Zymeworks Inc

NASDAQ:ZYME

Earnings Call Transcript 2024-Q1

[Operator]

Thank you for standing by. This is the conference operator. Welcome to Zymeworks First Quarter 2024 Results Conference Call and Webcast. [Operator Instructions] The conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Shrinal Inamdar, Director of Investor Relations. Shrinal, please go ahead.

[Shrinal Inamdar, executive]

Thank you, operator. Good afternoon. I'd like to welcome you to our first quarter 2024 results conference call. Before we begin, I'd like to remind you that we will be making a number of forward-looking statements during this call, including, without limitation, those forward-looking statements identified in our size and the accompanying or commentary.

Forward-looking statements are based upon our current expectations and various assumptions and are subject to the usual risks and uncertainties associated with companies in our industry and at our stage of development. For a discussion of these risks and uncertainties, we'll refer you to our latest SEC filings as found on our website and as filed with the SEC.

In a moment, I'll hand the call over to Ken Galbraith, our Chair and Chief Executive Officer who will be discussing recent corporate updates along with our financial results for the first quarter 2024. Following this, Dr. Paul Moore, our Chief Scientific Officer, will talk about recent data shared at the Annual American Association for Cancer Research or AACR meeting and key takeaways. At the end of the call, Ken, Paul and [indiscernible], our VP of Finance and Strategy, 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 Ken.

[Kenneth Galbraith, executive]

Thank you, Shrinal, and thanks, everyone, for joining us today on our first quarter 2024 earnings call. With that, I'll begin today's update with an overview of key achievements from our development programs as well as our financial results.

We're pleased to be reporting on another busy quarter where we've had a chance to present some really interesting data from our R&D team, which showcase the capabilities and internal expertise we have in screening and optimizing our candidates as presented at AACR, which Paul will speak to later in this call.

Beyond that, we've also made progress on the clinical development readiness of our teams, including conducting steering committee meetings and various regulatory agency consultations to fine-tune our clinical strategy for our 2 upcoming investigational and drug applications or INDs and foreign equivalents coming up this year.

We've also been strengthening our presence in key locations to carry out a broad Phase I clinical trial program in North America, Europe and Asia Pacific. With the majority of our patients in our upcoming Phase I studies expected to be recruited outside the United States. And I look forward to talking more about our plans in the near future, when we posted our respective study protocol publicly, on the clinical trials website and are actively recruiting in the dose escalation stage of our Phase I studies.

To support this continued growth, we brought in Dr. [ Neil Gallagher ] to join our experience forward. His experience in leadership in leading multiple development programs through the global regulatory approval will support our efforts to rapidly advance our 5x5 programs into clinical studies and our continued pipeline expansion of novel antibody drug conjugates and multispecific antibodies in the years ahead.

Dr. Gallagher [indiscernible] very good company and will provide complementary guidance along with the new and longer-serving members of our Board. I'm very confident that these advances, coupled with R&D reprioritization and some difficult but necessary personnel decisions over the past 2 years will position us for success as we approach pivotal milestones for Zymeworks this year and in the years ahead by focusing our resources and energy on our most advanced and highest potential clinical value drivers.

On our later-stage asset, we're very pleased that Jazz has completed its BLA submission seeking accelerated approval for zanidatamab in second-line billiary tract cancers or BTC in the United States as monotherapy. Yesterday Jazz also guided that their plans to submit a marketing authorization application or MMA to the European Medicines Association for zanidatamab, are proceeding. Similarly, BeiGene is expecting to submit their BLA for zanidatamab with the National Medical Products Administration in China during the second half of this year.

Jazz also initiated a Phase III confirmatory trial for zanidatamab as first-line treatment in BTC in combination with the current standard of care and enrollment for this trial is ongoing. Jazz is also noted that they expect to present updated data with longer follow-up, including overall survival findings from the Phase IIb HORIZON-BTC-01 trial at the 2024 ASCO Annual Meeting.

Additionally, Jazz is targeting the top line PFS data readout from the pivotal Phase III trial for zanidatamab in first-line gastroesophageal adenocarcinoma, or GEA, in late 2024. Furthermore, Jazz announced they expect to initiate a Phase III trial anticipated for the second half of 2024 for zanidatamab in HER2 experienced patients with HER2-positive breast cancer.

We sincerely appreciate the progress achieved and commitment shown by our partner, Jazz and BeiGene in leading zanidatamab towards commercialization initially in BTC and then with additional clinical development investment for potential label expansion, including in GEA and metastatic breast cancer.

Turning now to our financial position this afternoon. Zymeworks reported financial results for the first quarter of 2024. Zymeworks net loss for the 3 months ended March 31, 2024, was $31.7 million or $0.42 loss per diluted share compared to a net loss of $24.4 million for the same period in 2023. The increase in net loss was due mainly to a decrease in revenue which was partially offset by a decrease in operating expenses and an increase in interest income. As reported, our revenue for the 3 months ended March 31, 2024, was $10 million compared to $35.6 million for the same period in 2023.

Revenue for the 3 months ended March 31, 2024, included $9.9 million for development support and drug supply revenue from Jazz and $0.2 million from our partners for research support and other payments. Revenue for the same period in 2023 included $34.4 million in revenue for development support and BRIC supply payments from Jed and $1.2 million from our partners for research support and other payments.

The decrease in revenue from Jazz was a result of transfer responsibility for certain clinical trials regarding zanidatamab to Jazz for our transfer agreement and amended collaboration agreement with Jazz. Overall operating expenses were $47.8 million for the 3 months ended March 31, 2024, compared to $62.9 million for the same period in 2023, representing a decrease of 24% year-over-year.

The decrease in overall operating expenses resulted from a decrease in both research and development expense as well as a decrease in general and administrative expense. The decrease in R&D expense was primarily due to a decrease in expenses for zanidatamab as a result of a transfer responsibility for the program to Jazz for our transfer agreement and amended collaboration agreement. This decrease compared to the same period in 2023 was partially offset by an increase in preclinical expenses primarily with respect to the preclinical product candidates, ZW171,-ZW191 and ZW220. Salaries and benefit expenses decreased compared to the same period in 2023 due to a lower head count in 2024 and which was partially offset by an increase in stock-based compensation expense in 2024.

The decrease in general and administrative expense was primarily due to a decrease in expenses related to external legal spending and insurance expenses compared to the same period in 2023. As of 30, 2024, we had approximately 7.7 million shares of common stock outstanding and approximately 5.1 million shares of common stock issuable under prefund warrants. As of March 31, 2024, we had $420.5 million of cash resources, consisting of cash, cash equivalents and marketable securities as compared to $456.3 million as of December 31, 2023.

Based on our current operating plans, we expect our existing cash resources as of March 31, 2024 when combined cidocertain anticipated regulatory milestone payments will enable us to fund planned operations into the second half of 2022.

For additional details on our quarterly and year-end results, I encourage you to review our earnings release and other SEC filings as available on our website at www.zymeworks.com. With respect to our SEC filings, you may notice that our current shelf registration statement expires later this year. And as a matter of good financial housekeeping, we filed an automatic shelf registration statement today to take advantage of our new well-known seasoned issuer or whiskey status. This automatic shelf registration statement like our existing ATM equity program provides us with flexibility to consider various financing offers in the future as other biotechnology companies do, but does not commit us to raise any new equity capital.

As further financial housekeeping and may see some further upcoming filings with the SEC to bring our existing prospectus supplement filings regarding our exchangeable shares and our ACO program under our new [indiscernible] automatic shelf registration statement.

Turning to Slide 7. Our strategy of refocusing the business and building a diverse clinical stage product pipeline of antibody drug conjugates and multi-specific antibody therapeutics continue to provide a solid foundation, helping to achieve our long-term goal of identifying additional product candidates and seeking viable partnership options where appropriate to assist in global development and commercialization. Our strong financial position of $420 million in cash resources as of March 31, 2024, together with certain anticipated regulatory milestones payments gives us an expected runway into the second half of 2020.

We may also be able to extend this runway or fund an expanded R&D scope through potential regulatory approval milestone payments in connection with our existing partnerships with Jazz and BeiGene or new partnerships and collaborations, which we may choose to form. In addition, pending regulatory approval, we are eligible to receive commercial milestone payments based on annual sales of zanidatamab and tiered royalties between 10% and 20% on Jazz's annual net sales and between 10% and 19.5% on BeiGene sales.

With that, I'd like to hand over to our Chief Scientific Officer, Dr. Paul Moore, who will talk more about the really interesting work our team presented at AACR on our ADCs and Multi-Civic antibody therapeutics. Over to you, Paul.

[Paul Moore, executive]

Thanks, Ken. As you said, we were pleased to be able to showcase some of these capabilities at AACR and provide insights into how these technologies can be applied to the screening and optimization of our preclinical development candidates keeping the specific targets in patient populations in mind with the aim of derisking clinical development efforts. Posters presented on our multi-specific antibody therapeutics focused on our TriTCE [indiscernible] platform, a next generation trispecific T-cell engager with integrated CD28 co-stimulation. We presented data on the platform itself, and in the context of 2 tumor-targeting antigens, highlighting enhanced mechanistic and antitumor activity compared to clinical benchmark CD3 bispecifics targeting the same antigens. By providing balanced activation of both Signal 1 through CD3 and Signal 2 through CD28 in a single molecule, TriTCE [indiscernible] molecules have the potential to induce sustainable T cell responses in the tumor microenvironment beyond that achievable with conventional bispecific T-cell engagers that only engage CD3 or CD28 alone, providing a potential therapeutic modality to treat solid tumors with low T cell infiltration poor T cell function that are underserved by existing immune-based therapies.

On Slide 10 summarizes the first TriTCE co-stim presentation, which utilizes Claudin 18.2 a's a model tumor target. And a focus on the various design features optimized through protein engineering and reiterate a functional screening to enable 7 key functional properties desired in the platform. This includes conditional binding of CD28 contingent on CDC branding, obligate T cell binding of CD28 and CD3 with no T cell cross-linking between CD3 and CD28 on separate T cells. And with T cell activation contingent upon tumor antigen engagement.

In the presence of tumor cells expressing Claudin 18.2, the simultaneous engagement of Claudin 18.2 on tumor cells with dual CD3, CD20 co-engagement on T cells is anticipated to yield higher functioning T cells capable of driving more durable T cell responses, culminating and sustained antitumor activity. As shown on the left, we tested this hypothesis in an in vitro serial repeat challenge asset with results demonstrating superior T-cell liability, T cell proliferation and tumor cell site toxicity over time with the lead Claudin 18.2 TriTCE molecule relative to clinical stage benchmark bispecifics from Amgen and Astellas.

On the right-hand side of the slide, you can see that this also translates into enhanced antitumor activity in established gastric cancer models. Building on data shared in prior presentations on the platform demonstrating lack of systemic cytokines, we also continue to characterize the safety profile of the platform. In pilot NHP studies, Claudin 18.2 TriTCE co-stim was well tolerated upon repeat dosing at 3 mg per kg with mild changes in peripheral cytokines and noticed pathological changes observed in the stomach [indiscernible] express. Taken together, we view these results as very encouraging. Further validating the potential of the TriTCE co-stim and is supporting continued evaluation against additional tumor targets.

The second TriTCE co-stim presentation described the design and characterization of a DLL3-targeted TriTCE co-stim module, again, incorporating balanced CD3 and CD28 T cell activation to enhance cytotoxic T cell responses against DLL3 expressing tumor cells beyond that achieved with benchmark DLL3 CD3 bispecifics.

As described in the presentation, molecule selection was achieved through a rigorous evaluation and functional screening of various formats, geometries and power to affinities, while also leveraging advances in the platform described in the cloud 12-based poster.

This slide shows a subset of data from the poster. On the left, we show example in vitro cytotoxicity results performed at low ET ratio, demonstrating favorable activity of DLL3 TriTCE co-stim relative to benchmark clinical stage DLL3 CD3 bispecifics, such as AMG 757 or talatumab at HPM328 from [indiscernible]. And additional experiments reported in the poster, we further demonstrated that the DLL3 TriTCE add by design improves T cell proliferation and survival, resulting in a more sustained T cell set of toxicity and rechallenge experiments relative to benchmark TCEs while maintaining desired T cell engagement properties such as conditional binding to CD28 that requires co-engagement with CD3.

Similar to our Claudin 18.2 TriTCE, the novel geometry that prevents binding of the CD28 paratope in the absence of CD3 binding reduces the potential of cytokine release syndrome was tested using a predictive in vitro model through monitoring cytokine release.

Finally, as shown in the right-hand side of the slide, in vivo study is using a high bar established small cell lung cancer humanized xenograft model, comparing the DLL3 TriTCE to the AMG75 benchmark Theatre demonstrates tumor regression with the DLL-3 TriTCE not observed with the benchmark control. Taken together, we feel both AACR posters describing the trispecific T-cell engager platform, illustrate our ability to engineer T cell engagers to supplement CD3 activation with CD28 co-stimulation to enhance T cell responses and antitumor activity, while maintaining a desired tolerability profile paving potential opportunity to expand and enhance therapeutic responses in solid tumors patients beyond that achieved thus far with T cell engagers.

On Slide 12, as you are no doubt aware, the appeal of incorporating CD28 co-stimulation into T cell engager strategies is also being pursued by others in the industry, as shown in gray on this slide, highlighting the exciting potential of CD828 co-stimulation to augment T cell-based therapeutic strategies. The Zymeworks approach highlighted in green, however, differentiates from these competitive approaches and several key features.

First and foremost, we have designed tumor targeted T-cell engagers that incorporate both CD3 and CD28 co-engagement in a single molecule, engineering balanced CD3 and CD20 activation to enable an optimal level of T cell activation through signal 1 and signal 2. This differs from companies developing CD28 bispecifics alone or in combination with either anti-PD-1 or with CD3 bispecifics. While others have developed CD3/CD28 base trispecifics, in contrast to their approach, we have been very careful to engineer conditional CD28 binding and activation continue with CDC banding to offset the potential for T cell-T cell engagement and peripheral T cell activation.

The zanidatamab advance into regulatory review, much [indiscernible] milestone and validates our protein engineering expertise, including the Azymetric platform, also a core component of our multispecifics used in the next-generation T cell engager said W171 alongside our latest TriTCE co-stim candidates.

Most like our design and optimization of [indiscernible] a next generation as you HER2 agent, we anticipate our protein engineering expertise and attention to design features of next-generation T cell engagers will likewise provide enhancements in therapeutic benefits beyond the limits of first-generation T-cell engagers.

And we look forward to nominating a TriTCE molecule at the end of this year is the final molecule of our 5x5 strategy. From our ADC team, we had 3 posters or 1, ZW191 our folate receptor alpha targeting antibody drug conjugate. We shared additional preclinical data that's demonstrating its differentiated profile relative to other folate receptor targeting ADC with strong antitumor activity across an expanded set of folate receptor alpha tumor indications and its favorable tolerability and repeat dose nonhuman primate studies.

On this slide, we'll highlight a few of these results. On the left, we demonstrate the relative internalization, payload delivery and tumor spheroid penetration supported by ZW19 folate receptor [indiscernible] compared to collareceptor alpha targeting antibodies incorporated and for other ADC programs.

As you can see, ZW191-mab in blue and dark blue demonstrated higher levels of internalization, very penetration and Peladelivery compared to the maps from [indiscernible], MOR202, S02 and PRO 1184. This observation is consistent with our decision to select the ZW191-mab from a larger pool of fuller receptor alpha antibodies based on its optimal ability to deliver payload through enhanced internalization. And consistent with our care and factoring in all components of the agency when designing our candidates.

On the right hand of this side of the slide, we demonstrate ZW191 antitumor activity in a range of PDX models. Consistent with prior data, we saw greater total activity of 191 compared to [indiscernible] with ZW11 demonstrating activity in folate receoptor of high, medium and low models of ovarian cancer. We also reported promising results in folate receptor alpha expressing non-small cell lung cancer, endometrial and triple-negative breast cancer models with representative examples of responses shown.

Further for ZW191, we disclosed updated data from our GLP tox studies -- toxicology studies, supporting our IND filing. Where we reported the highest nonsevere hypoxic dose in non-human premise was 60 mg per kg, presenting a compelling profile for potentially efficacious dosing. Beyond the ZW91 poster our ADC team also presented development of a novel tumor spheroid model system applicable to multiple cancer types to aid in screening characterization of our ADC modules, including top-base ADCs that is more predictive of anti-tumor activity in vivo than traditional 2D cell line models.

It also is used in detection of ADC mechanism of action, such as the tumor penetration data shown in the ZW191 presentation. Finally, we also shared progress made on the design and functional screening bispecific ADCs to identify those optimally formatted in affinity, [indiscernible] design to overcome challenges associated with tumor heterogeneity associated with targeting a single tumor antigen, and we look forward to presenting more data from that novel technology in the future, including applications to additional tumor target peers.

In addition to today's updates, we anticipate further opportunities to showcase our progress from -- for both our preclinical and clinical milestones at upcoming conferences in 2024 and including the nomination of our final product candidate within our 5x5 portfolio. Our commitment to innovation and mission to provide effective treatment options for patients remains at the heart of what we do at Zymeworks.

we're actively exploring alternative mechanisms of actions and harnessing new modalities to optimize efficacy while minimizing toxicity, ultimately, with the aim of raising the bar for the standard of care, particularly in challenging to treat diseases. We're excited about the journey ahead and remain dedicated to advancing transformative therapies. Ken, back over to you.

[Kenneth Galbraith, executive]

That's great. Thank you, Paul. In summary, as mentioned earlier, we're very pleased with the BLA submission seeking accelerated approval for zanidatamab in second-line B2C in the United States having been completed. And we continue to work very closely with our partner, Jazz and BeiGene to achieve key term milestones. We're encouraged by our progress to date in 2024 and as excited as ever about the future of Zymeworks as we prepare to enter multiple Phase I trials in the next coming 24 months, our commitment to advancing innovative solutions remains evident with more preclinical data for our early-stage pipeline at presented throughout 2024.

Beyond that, we wish to further build upon and leverage the differentiated platform at Zymeworks to generate continued long-term R&D productivity with the ability to expand our therapeutic focus and research scope beyond the current pipeline with the potential for 2 new INDs annually from 2027 onwards. Our cash runway remains on track to support the development of our 5x5 product pipeline and invest in our long-term R&D strategy, called Advance. While we approach milestones that may result in the further extension of this runway or allow us to expand our R&D scope, we remain diligent in efficiently managing our operating expenses as we continue to execute on the strategic clinical development plans for our assets. We look forward to reporting our continued progress against our key priorities during the remainder of 2024.

With that, I'd like to thank everyone for listening to our call. I'd like to turn the call over to the operator now to begin the question-and-answer session.

[Operator]

[Operator Instructions] our first question comes from the line of Stephen Willey of Stifel.

[Stephen Willey, analyst]

Maybe just a couple of any questions for me. So Ken and perhaps, Paul, just Curious as to your thoughts regarding Merck's disclosure of the OS benefit that was seen in KEYNOTE-811. And I know that there was some suggestion that this could be the case per the interim analysis that we saw at ESMO back in October. But just wondering if you think that if this changes the longer-term competitive dynamic at all in frontline GEA and if that now kind of raises the bar for perhaps what the triplet arm needs to show in the HORIZON trial.

[Kenneth Galbraith, executive]

Yes. Thanks for the question, Steve. I mean, obviously, we don't know much more than what was put in the press release about the OS outcome. There's no actual data there. So it's hard for us to comment further about the strength of that data, the consistency across the patient population. Obviously, the OS was determined on ITT as it needs to be across the population. Obviously, the previous PFS result was not across the entire patient population but only in the PD-L1 positive stratified part of that study.

So until we see the actual data presented until we understand what's on the label. It's difficult for us to evaluate your question about the attractiveness of that regimen versus our own. And I think for us and Jazz and BeiGene, we're focused on completing the HORIZON-GEA-01 study, and we're more focused on seeing the results of of our own combinations, antiocumotherapy and tips chemotherapy with TSA and how that compares to our own active control arm. [indiscernible] in the patient population were study, which remember is is different than the KEYNOTE-11 patient population just because of the inclusion of the esophageal adenocarcinoma patients.

So I think we're more interested in the facing recruitment in our study understanding the PFS results and continuing to follow the patients. And I think once we have more data available on our study and the other study that it will be probably a little bit easier to understand the competitive environment for everyone.

[Stephen Willey, analyst]

Okay. I guess that's fair. And then I know Jazz obviously has outlined plans to pursue registration in post and HER2 metastatic breast and I think there was some KOL discussion on their call regarding the need for prospectively generated data in this patient population. But just curious, given that most KOLs think in HER2 is going to become frontline standard of care, I'm just kind of interested in your thoughts regarding the relevancy of this trial with respect to gaining utilization in the second-line setting, if indeed, that in HER2 upstream move into frontline occurs.

And I guess from a relevancy perspective, I'm just questioning the thought, right, that one would need to assume that the Cleopatra regimen in Kadcyla are kind of completely displaced and not repositioned as a later line treatment options post in HER2. So just kind of curious as to your thoughts there?

[Kenneth Galbraith, executive]

Yes. I mean I think Jazz indicated on their call as they're going to talk more about that study design in the second half of this year when it's initiatives. I don't want to get ahead of that. I'll say from our own perspective, we obviously did a number of studies in different combinations in the metastatic breast cancer setting. And you can certainly see the potential for [ zani ] in combination with other agents, just because if it's tolerability nature, makes it a great combination with other agents as we're doing in GEA and FLC to do in biliary tract cancer. So you can certainly see the potential for [ Zane ] to find a place in the treatment paradigm for metastatic breast cancer. And I know from the KOL work that we did when I got here before the Jazz transaction. There was certainly a need for something in a post in HER2 environment where patients may have got a response, but then progressed, and I think there was some sense that maybe having a different mechanism than another ADC at that time frame might be something that might be attractive.

So obviously, looking at [ Zani ] being a unique bispecific antibody in the HER2 space, surrounded by a way of a different ADC formats, including DXP might be a really attractive proposition provided you could find the clinical and regulatory pathway to that type of label. And I think we'll let Jazz describe their study in more detail when they initiated the second half this year to for you can understand more of the clinical rigor a pathway that they intend to pursue, but from a commercial opportunity, it was even to us that, that was something that was very attractive. Obviously, we just didn't have the capital to pursue that on our own and 1 of the benefits of the Jazz transaction for us is that they do have capital that they could put to work beyond which we can do on our own in attractive opportunities beyond biliary tract cancer and GEA, and that's what they've announced intend to do, and that's fantastic.

[Operator]

Next question comes from the line of Yigal Nochomovitz of Citi.

[Ashiq Mubarack, analyst]

This is Ashik Mubarack on for Yigal. I just have 1 maybe operational question than one scientific question. Just first, on the sort of financing, I mean, you're guiding to cash flow I think in the second half of 2027, including some regulatory milestones. I'm just kind of wondering if you kind give us a little color on what of that runway or how much of that runway is being contributed to from potential milestone payments? Are you able to break those out in more detail?

[Kenneth Galbraith, executive]

Yes, not beyond the guidance that we've previously given. And again, not all of the milestones that we may be entitled to for approval from our current deals with Jazz and BeiGene are included in that -- so there is some element, but not all. But I think we feel comfortable with our current financial position and current financial outlook that we can fund the R&D strategy that we have right now through the second half of 2027 in a number of different scenarios.

So I think we feel we have a very strong financial position. a good outlook for the business. Obviously, a number of other technology companies in our sector, went in access additional equity capital through offerings rations in the first quarter of this year. We were not one of those because I think we feel very confident in our current financial position and our runway and the outlook for the business, and that's why we chose not to do so. But I can't go beyond the details we've previously provided until all the milestones start to be received and then we'll obviously be in a position to announce those.

[Ashiq Mubarack, analyst]

Okay. That's understandable. Maybe 1 more. On the TriTCE platform, which you shared at AACR, but that was pretty interesting. I'm just curious if you could talk a little more about how you expect in the clinic, the CRS profile might be differentiated compared to more traditional CD3 bispecific.

I think you alluded to the idea that [indiscernible] cytokines might be less, but I'm just curious if you think the improvement could be meaningful enough in something like CRS that there may be practical differences in terms of maybe less to steroids or less step dosing or maybe potential to be in the outpatient setting versus continuous IV, et cetera? I'm just curious what you can comment from a maybe a practical potential standpoint.

[Paul Moore, executive]

Yes, sure. Good question. Just let me clarify that a little bit. So for the TriTCE, something that we were very careful of was actually the level of interaction with T cells that could trigger and T cell activation. So we're actually -- we are using a lower affinity CD3 and the CD28 binding is actually quite weak. But upon [indiscernible] being through CDCD28, we get engagement of T cells when we coengage with a tumor target, okay? So the amount of binding to see in the periphery is very low. Only when we engage target and then engage the T-cells to we see this nice [indiscernible] powered CD28 CDC activation.

So that, we feel, is important to something we've also embedded in the ZW171 program, where we're using a lower affinity novel CD3 [indiscernible] so far, but we've modeled that in preclinical studies, both in vitro and nonhuman primates does not support the level of T cell activation we see with other CD3s. So that's kind of how far we can take it. Obviously, we'll need to see a lot of the T-cell activation you can see in the clinic will also be driven by the target that you pair with the T cell engager. So that's also a factor that we consider. But overall, we've done what we think to engineer peripheral cytokine activation, that's independent of tumor engagement.

[Ashiq Mubarack, analyst]

Okay. Okay. Maybe last question for me. I'm just curious -- I mean, I think you said that the final program in the 5x5 will be one of these TriTCEs. I'm just wondering if if it potentially might be the DLL3 or the Claudin 18.2 programs you kind of outlined? Or could it be something else entirely?

[Kenneth Galbraith, executive]

Yes. I mean we obviously have a pretty broad program in both the TriTCE and co-stim but also other trispecific formats that we've been working on research. So we haven't disclosed yes. I think we have published data preclinically around the Claudin 18.2 and DLL3 because those were good programs to work on to benchmark ourselves against other product formats and understand what that that TriTCE co-stim might give you that you don't see in another basic antibody or anti-C or just a simple antibody? -- approach.

I think we will make a nomination of the candid we want to move forward with as our fifth later this year. But I don't want to speculate is whether it's 1 of the 2 that we publish data on or something else that we still continue to work on as a part of a broad portfolio approach there. That's beyond those 2, and you just have to wait until we nominate it to to see that, and that will be this year.

[Operator]

Our next question comes from the line of Akash Tewari of Jefferies.

[Unknown Analyst]

This is [indiscernible] on for Akash. So Profound Bio was recently acquired by [ Genmab ], which is a lead molecule [ Rena S ], which is a folate receptor alpha targeting with the topo ADC that is ahead of time with encouraging initial human data. I guess where do you think you can differentiate with ZW191?And what is your approach here that's different than [indiscernible] .

[Kenneth Galbraith, executive]

Yes, again, we don't -- like we don't know enough about that molecule, I think, to do a proper comparison. And then whether it's encouraging or not, I guess it was acquired, so much encouraging, but I don't know how to speculate on data that's publicly billed versus public data that [ Genmab ] made us had available to it. So I can really only comment on our own program and approach with ZW191. And I think that's reflected in data we previously published and also at AACR, where I think we think there's a lot of differentiation in what we're doing around the payload.

So we did disclose earlier this year our proprietary [ payload 519 ], which was through a significant medicinal chemistry effort to find a payload that was a camptothecin analog but proprietary to us and with properties that we believe are ideal to be used in an ADC, including in the indication of interest in fully receptor alpha I think from the standpoint of the antibody, we think we have made some innovations around how optimization of an antibody can make an ADC more effective.

And obviously, that was the purpose of 1 of our publications at AACR was to focus on not just binding but internalization and tumor penetration as a way to get efficiency out of the payload with maybe less tolerability given up to get that activity. And so we're really interested to put that to the test in clinical studies, and it won't be too long from now. And I think then will understand the characteristics of our own molecule. We definitely have some differentiated features in there from any of the other follicular alpha ADCs, including the 1 you mentioned. But I'm more interested in looking on our own data to understand the activity that can be generated find a dose, understand the tolerability of that agent and then be able to understand where we can create clinical differentiation against a host of competitors and it's just difficult for us to try and make a comparison at this point between between any of the other agents.

[Operator]

Next question comes from the line of Brian Chang of JPMorgan.

[Lut Ming Cheng, analyst]

We're seeing some excitement around the application of T cell engagers in the autoimmune space like scleroderma and myasthenia gravis just these recent weeks. Just curious if you have any interest or whether you have any potential ability to -- whether you see any potential ability to disrupt that space with your TriTCE platform?

[Kenneth Galbraith, executive]

No, it's obviously we -- Zymeworks has never been exclusively an oncology company. We have been working in autoimmune inflammatory and dermatology indications for some time period. We we just decided when I got here not to focus on because if you want to have a focused R&D program for the 5x5. But we definitely have some platforms and capabilities and experience in that area, given things we work on preclinical -- and if you look at the folks who had added since I got here, including Paul, we do have a number of folks who have some great experience in commercializing in the autoimmune and inflammatory space.

So I think as we think about going beyond the 5x5, we definitely have an interest and understanding of some of our platforms and assets can be really differentiated from what we see from others and be applicable dose patient population beyond oncology. And I think we haven't talked a lot about that. I think by the time we get to our R&D Day in Q4 this year, you should probably expect that we'll outline some more thoughts around assets and approach and differentiation against others who are in that space. So the answer, yes.

[Lut Ming Cheng, analyst]

Okay. Great. And then maybe just a follow-up on your prepared remarks, you talked about -- you mentioned partnership. And I think the past partnership has always been a core part of your approach. We're about halfway through the year. So just curious if there's also a particular direction that you're looking at from a partnership standpoint? And then on top of that, it -- are you looking for a partnership to kind of accelerate your development on auto union side? Just any color that you can provide would be helpful.

[Kenneth Galbraith, executive]

Yes. I think clearly, partnership is a part of our strategy for a number of reasons. One is obviously access to capital, and it's no surprise that transactions in both ADCs and T cell engagers have gotten to a much higher valuation at an earlier time point in development. We also look at partnerships with ability for us to accelerate and compete and obviously, with the acquisitions which have occurred over the past period of time in both ADC and T cell engagers, we find ourselves against larger and more formidable competitors and with the potential for broad applications, especially in 191 and 171 going to the clinic first in both mesothelin and fully receptor alpha. Those targets are of interest in a pretty broad patient population. I think we learned from [ Zani ] that there was a certain breadth of opportunity to [ zani ], which was probably beyond the reach of ourselves on our own and complete the gaze partnership, as you see with their subsequent developments that may allow them to pursue that where we couldn't do that on our own. And hopefully, we structured that in a way that allows us to continue to share in a good portion of the success for that.

So that's a good learning for us to look at. But we've also been very clear with [indiscernible] being partnered exclusively with Jazz and BeiGene that for our follow-on agents and 5x5, we would like to have the ability and the opportunity to build a future late-stage development and commercial opportunity for ourselves. And we've talked about it as a U.S. ex-U.S. potential partnering strategy. There's other forms we could do, but we'd obviously like to if we're fortunate to find another agent or 5x5, which has the potential that [ Zane ] seems to have in peak sales potential, which Jazz guided on that we'd like to be able to keep some of that for ourselves and not look at a fully licensed strategy going forward.

So obviously, there's a substantial amount of interest, as you know, and innovative products in both ADCs and T cell engagers, which gives us good optionality for potential partnerships and collaborations and the timing of those. But we also have a strong balance sheet, which -- and talent pool in the company, which allows us to execute those 55 programs in the early clinical data without requiring partnerships or collaborations as a part of that.

So I like the position we're in, where we have optionality and not a requirement to partner. I think there is considerable interest in both of these in both of these spaces as well as autoimmune. So I think we'll continue to consider interest have discussions, but make sure we can meet the requirements we might have for future capital folks to help us accelerate and compete against larger competitors as well as retaining rights and commercial opportunities for ourselves. And -- and until we find the right partnership, I'm willing to think about the optionality that we have by having a host of unencumbered assets, which are really interesting to us and are just going to clinical studies over the next 24 months for all 5 of them.

[Operator]

Our next question comes from the line of John Miller of Evercore.

[Jonathan Miller, analyst]

I wanted to ask a question on the trispecific stuff that you presented in particular, in addition to the reduced CRS or cytokine release, [indiscernible] cytokine risk that you already touched on. I also noticed was interested by improved T cell survival or it would look like improved characteristics of the stimulated T cells that are coming from those reduced affinity CD3, C28 binders.

Obviously, you have the spider plots in the decade, and those were up there at AACR. But do you have evidence that improving T cell health means that you get continued stimulation. I mean that is to say like, as you get in longer and longer in time line, do you see longer -- the ability to generate stimulated T cells further on into treatment after continuous treatment than you would with the CD3 bispecific alone, if that question makes sense? Did you buy more T cell activity by using these binders in terms of durability, in terms of potency?

[Paul Moore, executive]

Yes. Sure enough. I'm glad you brought that up because I think that's an important point that what we're trying to do here is by having that CD28 co-stimulation, we're generating T cells that are more durable and don't become exhausted and they then provide enhanced antitumor activity. So it's a little -- we've done some modeling of the sustainability of the response in vitro where we can do these kind of repeat challenges where we take the T cells and continue to restimulate them. And we can see that under those conditions that we can maintain response for much for longer if we've challenged them with this the trispecific with the CD28 compared to CD23.

So that's consistent with what you would expect by having fitter T cells, and that was described in the poster. And then when we've gone in vivo, what we have seen is we've reported this in some studies that we do see more T cell -- we look at T cell infiltration in the tumors. We see evidence for that. But I think what was very clear in the 1 example I showed today, was that we were seeing responses, tumor responses or antitumor responses with the TriTCE platform that you don't see with the bispecific CD3.

So that suggests to us that in the tumor microenvironment, not only this enhanced durability and sustainability, we're seeing better activity and responses where you don't see responses without CD3 bispecifics with CDC you don't see [indiscernible]. So that tells us that we are indeed doing something in the tumor microenvironment and our model, albeit that is supportive of our hypothesis. And we then, of course, anticipate that that will simply translate in the clinic to better responses.

[Jonathan Miller, analyst]

That makes sense. I guess 1 more on a related topic. I Obviously, the CD3 bispecifics are active drugs. They're used to great effect in many indications. Do you expect the sort of trispecific platform that you're talking about to be a fully generic improvement that -- is this going to be better in every case? Or are there certain indications of tumor antigens where you would expect this to be this sort of technique to be relatively most important or give you the relatively best benefit versus the CD3 bispecifics.

[Paul Moore, executive]

Yes. That's another great question. I think I think we do anticipate that overall, this should yield better responses. Even where CDP bispecifics work, I don't want to be too hypothetical, but I think when you think about the CAR T space, without co-stimulation on those T cells, the responses were not generally as good without you needed that co-stimulation. So there's a potential that we could have broader overall better response with this. And I think that's why other companies are pursuing CD28 co-stimulation as well, it's fundamental T cell biology.

But I think where we see maybe the biggest need is in solid tumors where low T cell infiltration are T cells are already on artic need a little bit more than just CEC, that's where you could really see the greatest potential impact. And so that's part of the design feature and the thinking behind developing this type of technology.

[Operator]

Next question comes from the line of Derek Archila of Wells Fargo.

[Unknown Analyst]

This is [ Evan ] for Derek. A quick 1 from us. Can you share how the IND filing activities are progressing for 191 and 171 and when are we expecting -- are you expecting to initiate the Phase I study? Like I'm just trying to understand like is this like a 2024 event for any of these molecules.

[Kenneth Galbraith, executive]

Yes. We previously guided that it was our intention to file INDs and commence first in-human studies are both 191 this year. We haven't given any more guidance specifically that, and I won't on the call today. I think once both of those studies are up on Quintiles, which means we've initiated our first site, then we'd be happy then to talk more about the details of the study design and timing that's available off trial.

So I think once you see them up there, we'll be happy to publicly comment on them. But until then, we're on track. We're a little bit ahead of schedule where we might have been, and hopefully we can keep that a little bit ahead of our schedule and be discussing those in the near future. But until we have those publicly disclosed, we initiated -- we won't be talking about them further.

[Operator]

[Operator Instructions] Our next question comes from the line of John Miller of Evercore.

[Jonathan Miller, analyst]

One thing that you mentioned in the prepared remarks, I just wanted to get a little bit more color on. You mentioned that you expected that your Phase I would have mostly ex U.S. to the global study, but mostly ex U.S. patients. Obviously, you're not commenting on the specifics of trial design at this point, but I would love to hear you talk a little bit more about strategy on where you're running, where you anticipate running the studies and what the pushes and pulls are in terms of where you're getting your patients from?

[Kenneth Galbraith, executive]

Yes, absolutely. I think we took a decision a while ago that we could go faster and potentially get a higher quality, more diverse set of patients even from the very first dose escalation cohort if we structure ourselves to be able to globally recruit patients. So you should see in our Phase I study, not just IND filings, but for an equivalents very quickly thereafter. -- so that we can get up a pretty global program, which encompasses sites in Europe, North America and Asia pretty concurrently so that we can recruit in all those jurisdictions, even from the early dose escalation cohorts. And I think that just allows us to go quickly, get high-quality and diverse patients from the start.

And more importantly, if we see data that looks pretty interesting and compelling, we can go further faster to follow those data signals in a broader Phase I program as we move from dose escalation to expansion cohorts and eventually the combination cohorts and eventually beyond Phase I. So I think we've thought a lot about how we would execute this. I think we structured our groups internally and externally to be able to do this. And the hope is that we can go fast with high quality diverse patients and the data that comes out of that will come to us faster and also in a way that allows us to interpret it in a more significant way.

So we will have U.S. sites, but I would expect the majority of patients in both those studies in Phase I. The vast majority will be recruited outside the United States. And hopefully, we restructure ourselves and made those decisions to accomplish what we want, which is a faster Phase I study and clear data and a more diverse data set by recruiting patients globally. So we'll have to see if we can do that, but that is the goal. And hopefully, you'll see evidence of that pretty soon.

[Operator]

There appear to be no further questions. I'd like to turn the conference back over to Ken for closing remarks.

[Kenneth Galbraith, executive]

No. Thank you very much. I really appreciate everyone taking time today to listen to our call and ask the questions. Hopefully, we were able to answer them fully. If there's any follow-up questions, please don't hesitate to to reach out to us, we're happy to address any questions or clarify anything on the call. Hope you can see we're very excited about 2024. This is getting really interesting for us this year and next year. And we are all in on executing the plan in front of us in the best way possible and look forward to reporting results of that execution to you as we move forward through 2024. So thank you for everyone for listening today.

[Operator]

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.