still be continued to be worked on or there should be attrition in the portfolio. If we're going to continue to work on it, to what extent do we do that in more of a partnered model than an unencumbered model, which is what we're working on right today.
Yeah, so you mentioned IND submission that's coming for 251 later this year. Could you speak to maybe the preclinical data that influenced you to prioritize 251, which is the Glypican-3 targeted ADC over 220, which was the NAPI2B ADC? Also, how do you envision its role in treating HCC?
Yeah, so I think the original context we had was that we wanted to build our own kind of mini portfolio of ADCs. In this case, it was three. Using the same payload, the same linker strategy, the same thought around that certain antibody characteristics would be really important in ADC construct. This internalization and tumor penetration characteristics that we optimized for and build our own little portfolio. We did provide some diversity in that between the type of DAR we would use, between how validated the target was, how crowded the space was. Our first ADC that ended up in the clinic, ZW191, was a folate receptor alpha ADC, which had obviously been validated with the approval of MERV, as well as others who were in the space.
Then behind that, we had ZW251, which is a little bit more novel as a GPC3 targeted ADC. I think GPC3 is a well-validated target in HCC, maybe more from a radioligand standpoint or CAR-T or antibody space. We thought that we had enough protein engineering and characteristics to build an ADC to be utilized in regimens for HCC, which is not currently available for that patient population. With the same thought that if we can make these ADCs be extremely tolerable, drive good single-agent activity, we could open up the possibility for combinations to move to earlier line settings and maybe really drive a substantial benefit for patients over and above standard of care. I think GPC3 is well-validated biology. I think our ADC approach fits well with the patient population we're trying to treat in HCC.
We would hope as we get clinical experience with this agent, we'd find ourselves in a position with a tolerable enough ADC to combine with standard A plus B immunotherapy plus VEGF. We think that's a really interesting construct. Of course, it's not crowded with lots of other people trying to do this. We think our particular approach to designing ADCs might allow us to fit into this patient population where there aren't ADCs used in HCC today. In our ADC portfolio and overall portfolio, different levels of novelty and diversity, different levels of trying to be different where there are others, and in some cases trying to be on our own, trying to really move the needle scientifically on an approach that maybe hasn't been tried or accomplished successfully before.
When you do that in an overall portfolio approach, you can take some variety like that in the portfolio, which is what we've certainly done with both ADCs and our T cell engagers.
Yeah, and I think you touched on this briefly, but you recently presented 209 data at AACR, which is the DLL3 targeted trispecific T cell engager, which has the integrated CD28 co-stimulation. Could you elaborate on how the cis binding of CD28 kind of contributes to the safety profile and the off tumor, kind of minimizing off tumor activation?
Yeah, I think we've been spending the last number of years trying to, again, do what others have been trying to do, try to find a way to get more efficiency out of the T cell engagement process, but also more durability where we can. Those are the two things that we thought we could improve upon. I think for many, it was trying to find a way to combine a CD3 T cell engager with another bispecific. A number of our peers have been trying to find a way to combine two different bispecific antibodies together in a patient population and have them be able to be tolerable together.
We, being protein engineers, I think multifunctionality, we thought if we could make a trispecific and just use three arms of an antibody to build another capability or mechanism in with the CD3, that might be a preferred way to do that. We came up with this idea of building in a co-stimulatory factor, in this case CD28, into what would look like a normal bispecific T cell engager. In this case, the first one going in the clinic is DLL3. What we found is the ability to engineer it in certain constructs, which allows this to not be an independent signal on its own, but something that's only activated when CD3 is activated, allows you to potentially get more efficiency out of the CD3 process and also more durability so these T cells won't get so tired so quickly.
We felt building that into a single molecule gave us much more control over how those three arms work together in a way that's different than combining a CD3 bispecific with a CD28 bispecific in a patient population, which some have done. Our preclinical data suggests that that's a good approach. We are putting our DLL3 tri-TCE into clinical studies next year to hopefully clinically see the types of responses that were encouraged by from our preclinical data. I think if we're able to solve this, it's a pretty, it's been a tough engineering challenge for others who have tried this in a trispecific structure. We hope we got the geometry and the different elements right to work together. Our preclinical data on tolerability and activity tells us we're on the right track.
Really excited to put this in clinical studies and see if that is a way to get more out of a T cell engager by combining a third arm or the co-stimulatory factor into what looks like a traditional bispecific. That is different than what others are trying to do. That is a part of our business. Hopefully, this ends up having differentiated responses from doing this as opposed to a combination. Hopefully, it gives you an improvement over a traditional T cell engager. Obviously, Tarlatamab is a DLL3 targeted T cell engager, which is now approved. If we can find a way to get more efficiency and durability to improve upon that bispecific structure.
Really excited about the science we've worked on for a few years to put us in this position and really excited with DLL3 being the first of what might be several trispecific approaches to do this with a co-stimulatory factor, CD28, built into the molecule and interested to see what that mechanism provides us in clinical responses.
Yeah, great. Recently, I think you announced 327, which is the LY6E-targeted ADC with, I believe, a novel payload. Could you talk a little bit about the insights that you've gained from the NHP models on its therapeutic window and potential for clinical translation?
Yeah, really interesting. I mean, we had a hard time picking our little mini ADC portfolio, which we ended up with folate receptor alpha, NAPI2B, and GPC3 as the three targets that we wanted to build ADCs against and move into clinical studies. We had some others that we thought were interesting. LY6E was one of them. It did not make it into the first three, but as usual, our scientists continued to work on it and progress. There was a prior ADC with a LY6E antibody, which was put in the clinic by Genentech. It was okay. It just did not meet their standard to go forward. I do not think the payload linker strategy of that was correct.
We decided we would try and optimize a different LY6E antibody that maybe had characteristics that would make it a better ADC and then pair it with our topo payload and our linker strategy. Very difficult to optimize an antibody for LY6E, which I think is why you do not see a lot of them. We were able to overcome that with our protein engineering experience inside the company, come up with a really interesting antibody, which when paired with our still 519 payload and some linker strategy, looks pretty interesting in a broad set of potential tumor indications. We talked about that at AACR for a little while. For us, we probably need some help from a partner to move that one forward into clinical studies. It is really interesting.
Again, we have to be careful about taking on too much from a capital perspective, too much from a time perspective and focus. We are really interested in seeing if that can be a fourth ADC that we can add to our mini ADC portfolio. Rather than doing that on our own with our own capital, we probably need someone to help us move and progress that one forward. Again, very unique. We have some validation of the biology from the prior program from Genentech, which makes us excited about trying it. It is very difficult to design a LY6E ADC, so there might be some uniqueness for us, at least for some time period in this busy, crowded marketplace. Really excited about the ability to even broaden the patient population beyond what we see with our first three ADCs, which are currently in our portfolio.
I just stay tuned for that one to see how we can progress that. It is pretty interesting to be able to add to the portfolio beyond what we talked about a number of years ago as buildings.
Maybe last question on pipeline. It's been exciting to see the expansion beyond oncology, as you mentioned, with 1528, which is the dual cytokine bispecific targeting IL-4R alpha and IL-33. Can you talk a little bit about how this bispecific approach kind of compares to existing therapies in modulating both type 2 and non-type 2 inflammation and COPD?
Yeah, I think we've obviously used our Azymetric platform to design multi-specific antibody approaches both for ourselves and others. Zanidatamab was done that way. It's approved now. KLK2-CD3 was done that way. We thought, what if we can find a way to get a multifunctional therapeutic for COPD that combines the power of Dupixent in one arm, which is now the first biologic approved for COPD, and also combines another target, which might be nice to pair with that. In this case, we picked IL-33 just because there's good validation, I think, from clinical studies which have been conducted. We think the combination of those two could be pretty interesting in a bispecific format and might address some of the issues of the segmentation of the COPD clinical population, which has been segmented by current smokers, former smokers, type 2 inflammation, mixed inflammation.
Of course, Dupi addresses a part of that marketplace. IL-33 might address a different part of that marketplace. In a bispecific structure where you combine both of those mechanisms in a single biologic, might be able to address a broader market. There might be some complementarism between IL-33 and IL-4 receptor together. Hopefully, we see what we saw with Zani, which is the mechanism becomes quite different than looking at the combination of the two antibodies separately. That is what our preclinical data shows. We are interested to see if in clinical studies in that population, maybe we can treat a broader population with one single biologic, which gets you both those mechanisms. Might get you a little bit more because of the bispecific nature of how those two will work together in the construction. Really interested in that.
In COPD, we've got the first biologic with Dupixent, which is great. I think there are other routes we can take to try to improve the standard of care for COPD patients, which is still in desperate need of more innovative therapies. We are really excited about putting our first bispecific approach in autoimmune into clinical studies next year. That COPD population will not be the last one that we do that way. We do believe this multifunctional approach is better than trying to think about combining two biologics separately in that patient population. I think this will hopefully show that we can accomplish these different clinical responses where it cannot be.
Broad note, the patient population might make it easier for understanding how you might treat these patients by not having to segment them as much because of the nature of the target that you're pursuing.
You mentioned this earlier, and you've talked in the past about having a finite amount of clinical development capacity internally with all of these INDs that you've already submitted and are planning to do in the next year. You mentioned also, of course, the LY6E potentially partnering that out. How do you think about prioritizing resources across all of these programs?
Yeah, absolutely. I think having been in this business a long time, innovation does not matter unless you can create value for shareholders on a per-share basis. You need to pay attention to that. It is great to do world-leading research. It is great to have your first molecule, which goes into the clinic, be approved. That is fantastic. We need to find a way to make a business out of this that rewards our investors on a per-share basis from the innovation we make.
The only way you can do that is by having extremely high scientific quality standards, having a pretty big substrate to pick agents from, making sure you give yourself a broad chance, but not lose too much focus, make sure your capital can be reallocated and reorganized, that your people can be reorganized around the agents, which then give you the clinical responses which seem to justify continued investment. We love all five agents of solid tumors that were in the clinic or moving to the clinic. We really like the bispecific approach we have in COPD, and all those are moving forward.
At some point, we will have to have partnering attrition, be able to reallocate based on different priorities so that we can actually progress the innovative parts of the company, but at the same time, make sure we can build an appropriate investment return for our shareholders for that on a per-share basis. It is not surprising when you talk about that. We have not done an equity financing in the company since January 2022. We have been able to run most of the company and our capital so far based off the partnership with Zymeworks and other income that comes in from our other programs that we have partnerships for. In the future, we can still continue to do that through more of a partnership model than relying too much on equity.
We're building a lot of value in Ziihera, other agents, this unpartnered portfolio, but making sure we build that value on an innovation per-share basis the way we think about it. That's an important element of biotech that I think gets overlooked, gets overlooked more when capital markets are easy. People pay attention more when capital markets are more difficult as they are today. We've always taken that approach at this company since 2022 at least.
I think we'll find a way forward to move interesting products forward in clinical development, move interesting science into clinical development, and be able to do that with the right capital strategy, capital allocation, partnership input, and build what hopefully is a really great company with multiple products that are helping patients, but can also be seen as financially successful for rewarding our investors who helped us along the way with returns on a per-share basis that compensate them for the risk capital they provided.
Maybe on that point, you've guided to, I think, the second half of 2027 in terms of cash runway. I think that includes maybe some certain milestone payments. Where does that take you with respect to the pipeline, how you think about that?
I think for now, it takes us far enough. I think people focus a little bit too much on this cash runway. Our business is all about optionality. I have what I think is a really high-quality, unencumbered, wholly owned pipeline, which gives me optionality over how I construct that with potential partner involvement and bring more capital into the business. Obviously, with Ziihera, it obviously looks like it could be a more promising product overall from a peak sales potential than maybe we even contemplated when we went into our first clinical study with that agent. Sometimes along comes something like the KLK2-CD3 T cell engager from J& J Innovative Medicines, which could provide additional financial interest to us. I think from our perspective, we have the right R&D strategy. I think we have the right capital strategy behind it.
I think we can find a way to have a share of our success from the commercialization of Ziihera and other medicines at the same time as being an innovative R&D company and still ensure that we can provide some returns for shareholders at the end of the day on a per-share basis. I think biotechs need to make sure that they can see that business or investment model underlying the R&D strategy that we have that we're always so excited about in biotech companies like Zymeworks.
Maybe with our last couple of minutes here, I'd love to touch on your Azymetric and Effector platforms. Maybe could you talk about the challenges associated with developing bispecific and trispecifics? You've sort of touched on this already, but particularly kind of in terms of manufacturability and then the clinical translation and then kind of the advantages that your platforms have over traditional kind of antibody engineering approaches?
Yeah, I mean, we started life as a computational platform company. So we were using AI before. We called it AI, and we still do. It's just a part of what we do every day. We don't talk a lot about it, but these computational methods we think are really important. On that, we've layered kind of Azymetric, which provides us an amazing platform to test all sorts of things in a biologic structure. We're able to go from something that looks like a basic antibody to something that looks like multi-specific, whether it's bispecific or trispecific, and still seems to operate like it is a monospecific antibody. All these issues around manufacturability and immunogenicity, et cetera, tend to be things we don't worry as much about.
What is really important is us being able to test all sorts of different formats, whether it's geometry of how we align the different arms of that antibody, valency, relative affinities, all sorts of other things, and do it in a way that I wouldn't say is high throughput, but allows us to test a pretty large amount of geometries computationally to get a direction. It is how we found Zani as the perfect structure, how we found the KLK2-CD3 as the perfect structure among the bunch. It is how we designed all the molecules we put in the clinic, including the bispecific antibody for COPD. We are hoping that those capabilities we have honed over many years with the same team are going to be able to create a range of approaches which can go into clinical studies and hopefully come out the end as approved agents.
Not sure we can keep 100% record in the company, but I think we're going to do our best.
It has been exciting to see. I think that's all the time we have. Thank you so much for the discussion today.
Oh, thank you very much for having us here. I appreciate it.