Zymeworks Inc

NASDAQ:ZYME

Earnings Call Analysis

Zymeworks' Optimistic Financial and Clinical Outlook

Zymeworks reduced their net loss to $104.2 million in the first nine months of 2023 from $185.1 million in the same period last year. Revenue increased substantially to $59.1 million from $10 million. R&D expenses dropped to $118.1 million from $155.6 million, while G&A expenses rose to $55.6 million from $43.2 million. Cash resources totaled $390.2 million, a decrease of $102 million within nine months. The company anticipates its cash runway to extend through the end of 2026 and possibly further, without depending on new partnerships. Clinically, Zymeworks expects pivotal data in 2024 for a GI cancer study, has advanced with its 5x5 portfolio strategy, and is on track for multiple submissions by 2025.

Financial Performance and Revenue Growth

Zymeworks showcased a considerable improvement in financial performance during the third quarter of 2023. The company reported a net loss of $104.2 million, a significant 44% decrease compared to the net loss of $185.1 million in the same period the previous year. This improvement was driven by a collaboration agreement with Jazz that not only increased revenue but also mitigated research and development expenses. Revenue growth was notable, with third-quarter earnings totaling $59.1 million, up from $10 million in the previous year, bolstered by development support and drug supply revenue from Jazz.

Operational Efficiency and Cost Management

In terms of operational efficiency, Zymeworks has reduced its research and development expenses by eliminating costs associated with the zanidatamab program transferred to Jazz. The company also reduced general administrative expenses by streamlining operations, demonstrated by a 45% reduction in employee headcount, from 455 full-time employees at the end of 2021 to 252 by September 2023. This downsizing reflects the company's strategic decision to focus on lean operations and efficiency.

Strong Balance Sheet and Future Prospects

The balance sheet remains healthy with cash, equivalents, and marketable securities standing at $390.2 million. Zymeworks also anticipates recouping a sizable $64.3 million in receivables from Jazz. These factors, combined with the streamlining of operations and non-dilutive funding from licensing and collaboration agreements, position Zymeworks to continue its operations well into the end of 2026 and potentially beyond.

Lead Candidate Zanidatamab Shows Promise

Zanidatamab, Zymeworks' lead candidate, exhibited strong efficacy and tolerability results. A Phase 1b/2 study indicated an overall response rate exceeding 75% for patients treated with zanidatamab in combination with other therapies. The responses continued for a median duration of 22.8 months, and the median progression-free survival was reported at 16.7 months. Another study showed that as a monotherapy, zanidatamab achieved an overall response rate of 47% and a median progression-free survival of 5.5 months. These encouraging outcomes demonstrate zanidatamab's potential as a competitive treatment option.

Earnings Call Transcript 2023-Q3

[Operator]

Good day and thank you for standing by. Welcome to the Zymeworks Third Quarter 2023 Results Conference Call. [Operator Instructions] Please be advised today's conference is being recorded.I would now like to hand the conference over to your first speaker today, Shrinal Inamdar, Director of Investor Relations. Please go ahead.

[Shrinal Inamdar, executive]

Thank you, operator. Good afternoon, everyone. My name is Shrinal Inamdar, Director of Investor Relations here at Zymeworks and I like to welcome you to our third quarter 2023 results conference call. Slide 2, before we begin, I'd like to remind you that we will be making a number of forward-looking statements during this call, including without limitation those forward-looking statements identified in our presentation slides and the accompanying oral commentary. Forward-looking statements are based upon our current expectations and various assumptions and are subject to the usual risks and uncertainties associated with companies in our industry and at our stage of development.For discussion of these risk 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 Chris Astle, our Senior Vice President and Chief Financial Officer, who will be discussing our financial results, including certain non-GAAP measures. A description of our non-GAAP measures and a reconciliation to the most directly comparable financial measures as determined in accordance with GAAP are described in detail in our press release, which is available on our website at www.zymeworks.com, under the Investor Relations tab.Following the discussion of our financial results, Dr. Paul Moore, our Chief Scientific Officer will talk about our early-stage pipeline and introduce our latest IND candidate, ZW251, a potential first-in-class ADC molecule, designed for the treatment of glypican-3 or GPC3 expressing hepatocellular carcinoma or HCC. At the end of the call, Chris and Paul will be joined by our Chair and Chief Executive Officer, Ken Galbraith for the 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 hand over to Chris, our Senior Vice President and Chief Financial Officer.

[Christopher Astle, executive]

Thanks, Shrinal and thank you, everyone for joining us today for our third quarter 2023 earnings call. With that, I will begin today's call with an overview of our financial results. This afternoon, Zymeworks reported financial results for the 3 and 9 months ended September 30, 2023. The 9 months ended September 30th, 2023, Zymeworks' net loss was $104.2 million or $1.53 per diluted share, compared to a net loss of $185.1 million for the same period in 2022. The decrease in net loss of 44% was primarily due to revenue from our collaboration agreement with Jazz and an increase in interest income, as well as a decrease in research and development expense. This was partially offset by an increase in general and administrative expense and an increase in income tax expense.Revenue for the 9 months ended September 30th, 2023 was $59.1 million, compared to $10 million for the same period in 2022. Revenue for the 9 months ended September 30th, 2023 included $56.3 million for development support and drug supply revenue from Jazz and $2.8 million for research support and other payments from our partners. Revenue for the same period in 2022 included a $5 million research license fee from our Atreca licensing agreement and $5 million from our partners for research support and other payments.Research and development expenses for the 9 months ended September 30th, 2023 were $118.1 million, compared to $155.6 million for the same period in 2022. Excluding stock-based compensation and 2022 restructuring expense, research and development expense decreased on a non-GAAP basis by $31.4 million in the 9 months ended September 30th, 2023, compared to the same period in 2022. This decrease was primarily due to a decrease in expenses for zanidatamab as a result of our transfer of this program to Jazz during the 3 months ended June 30th, 2023 for our transfer agreement and the amended Jazz collaboration agreement.This decrease compared to the same period in 2022 was partially offset by an increase in preclinical expenses, primarily with respect to preclinical product candidates of ZW171 and ZW191. In addition, salaries and benefits expenses decreased compared to the same period in 2022, due to lower headcount in 2023. For the 9 months ended September 30th, 2023, general and administrative expenses were $55.6 million, compared to $43.2 million for the same period in 2022.Excluding stock-based compensation and 2022 restructuring expenses, general and administrative expense increased on a non-GAAP basis by $9.9 million in the 9 months ended September 30th, 2023, compared to the same period in 2022. This increase was primarily due to an increase in expenses for professional services and other expenses related to higher depreciation on facilities and higher technology expenses in 2023, compared to the same period in 2022. This was partially offset by a decrease in salaries and benefits expenses, compared to the same period in 2022, due to lower headcount in 2023.Overall, our total employee headcount has been reduced by approximately 45% over the past 21 months from 455 full-time employees as of December 31st, 2021 to 252 full-time employees as of September 30th, 2023. Our cash resources, consisting of cash, cash equivalents and marketable securities were $390.2 million as of September 30th, 2023, a net reduction of $102 million from December 31st, 2022.For the 9 months ended September 30th, 2023, our cash used in operations was negatively impacted by working capital movements, primarily due to higher levels of receivables, which we expect to partially reverse by the end of 2023. As of September 30th, 2023, we have approximately $64.3 million in receivables from Jazz, reflecting reimbursement for zanidatamab development costs, which we expect to be reimbursed subsequent the end of the third quarter.Moving forward, the accounting for our Jazz collaboration should be simplified, given that the majority of zanidatamab development expenses will be incurred directly by Jazz. Any continued zanidatamab development expenses incurred by us and reimbursed by Jazz will be reflected as a reduction in operating expenses, rather than collaboration revenue.We continue to expect further development support and drug supply payments from Jazz, which will continue to be reported as collaboration revenue. Due to the transfer of a significant number of our employees dedicated to zanidatamab development to Jazz, we recently decided to vacate our existing long-term leased Seattle office location and have secured a fit-for-purpose office facility on a short-term, financially attractive lease arrangement in Bellevue to accommodate our remaining Seattle-based workforce. The majority of the financial impact related to this decision was reflected in our Q3 financial results.With the continued focus on the balance sheet and the significant transformative impacts of the non-dilutive inflows from our licensing and collaboration agreements with Jazz and BeiGene, we continue to expect to have cash resources to fund planned operations to at least the end of 2026 and potentially beyond. As of November 6, 2023, we had approximately 70 million shares of common stock outstanding with all previously issued pre-funded warrants exercised.For additional details on our quarterly and 9 months ended results and for a description of our non-GAAP financial measures and a reconciliation of GAAP to non-GAAP measures, I encourage you to review our earnings release and other SEC filings as available on our website at www.zymeworks.com.With that, I'd like to hand over to our Chief Scientific Officer, Dr. Paul Moore, who is going to talk about recent data readouts, our early-stage pipeline and our latest IND candidate, ZW251. Over to you, Paul.

[Paul Moore, executive]

Thank you, Chris. Before I move on to our early-stage programs, I'd like to spend a few minutes first talking about data highlights from this quarter on our lead candidate -- candidate zanidatamab, shown here on this Slide. Data presented by our partners Jazz and BeiGene at the European Society for Medical Oncology Annual Congress highlight zanidatamab's continued efficacy and tolerability. Two abstracts were presented. The first describe clinical results from the ongoing global open-label Phase 1b/2 study for zanidatamab plus chemo and tisle, an anti-PD1 monoclonal antibody for first-line treatment of HER2-positive gastroesophageal junction adenocarcinoma, with an overall response rate exceeding 75%, this study resulted in encouraging data for the triplet regimen, with a median duration of response of 22.8 months and a median progression-free survival of 16.7 months.The second abstract describe quality-of-life outcomes from the Phase 2b HERIZON-BTC-01 study, evaluating patients with zanidatamab treated HER2-positive biliary tract cancers and patients with centrally confirmed HER2-amplified tumors. We previously reported data from this Phase 2b study for zanidatamab as monotherapy in this patient population had a confirmed overall response rate of 41.3% and 51.6% in the IHC3+ patients, as well as a median progression-free survival of 5.5 months.As we continue to monitor other development stage candidates for GEA, we have yet to see data reported in first-line GEA patients comparable to the Phase 2 data for zanidatamab on chemo with or without a PD-1 inhibitor. We believe the differentiated mechanism of action from our bi-specific HER2 antibody zanidatamab is responsible for the encouraging and durable patient responses we have seen in our GEA study conducted to date.Having reviewed the current results from other development candidates, including those presented at ESMO, we believe that the potential for positive outcomes from HERIZON-GEA-01 could dramatically change the standard of care for GEA patients in the first-line setting. Unlike data seen from other development candidates, we see the potential for clinically meaningful benefit from both -- for both PD-L1 positive and PD-L1 negative patients in our study, with the potential for additional clinical benefit as seen in our recent Phase 2 study in patients with high PD-L1 scores.We believe that zanidatamab's tolerability profile allow for combination with other agents, including chemotherapy and immuno-oncology agents that may help achieve patient responses not achievable with monotherapy approaches. As I said, both zanidatamab presentations at ESMO provide continued positive efficacy, safety and tolerability data for zanidatamab used in both GEA and BTC. The outcome of the current randomized study is widely anticipated among KOLs in the GI community and we look forward to that top line pivotal data in 2024.I'd like to now turn to the next Slide and talk a little bit about our R&D focus for our preclinical programs, which you have probably heard us refer to as our 5x5 pipeline. The idea behind this starting in 2022 was to nominate and initiate 5 -- clinical trials in 5 new molecules by 2027. Today, I'm pleased to announce the nomination of our fourth candidate, ZW251, which I will discuss in more detail shortly.Overall, we are very pleased with the speed at which our team has been able to identify opportune targets and develop quality candidates, something achieved thus far ahead of our own expectations for the first 4 slots and we hope to nominate the final INP candidate for our 5x5 pipeline during 2024. To reach this goal, we begin by using an integrated internal R&D engine for both antibody drug conjugates or ADCs and multi-specifics. Technologies we believe will continue to be extremely valuable for us in the long term. And we do this with a commercial focus around what kind of target product profile will support a substantial increase in the standard of care for patients in commercially attractive markets, especially in the U.S., where we would seek to eventually become a commercial company.Essentially, our approach is quite straightforward. We select difficult-to-treat cancers, validated targets or [ peers ] of targets from those cancers. We have a range of technologies available to us internally to decide which product mortality to pursue and how to design those. The result of those platforms is either an innovative antibody conjugate, as you'll see with our latest IND candidate, ZW251 or an innovative multi-specific antibody.As I mentioned, our candidates must meet both a very rigorous R&D and commercial business case before we begin development. Our teams look at each aspect of the candidate's potential, which includes development complexity, commercial opportunity, competitive landscape, probability of success, as well as investment in partnering with potential.We have a strong focus on finding opportunities for ADCs and multi-specific antibodies to be used throughout the continuum of care for patients with difficult-to-treat cancers, both as monotherapy and in combination with other agents currently approved as standard-of-care. This requires a strong focus on both efficacy and tolerability to ensure the potential for combination therapy and is important consideration in the selection of targets of interest in product formats.Finding a way for ADCs and multi-specific antibodies to be used in earlier stages of therapy in combination with standard-of-care view the best approach to make breakthroughs in patient outcomes in these difficult-to-treat cancer indications. And the last point, we recently have seen the benefits of partnerships with significant transactions in ADC space, validating Zymeworks focus on developing IND candidates in the growing area of topoisomerase 1 inhibitor ADCs. These candidates provide us with multiple opportunities beyond zanidatamab to advance compelling therapeutics, focusing on targets of interest into clinical studies as soon as next year.So now I'd like to move and introduce ZW251, our latest IND candidate, which is a potential first-in-class GPC3 targeting topoisomerase inhibitor ADC for the treatment of hepatocellular carcinoma. Liver cancer both in the U.S. and worldwide presents a substantial health burden. Globally, HCC is the third most common cause of death from cancer. This burden has been on the rise due to factors such as the increasing prevalence of alcohol consumption, obesity and lifestyle-induced HCC.Despite progress in improving the prognosis of many cancer, liver cancer continues to have a dismal survival rate. This unmet need fits with our strategy to develop therapies in such areas. The limited treatment options available for HCC further reinforce our commitment to this disease. Historically, mainline treatments primarily relied on multi-kinase inhibitors, but more recently there has been a shift to focus on anti-angiogenic agents and checkpoint inhibitor combination therapies.Liver cancer is challenging to treat with various modalities showing only partial effectiveness. While cytotoxic chemotherapies demonstrate some response, better outcomes are achieved with local regional therapies, such as Transarterial chemoembolization or TACE versus systemic therapies. Despite recent approval of these agents, we've only seen a modest overall increase in survival for HCC patients.Systemic chemotherapy has been investigated to treat HCC in the past and older trials investigating chemotherapy show objective responses in the rate achieved by multi-targeted tyrosine kinase inhibitors and immuno-oncology combinations. Moreover, TACE is used to treat intermediate stage HCC and often employs DNA damaging chemotherapies like Deoxyribose Cisplatin. We interpret this as demonstrating HCC is indeed chemosensitive, provided enough drug can be delivered and we can reasonably expect to reach the same doses as things such as the [ roxaticin ] conjugates based on our preclinical toxicology studies.If we reach those same doses at the roxaticin being 5 milligrams per kg or more, we believe that we can deliver sufficient payload to potentially shrink the tumors. So, our approach, leveraging the ADC modality to enhance the efficacy of cytotoxics in liver cancers offers a new dimension to treatment to enable the delivery of such cytotoxics. The potential to improve efficacy within ADC and expand on limited targets and targeted therapies in HCC provide an opportunity for us to develop a potential first-in-class candidate for this patient population.The focus of interest on TOPOs has been due to the notable clinical success of TOPO1 inhibitor-bearing ADCs against solid tumors. Further, topoisomerase inhibitors, a systemic treatment to HCC are found to be active, but yield mixed responses and the remains important. Meanwhile, novel therapies like CAR T-cells while promising face challenges as they must overcome the strong immunosuppressive environment of HCC. Moreover, engineered cell therapies are more costly than the off-the-shelf options like ADCs and are not suitable for patients that cannot tolerate high-intensity conditioning regimens.The range of available treatments yield fairly low responses and median progression pre-survival rates as shown in the right-hand side of the Slide, with later lines of treatments being an exercise in combining limited approved regimens, highly unique and opportunity for new treatments, with a lack of competition for ADC in this area. If we can develop an effective and tolerable ADC to be used as both monotherapy and in combination with other approved agents, we may be able to provide a new treatment option for patients throughout the continuum of care of HCC, including an early lines of treatments which may provide the ability to transform survival outcomes for these patients.Next Slide, I'd like to talk a little bit more about target. So what is the target that we're targeting, GPC3 or glypican-3 and what makes it a good target? So GPC3 is considered an oncofetal glycoprotein, which is important in fetal development, but down regulated in belt tissues. This key attribute of minimal expression in normal healthy tissues while showing frequent and high expression -- expression in HCC has been corroborated then by multiple groups.This profile makes GPC3 a validated and a highly selective approach to treat HCC, which has also been seen in the clinic, for example, studies with radio label burdens of the anti-GPC3 Codrituzumab demonstrated rapid and selective uptake into liver cancer lesions in a study of HCC patients, reinforcing our hypothesis that antibody targeting with GPC3 is a good way of specifically targeting HCC. We believe this level of selectivity makes GPC3 a really exciting target and a potential turning point for treatment of liver cancer.In the next slide, what we have laid out here are some of the key characteristics of ZW251, which we believe make it a fitting candidate for targeting GPC3 and HCC. The antibody itself was selected for strong binding, specificity and internalization, foundational features for all our ADC programs. We then combine this quality antibody with our own proprietary topo 1 payload, with a desired and appropriate bounds of stability, potency, tolerability and bystander activity.Topo 1 based technologies show meaningful clinical benefit in a wide range of solid tumors, including hard-to-treat solid tumors and have been validated with other targets. We are therefore optimistic about the combination of a GPC3-targeting antibody and Topo platform for the treatment of HCC.As per our standard development process, a DAR 4 and a DAR 8 ADC were evaluated to let us make data-driven decisions for the next steps. And it was determined that we will be taking forward a DAR 4 molecule in line with our philosophy to balance efficacy and tolerability. Altogether, we see ZW251 as a unique asset and to the best of our knowledge, no other liver cancer ADCs are being actively developed against GPC3.Let's switch to the data slide, which highlights 2 key features of ZW251. On the left are examples of anti tumor activity against patient-derived xenograft model. We've demonstrated this in multiple models at conferences. And equally important on the right-hand side demonstrates the tolerability of ZW251 in non-human primates, where we've been up to 60 mgs per kg and 120 mgs per kg on repeat doses for a DAR 8 and a DAR 4 respectively.So turning to the next slide, you see the expected then INDs -- progression of INDs from the 5x5. We expect to see -- we're on track for submissions for 171 and 191 in 2024, followed by ZW220 in the first half of 2025 and ZW251 in the second half of 2025. We're then hopeful to be able to nominate our fifth product candidate in 2024 with a planned IND filing in 2026. Given our improved R&D productivity over the course of 2022 and 2023, this would accomplish our 5x5 portfolio nomination about 1 year ahead of schedule. So we're beginning to strategize and plan on a longer-term R&D strategy beyond the 5x5 development pipeline.On this next slide, what we've done is to provide a perspective on the coverage, the tumor coverage of our nominated 5x5 programs overlaid together with our clinical stage development programs zanidatamab and zani zovo, reiterate again, our focus on cancer types with the poorest overall 5-year survival. This tumor landscape, this focus will form the basis also of new programs move forward. We're already thinking about the next and we're already thinking about the -- what the next advanced pipeline could look like and we'll share that vision in subsequent slides. Taken together, we believe this portfolio of construction gives us a diverse range of targets with multiple opportunities of success in the coming years.I'd like to now switch to our longer -- our thinking beyond the 5x5 where we believe still that the antibody-based platform technologies at Zymeworks disposal both in drug conjugates and protein engineering has us well positioned to continue pursuing the development of cutting-edge multifunctional biologics, where we can weave into a single molecule, multiple mechanism of actions to overcome complex disease states that require a multi-targeted approach to provide patient benefit.With our infrastructure and talent in place, combined with the diversity in purchase or platform technologies afford, we believe we are well positioned to deliver 2 INDs -- 2 IND ready molecules annually. While there is obviously a clear need to improve the outcome for oncology patients, particularly in the cancer techs with pure survival such as liver cancer, as described today, we also see opportunity in other disease states to leverage our technology. In particular, we see opportunity in autoimmune inflammatory disease where multi-specific technology lends itself to blocking dual pathways or leveraging key signal pathways.Importantly, we also have the internal personnel with experience in developing such molecules from concept to clinic and the infrastructure in place from preclinical through manufacturing and clinical development that can be leveraged. Financially, we believe this goal will be sustainable through a combination of internal funding and external partnerships to take molecules forward into the clinical -- into clinical development.So the next slide, I wanted to just share -- give you a flavor of this -- what we're calling our AD-VAN-CE portfolio and some additional details on that, which we see taking shape beyond our 5x5. Again, where we see the ADCs and multi-specific molecules as the platform technologies we leverage and evolve to meet the challenging of addressing complex disease states and really making impactful change to patients.Within the ADCs, we see great opportunity in combining Zymeworks bispecific technology with drug conjugates, something we have deep experience with in the field with zani zovo, a biparatopic ADC. In particular, we see opportunities through both biparatopic or dual epitope binding molecules and bispecific for fuel antigen targeting molecules to broaden responses and cancer types to enable broader and deeper responses. That's on the antibody targeting side of the molecule.On the payload drug linker side, we also see need for alternative payloads and our chemists who generated our novel TOPO payload are already at work on additional payload strategies to complement TOPO and MTI payloads already in our toolbox. Within the immune cell engagers, we have our first in-house T-cell engager for which we expect to file an IND in 2024, employing a novel low affinity anti-CD3 and targeting mesothelin using an optimized 2+1 structure, enabling anti tumor activity models not observed with other designs or formats, including prior clinical stage programs. We will be building on that and if you have been following our recent presentations at AACR and SITC, you'll be aware we are advancing trispecific T-cell engagers. We're in one version we incorporate into the T-Cell engager, a conditional CD28 co-stimulatory arm. Importantly, CD28 engagement has been engineered to bind and trigger signal only upon synapse formation between the tumor cell and the T-Cell, resulting in a more productive T-Cell response than observed with CD3 engagement alone.Moving forward, we see potential utility of CD3 CD28-based trispecifics across multiple cancer types to improve the breadth, depth and length of responses to T-Cell inhibitors. We have additional design for T-Cell engagers to enhance response by incorporating additional functionality beyond co-stimulation, such as checkpoint inhibition, in addition to the dual tumor antigen targeting to enhance potential therapeutic window.Beyond immune cell engagers, there is a metric platform also affords opportunities in immuno-oncology outside of immune cell engagers, including cytokine engineering, combined with masking, something we have presented on previously as an example, an affinity modulated masked IFL design to agonize immune system enhanced tumor responses, in addition to opportunities such as simultaneous blockade of multiple checkpoint inhibitor.Finally, as I alluded to on an earlier slide, outside of oncology, we're excited with opportunities in the autoimmune and inflammatory disease space, where we can leverage our multi-specific platform to block multiple drivers of disease state including multiple cytoxans. Over the past 5 years, we have been -- had an ongoing development collaboration with LEO Pharma in the eye disease area, which provided us an opportunity to gain experience and insight regarding the potential utilization of our technology platforms outside of Oncology. With the recently announced change in this collaboration, we now have sold unencumbered rights to a number of preclinical products in [ AI&I ] and we are actively evaluating incorporating set of these three clinical product candidates into our advanced R&D strategy.So to wrap up in just over 2 years from now, we are anticipating to have 5 IND submissions, with early clinical data being generated from a number of these product candidates and potential additional quality IND candidates coming out of our R&D organization from 2027 and beyond. We're already working on the future beyond the 5x5, while not losing focus and more making sure we translate these 5x5 preclinical programs into the clinic in a way that's quick, is valuable and that's meaningful in terms of the data that's created, while also starting to work on a longer-term R&D strategy.We look forward to updating you on these developments in the coming months and expect to schedule another R&D Day in the fourth quarter of 2024 to reflect in the progress of the 5x4 portfolio and to discuss the longer-term R&D strategy for the company in more detail. We believe a lot of hard work has been done in 2022 and 2023 to craft and execute a focused and cohesive R&D strategy around 2 key areas of interest, ADCs and multi-specific antibody therapeutics, supported by an appropriate financial and partnering strategy. We're ahead of our schedule with 5x5 portfolio construction, while maintaining financial discipline on R&D investments, with the net expected cash runway to fund our planned operations through at least the end of 2026 and potentially beyond.In addition, we believe the company is well positioned for a series of important milestones to be achieved in 2024 and 2025, especially potential initial regulatory approvals for zanidatamab in BTC and a top line data from the HERIZON-GEA-01 study with zanidatamab which will be available next year. These are expected to be significant events in the company's history and we're really looking forward to reporting on this progress.As we continue to develop unencumbered product candidates from our focused R&D engine, we'll continue to evaluate the potential to be co developed by partners in order to broaden and accelerate prospective development programs in an ever increasingly competitive environment. For these development programs, we will continue to seek attractive economics with upfront payments and committed development payments to help plan development of our in-house candidates, as well as attractive loyalty commercial milestones and/or retain commercialize to such product candidates in the United States.With that, I'd like to thank everyone for listening to our prepared remarks and I'll turn the call to the operator to begin the question answer session. Operator?

[Operator]

Thank you. [Operator Instructions] Our first question comes from Jonathan Miller from Evercore.

[Jonathan Miller, analyst]

I'm going to start on the new GPC3. I guess we're seeing some interest there for another CAR-T especially, but also like radioligand approaches, TCRs, et cetera, but also Roche failed in the indication. So can you give us a little bit more color on what the opportunities are, specifically for an ADC for your version of an ADC here relative to other modalities against this same target? And then maybe secondly, I noticed that you said this quarter that your runway could extend beyond '26. And I'm just wondering what levers are on that potential for going beyond '26? Does that require additional partnerships or milestones that you're not baking in? What's the -- what's new this quarter that's leading you to think you could push it even further?

[Paul Moore, executive]

This is Paul. I can take the first question. So regarding how do we see our opportunity differentiated from what others are doing. So first of all, I would say the fact that there are multiple programs being developed against GPC3, speaks to the attractiveness as a target in HCC. We are certainly to our knowledge really the leads or focusing on the use of ADCs to target GPC3. And so we feel like we have a differentiated strategy based on using an ADC. We think the ADC rationale is strong there from our package of data that we've looked at from our preclinical setting, from the tumor efficacy we've seen across a lot of models and the safety profile we've seen in non-human primates. The payload that we're employing here is our own proprietary payload and we've designed it with a lot of care to have features that we think will support the product profile.Certainly, other approaches have also been used -- are also being explored. The CAR-Ts that you mentioned, others have tried antibodies. In the past, no one has really tried a TOPO payload ADC. And also when we develop our antibodies, we're also very careful about developing an antibody that we think has the key features to support the delivery of a payload, our payload. So I think that from our preclinical data does give us confidence that we've done something that others haven't tried before and has a good opportunity for us to develop that and the profile supports development.

[Kenneth Galbraith, executive]

And just your second question, Jonathan, I can take that. I think we've consistently stated since the Jazz partnership closed in the fourth quarter last year that our runway took us to at least 2026 and potentially beyond. Maybe it wasn't in bold print, the way it is in the slide in our SEC filings, but I think we've always felt comfortable that our cash flow would take us beyond 2026. We still feel that way. We continue to say that I think it doesn't include any new partnerships at cloud race we form which will obviously give us a much bigger runway to fund things like AD-VAN-CE or get us beyond 2026.So we do have a little bit of unallocated R&D investment capital that we've not put onto the 5x5 portfolio. So it gives a little bit of flexibility to deal with the situation we have now, which is the 5x5 portfolio is 12 or 18 months ahead of schedule. So now we're starting to think about what we do next and how we start to put some seed money to work on that AD-VAN-CE portfolio. And we can certainly accommodate that within that cash runway and still be beyond 2026. I think it's a pretty consistent statement we may continue to say it and we get more confidence as we say it as we continue to work our way through 2023.

[Operator]

Please standby for our next question. Our next question comes from Yigal from Citi.

[Ashiq Mubarack, analyst]

This is Ash Mubarack on for Yigal. This one might be a little premature, but for your GPC3 ADC, you alluded to this asset being potentially combinable with other agents. I'm just wondering what types of combos might make the most sense given the target and the mechanism of action. I guess there's a few different potential options at tislelizumab, TKIs, chemo and so on. Are you thinking about something potentially even more novel of those?

[Kenneth Galbraith, executive]

Yes, maybe I can try and answer that in general with the whole portfolio and GPC3 is a good example of that. We've thought very carefully and intentionally about that portfolio we're constructing with both ADCs on the T-cell engagers that designing molecules that are against targets and indications where we believe being able to use those agents as monotherapy or in combination with standard of care just gives you access to the patient population the entire continuum of care for these patient. So that's really been something we thought about as we pick these molecules and design and engineer done on GPC3 specifically. We firmly believe that an ADC approach could be very effective. We think being effective in an -- the earliest line of therapy for these patients gives you probably the best chance of getting response rate that's better than we've seen now and turning that response rate into something durable where we can start to talk about reasonable long-term survival of this patient population, designing the GPC3 ADC. We took into account that current standard-of-care as we identified as A+B and other combinations. And we would look very early on after our monotherapy Phase 1 to look at -- at the ability to combine in a tolerable way with these other standards of care to hopefully intervene in a patient's disease at the earliest -- in the earliest line of therapy possible.So that's through out, it's a deliberate strategy throughout the entire portfolio, that's where you should expect us to go with our folate receptor ADC, NAPi ADC, our T-cell engagers and specifically GPC3 ADC. So what we're looking for is really making the most out of ADC technologies, which means earlier line of therapies, which means in combination with standard-of-care, which means the design and selection of these agents have to hopefully allow for that to happen and we'll know that pretty quickly out of Phase 1, we need to understand the tolerability of these agents on their own and then look to move very quickly to combinations in every one of these programs.

[Ashiq Mubarack, analyst]

And if I could squeeze in one more. I guess, what are the gating factors for filing INDs for your leading preclinical assets? I guess where are you in IND enabling studies, especially for 191 and 171? I'm just wondering if you can give us a sense of how much work is left before you can enter the clinic?

[Kenneth Galbraith, executive]

Yes. Those are both on target for 2024 as we stated. We haven't given more guidance on that yet. We may give some more guidance as we move into 2024, but you're more likely to see a clinical study up on clintrials and an indication that we're recruiting patients along the way. So I think we're in really good shape with where we're at. I think you'll have to wait for more guidance next year, early next year or just wait for some events, which shows we're actually recruiting patients on both those studies.

[Operator]

Please stand by for our next question. Our next question comes from Charles from Guggenheim Securities.

[Yue-Wen Zhu, analyst]

Maybe one from me with a bit more of a near-term focus. Regarding zanidatamab, some of those milestones coming up in the next year, a couple of ones here. Any reactions to the KEYNOTE-811 data from ESMO as well as from I believe it was the European review and how that sets a bar for HERIZON-GEA? And as well as similar to that, we do have the, I guess, the headline figures on some of those near-term milestones from Jazz as well as BeiGene related to zanidatamab milestones in 2024. But could you also perhaps quickly remind us like how much of that could be accounted for with BTC and GEA?

[Kenneth Galbraith, executive]

No, thanks for the question or a couple of questions that you sneak in there. One question. No, I think for guidance on those 2 programs we'll defer to both Jazz and BeiGene. I know Jazz has earning call tomorrow in terms of what guidance they'd like to provide, well let them make that. Obviously, in the arrangement we have with Jazz, we have $525 million in development milestones remaining on that deal based on approval of zanidatamab in different geographies and different indications. I don't think we can say any more than that other than that's a pretty reasonable milestone payments in a time period, but I think would be really helpful for us to continue to fund both the 5x5 portfolio further in the clinic, as well as see the additional R&D we'd like to do.With AD-VAN-CE, I think beyond that, we've been following [ KEYNOTE-811 ] since the study started and we've been 12 or so months behind that study. I think it's safe to say from the data that was available at ESMO and before that in the European review is that I think the commercial opportunity present zanidatamab to be the standard-of-care in the first-line GA patients regardless of PD-L1 status, but also with the possibility of being used in combination with chemo and potentially a PD-1 is better than we've seen, I think, better than we thought it might have been 12 months ago.So I think there's obviously a stronger commercial opportunity. I think we and our partners are anxious to get to that point. So we're really looking forward to getting the top line data from our study next year, which is still on target and then showing that data with regulators to understand the earliest opportunity that we could make this therapy available for patients based on that data outcome.So it's always hard to have a substantial competitor 12 or more months ahead of you in this marketplace. But I think given the data that we've seen so far and what we continue to see from zani, we're very optimistic and more optimistic about the potential uses of zani in this patient population, the potential benefit we could provide to these patients and therefore the commercial opportunity being pretty exciting for ourselves and our partners as well as for patients.

[Operator]

Please standby for our next question. And our next question comes from Akash from Jefferies.

[Amy Li, analyst]

This is A Li on for Akash. We just have one quick question. So how does the Merck, Daiichi's data CDH6 change your appetite to go after FR-alpha AR in cancer?

[Paul Moore, executive]

Yes, no, we saw that data and it looks very encouraging for a total base payload that data for ovarian cancer. We have looked at the expression profile of that target and we feel both the polireceptor alpha and the NAPi2b expression in ovarian cancer and other cancers is supportive of also pursuing those antibody-based drug conjugates. So we think that doesn't -- it doesn't deflect from our motivation and excited about those targets. We think the profile is supported, especially when you compare it to the profile of [indiscernible].

[Operator]

Please standby for our next question. Our next question comes from Stephen from Stifel.

[Stephen Willey, analyst]

Maybe 2 quick ones. So on the updated front line data zani chemo, tislelizumab that was presented at ESMO. Can you say if PD-L1 status was centrally determined? And I guess, do you know if BeiGene has made any attempt to go back and see if any of those sub-5% PD-L1 scores actually fell below that 1% threshold? And then I guess also pertaining to that data update, it looks like there were a bunch of patients who upon central HER2 reading were scored negative. And just wondering if there's kind of any explanation for the disconnect there, I think there was actually maybe 5 or 6 patients that ended up being determined negative when assist centrally?

[Kenneth Galbraith, executive]

For that study by BeiGene inclusion was based on local testing confirmed centrally later. Again, small data sets, so it's too hard to carve the numbers. I think the most important thing for us in our Phase 2 that we did in the doublet, which was simply confirmed just a little bit different. But between both of those studies collectively, we still feel very confident that zani plus chemo is going to provide a very consistent, durable and quick response regardless of PD-L1 status, that's what our data shows us right now. We can certainly see how a PD-1 inhibitor on top of zani plus chemo for certain patients may provide an additional benefit to justify the immune-related adverse events that come along with using a PD-1 inhibitor.I think we'll have to wait for the randomized Phase 3 study to understand exactly what that group is. And I think that will be important information for clinicians to understand the additional benefit you may see and some of that you can see in the small Phase 2 we have, but also understand how that corresponds with the adverse event profile that goes with adding in PD-1. So we still feel very confident in the collectiveness of the Phase 2s that we've conducted so far that we obviously hope to confirm and need to confirm in the Phase 3 study that reads out next year. And I think these little items that you talked about I think is, we're better operating for the Phase 3 data that's available next year to get a full understanding of that data set.

[Stephen Willey, analyst]

And then maybe just 1 quick one on HERIZON. I think one of the narratives around the KEYNOTE-811 data was that the control arm outperformed what was observed in [ Togo ] and I guess that's a byproduct of improved HER2 scoring, et cetera. But just wondering how you feel about the statistical powering when you go back to the underlying plan and kind of plug in a higher-than-anticipated PFS and OS in the control arm?

[Kenneth Galbraith, executive]

Yes, I mean, obviously, we haven't seen all the data from KEYNOTE-811. We've seen as much as we can in the European review and I imagine it's going to be more disclosed next year, either through the FDA process or by the sponsor of the study. I think it is a hard -- little hard to know what to make it that study because there are some disclosures on ITT, there's some disclosures not only the labeled indication, which is different, so it's hard to understand that. Obviously, the recruitment of that study was skewed a little bit differently than we might have thought a real-world population would be. So I'm not sure what to make about that as well.I think from our standpoint, if we look at the control arm and the ITT population and look what you saw from not really an ORR perspective, but you look at a PFS perspective, convenient PFS was around 7 months. So a little bit better than Toga, but very consistent with the assumptions that we use in our statistical design, if you look through what we disclosed previously around this physical design. So we didn't see anything in the active control arm of KEYNOTE-811 that makes us think that we're -- our design was not consistent with what we expected.So I think that part of that study gave us increased confidence in our statistical design, so that's great. And obviously, the comparison from the triplet in that study and its limited ability to drive OS so far and its limited ability to really show a benefit in the PD-1-negative population gives us more confidence, obviously, in our ability to have a successful study and really be the choice of therapy in the first-line GA patient population regardless of PD-L1 status, it'd still be our goal.

[Operator]

Please standby for our next question. Our next question comes from Brian from JPMorgan.

[Lut Ming Cheng, analyst]

We talk a lot about your thoughts around the strategy with your ADCs in the pipeline in the past. When you think about 251, I'm just curious, do you see this asset as an asset that you can potentially take it all the way to the finish line? Or is this asset something that you want to see proof-of-concept first and then engage a partner to partner off given the indication or target? And then on top of that, just a housekeeping question. Looking at your INDs that are in the plan, with 2 programs rolling out in next year and also 2 after in 2025, how should we think about your expense trajectory? And any color on that would be super helpful for us from the modeling perspective.

[Kenneth Galbraith, executive]

No, 2 good questions. I think strategically on the portfolio, we've tried to be very transparent about this, so that investors can understand the rationale and obviously the prospects of the entire 5x5 and it also makes it easier for us to have very open and active discussions with potential collaborators. So you can see that at least with the 4 agents we nominated now, there is a bit of a therapeutic concentration around both on the ADC and multi-specific side around focused on gynecological cancer patients and also on lung cancer patients and that's not unintentional. Those are 2 areas where we think we could make some strides with the agents we have, both on T-Cell engagers and our ADCs in those areas. I think when you look at other areas that we have experienced in with zanidatamab definitely on the GI side between GM BTC, it made sense for us to look for an opportunity that was consistent with some of our experience. So HCC was a natural thing for us to look at. We obviously look for a less unencumbered and proven space. So I think GPC3 as a target is well understood.But I think we have the first chance to take an ADC approach to HCC with a topo payload and we're excited about that for GPC3. So I think there was some sense that we have some experience in the GI space, HCC is something that we can broaden into a little bit. But we definitely have a concentration in gynecological cancer and lung cancer that when we talk to potential partners about multiproduct collaborations. It's obviously around those therapeutic categories. HCC is probably the one opportunity in GPC3 that we have the very active interest in collaborating, but probably more of a compelling reasons to hopefully hold on to that one for longer than we see clinical data. Both ADCs and multi-specific as you know are areas of interest that we see continue growing. We continue to see value attributed in transactions to quality assets at preclinical or early clinical stage, but those values continue to go up and we think that's going to continue. So we have the capital and talent and infrastructure to be able to execute these programs on our own, but it doesn't mean we don't have discussions about putting ourselves in a better position with a strong collaboration either on a product basis, a multiproduct basis or around that therapeutic concentration in kind of [indiscernible] cancers, lung cancer or GI moving forward, obviously, moving things from preclinical into clinical studies takes on some additional cost. I think we've worked really hard this year and last year to build an infrastructure that's a little more nimble and little more cost effective than maybe we had when we were developing zanidatamab.So I feel very comfortable with the cost efficiency we've done in that infrastructure to be able to move quickly at a very cost-effective way and in a way that's much more recruiting patients outside the United States than inside the United States, not just for cost purposes, but to try and get access to patients more quickly and also the patients who might be of a higher quality because they have fewer pre treatments available for them. So that's the strategy we're working on since last year.If we're right, we'll be able to execute all 5 of these clinical programs in a very fast, nimble way, in a very cost-effective manner and generate meaningful data from the very first dose escalation patient that we [Technical Difficulty] the strategy that we're working on hard and we'll see -- we'll get a chance over '24 and 2025 to see us put that into action.

[Lut Ming Cheng, analyst]

And just any thoughts or early color on how we should think about the expense projection given the 2 INDs and the 2 INDs in 2024 and 2025 respectively?

[Kenneth Galbraith, executive]

Yes. I think right now, obviously, we're -- we're -- for this year, we're looking at spending 20-odd percent of the cash balance, we started the year with -- obviously, that's going to go up with more programs. But some of these preclinical programs in terms of doing GMP and GLP talks are a sizable investment as well. So I think you'll see the cost structure go up just because the number of programs that are either in preclinical or clinical is getting higher. And if we assume there's no new collaborations and partnerships, that will be the case. We feel very comfortable right now with moving all 5 of those ahead absent collaborations and partnerships. And obviously, partnerships and collaborations and milestones from zanidatamab approvals will be things that will rely upon to think about beyond 2026. So I think you'll see -- we'll give some financial guidance early in 2024, about 2024. So you'll likely see an increase from our cost structure because of the level of activity and size of the product portfolio, but not to a degree that we can't handle that with our current cash runway.

[Operator]

I'm showing no further questions at this time. I would like to turn it back to Ken for closing remarks.

[Kenneth Galbraith, executive]

That's great. Thank you. Thank you everyone, for listening today. Obviously, we feel very encouraged by our progress to date through 2022 and year-to-date in '23. And inside the company, we're as excited as ever about the future of Zymeworks and what 2024 and 2025 hold through us. We're very much looking forward to reporting our continued progress against our key priorities during the remainder of 2023 because we're not done the year yet and into what we think will be a really exciting 2024 for us throughout the entire product portfolio. And with that, I want to thank you again for joining us. Appreciate your support and have a wonderful rest of your day. Thank you.

[Operator]

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.