Zymeworks Inc

NASDAQ:ZYME

Earnings Call Analysis

Zymeworks reports revenue decline but emphasizes promising pipeline developments

Zymeworks reported a net loss of $99.2 million for the nine months ending September 30, 2024, a slight improvement from $104.2 million in 2023, driven by reduced operating expenses. Revenue fell to $45.3 million from $59.1 million, largely due to a drop in development revenues. The company has a strong cash position of $374.9 million, providing a runway until mid-2027. Anticipated milestones include the PDUFA date of November 29, 2024, for zanidatamab in biliary tract cancer and the upcoming R&D Day in December, where a new trispecific T-cell engager is set for nomination, reflecting growth in Zymeworks' portfolio.

Steady Progress Amid Challenges

Zymeworks continues to navigate through a challenging landscape, reporting a net loss of $99.2 million or $1.30 per diluted share for the first nine months of 2024, a slight improvement from a loss of $104.2 million during the same period in 2023. This decrease in loss is attributed to lower research and development (R&D) and general administrative expenses, showcasing the company's ongoing efforts to optimize operational costs.

Revenue Trends and Milestones

The revenue for the first three quarters of 2024 stands at $45.3 million, down from $59.1 million in 2023. Revenue streams included $32.8 million in development support and drug supply from Jazz Pharmaceuticals, and notable milestone payments of $8 million from BeiGene and $2.5 million from GSK. These figures illustrate the impact of ongoing partnerships, although revenues have noticeably declined overall.

Cost Management Initiatives

Operating expenses decreased by 8% year-over-year to $160.2 million, thanks to stringent cost management in both research and administrative expenses. The company made strategic cuts, particularly in R&D costs related to its programs, which are paramount for driving future growth.

Cash Position and Future Runway

As of September 30, 2024, Zymeworks reported cash resources totaling $374.9 million, down from $456.3 million at year-end 2023. With these resources, the company projects a cash runway that extends into the second half of 2027, providing a solid foundation for its developmental pipeline and future initiatives.

Stock Repurchase Program

In August 2024, Zymeworks initiated a stock repurchase program, authorizing up to $60 million, with the first tranche of $30 million already completed by buying 2.5 million shares at an average price of $11.79. This move aims to enhance shareholder value significantly and sends a positive signal about the company's confidence in its intrinsic value.

Clinical Development Trajectory

The company has received FDA clearances for IND applications for ZW171 and ZW191, and progress is being made in clinical trials with ZW171 already enrolling patients. The enthusiasm for ZW220's preclinical results at ENA 2024 bolsters optimism for these candidates, potentially addressing significant unmet needs in oncology.

Looking Ahead: Guidance and Pipeline Potential

Zymeworks plans to outline further details on its pipeline during the upcoming R&D Day on December 12, 2024. Investors should look for insights into the potential milestone events and updates on both the 5x5 program and Zani, which is gearing up for pivotal data announcements in 2025. The expected PDUFA date for zanidatamab in the U.S. is November 29, 2024, marking a significant upcoming event for the company.

Earnings Call Transcript 2024-Q3

[Operator]

Hello. Thank you for standing by. This is the conference operator. Welcome to Zymeworks First Quarter 2024 Results Conference Call and Webcast. [Operator Instructions] and the conference is being recorded. [Operator Instructions]

I would now like to turn the conference over to Shrinal Inamdar, Director of Investor Relations. You may begin.

[Shrinal Inamdar, executive]

Thank you, operator. Good afternoon, everyone. Thank you for joining us at [ Quarter 2024 ] results conference call.

Before we begin, I would like to remind you that we'll be making a number of forward-looking statements during this call including, without limitation, those forward-looking statements identified in our slides and in 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 the companies in our industry and our base of development. For a discussion of these risks and uncertainties, we'll refer you to our latest SEC filings as filed on our website and as filed with the SEC.

In a moment, I'll hand it over to Leone Patterson, our Executive Vice President and Chief Business and Financial Officer. Leone joined our ownership team is September 2024 and today, Leone will be discussing recent corporate updates along with financial results for our third quarter 2024. Following this, Dr. Paul Moore, our Chief Scientific Officer, will talk about key [indiscernible] of our third quarter including the initiation of the first patient dosed in the Phase I trial of our first bispecific [ 2 plus 1 ] [indiscernible] T-cell engager, [ ZW171 ]. At the end of the call, Leone, Paul and Ken Galbraith, our Chair and CEO, will be available for Q&A.

As a reminder, the audio and slides from this call will also be available on the website [ after ] later today. I'll now hand you over to Leone.

[Leone Patterson, executive]

Thank you for the introduction,, Shrinal, and thank you all for joining us today. I'm very pleased to have joined the Zymeworks team at such a pivotal time of growth and at the time when we are on the cusp of many exciting developments still to come as we close out the rest of 2024 and a series of new developments anticipated in 2025, which underpin our long-term growth strategy. I look forward to talking more about these milestones as we continue to execute on our R&D pipeline and corporate objectives.

If you could now turn your attention to Slide 5, where I will touch on recent key themes across our development programs. Starting first with our [indiscernible] pipeline. We received FDA clearance for our IND applications for both ZW171 and ZW191 in August this year. Since then, over the last few months, our global clinical development team has been working very quickly and efficiently to enable dosing of the first patient with ZW171 as part of our global Phase I clinical trials. Later during today's call, Paul will provide more details on the clinical trial design for ZW191 as well as providing an effect on the progress we have made in the clinical development of ZW171 across North America, Europe and the Asia Pacific region.

We also have the opportunity to present more promising preclinical data on our [indiscernible] pipeline at the ENA conference earlier this month in Barcelona for both ZW220 and ZW251 which Paul will go through in more detail later in the call. These preclinical data highlights the transformative potential of our novel approach to design ADCs, utilizing our proprietary payload 519 and highly differentiated antibodies. And we look forward to updating you on the anticipated IND filings for both ADCs and 2025.

Moving on to our partner program, Jazz Pharmaceuticals provided updates to our internally developed [indiscernible] targeting bispecific antibody, Zani. Recent presentations at the [ ENA ] Annual Congress in Barcelona continued to highlight Zani's potential within treatment of multiple Tier 2-positive indications, including long-term follow-up data and metastatic [ DEA ] patients, for which a [indiscernible] estimated 30 months overall survival of 59% was reported from an ongoing Phase II clinical study of Zani in combination with [indiscernible] therapy. We are also pleased to recognize in our Q2 revenue, a $2.5 million research milestone from our longstanding partner, GSK. This milestone provides validation of the strength and versatility of our internal platforms and technologies, including [ Azymetric ], where we continue to have a range of legacy licensing arrangements in place. As a reminder, under the terms of this agreement with GSK, we received an upfront technology access fee and we remain eligible for future research development and commercial milestone payments of just over $1 billion. In addition, we are also eligible for [ tiered ] royalties on any worldwide sales of the licensed products.

While we had a busy few months on the development of our R&D pipeline, we have also been executing on our corporate goals. This includes completing the first $30 million of our share repurchase program, which I will touch on next. On August 1, 2024, we adopted a stock repurchase program to repurchase up to $60 million of the company's outstanding common stock with an initial authorized base of $30 million. As of October 31, 2024, we have completed the initial $30 million of the repurchase program through the purchase of approximately 2.5 million shares of common stock at an average price per share of $11.79.

Now turning to our financial position. This afternoon, Zymeworks reported financial results for the third quarter of 2024. Zymeworks net loss for the nine months ended September 30, 2024 was $99.2 million or $1.30 per diluted share compared to a net loss of $104.2 million for the same period in 2023 the decrease in net loss was primarily due to lower research and development and general and administrative expenses as well as a decrease in income tax expense, which was partially offset by the decrease in revenue and an impairment charge recognized in 2024 [indiscernible].

As reported, our revenue for the nine months ended September 30, 2024, was $45.3 million compared to $59.1 million for the same period in 2023. Revenue for the nine months ended September 30, 2024, included $32.8 million for development support and drug supply revenue from Jazz, $8 million of milestone revenue from BeiGene in relation to the acceptance by the CDA of the NPA in China of a BLA for Zani for second-line treatment of HER2-positive BTC. $2.5 million of milestone revenue from GSK in relation to the sequence [ peer nomination ] by GSK under the 2016 licensing agreement with [indiscernible] and $2 million from BeiGene and other partners for research support payments. Revenues for the same period in 2023 included $56.3 million for development support and drug supply revenue from Jazz and $2.8 million from BeiGene and other partners for research support and other payments.

Overall operating expenses were $160.2 million for the nine months ended September 30, 2024, compared to $173.7 million for the same period in 2023. The representing a decrease of 8% year-over-year. The decreases in overall operating expenses resulted from a decrease in both research and development expenses as well as general administrative expenses. The decrease in research and development fees was primarily due to a decrease in expenses for Zani as a result of the transfer of responsibility for this program to Jazz and a decrease in expenses for DW-171 and ZW191. This decrease compared to the same period in 2023 was partially offset by an increase in expenses and ZW251 and other preclinical and research activity. Stock-based compensation expense increased primarily due to a lower experience in 2023 as a result of the cancellation and modification of rewards in respect of employees transfers to Jazz.

Now turning to G&A. The decrease in G&A expense was primarily due to a decrease in external consulting expenses for information technology, legal fees and other expenses for advisory services, insurance and depreciation and amortization expense compared to the same period of 2023. This was partially offset by costs incurred due to the termination of our long-term facility lease in Seattle in 2024 and an increase in stock-based compensation over 2023, primarily due to a reversal of compensation expense for option cancellations and modifications in 2023. During the nine months ended September 30, 2024, we recorded a noncash impairment charge of $17.3 million as a result of the company's decision to discontinue the zanidatamab Zovodotin clinical development program, which utilize the technology represented by acquired and processed, research & development assets.

Other income net was [ $16.1 million ] for the nine months ended September 30, 2024, compared to $14.6 million for the same period in 2023. The increase was primarily driven by an increase in the average interest yield of our cash balances and investments during the period. As of October 31, 2024, we had approximately 68.9 million shares of common stock outstanding and approximately 5.1 million shares of common stock issuable under prefunded warrants. As of September 30, 2024, we had $374.9 million of cash resources consisting of cash, cash equivalents and marketable securities as compared to $456.3 million as of December 31, 2023. 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.

Now I would want to turn to the cash runway. Based on current operating plans, our strong financial position of $374.9 million and cash resources as of September 30, 2024, together with certain anticipated regulatory milestone payments continues to provide an expected cash runway into the second half of 2027. And just as a reminder, that we may also be able to extend this run rate or fund and expand in R&D scope through potential additional 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 Zani 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 provide more details regarding the development of our wholly owned pipeline and our highly anticipated R&D Day later this year.

[Paul Moore, executive]

Thank you, Leone. So I'd like to start off by talking about some of the preclinical work we mentioned earlier on the call, which we presented last week at the ENA conference in Barcelona. For ZW220, we were pleased to share data, which demonstrates that ZW220 exhibits robust activity across a wide range of NaPi2b expression levels in vitro and then showing also significant antitumor efficacy in patient-derived xenograft models of ovarian, endometrial and non-small cell lung cancer. In these preclinical models, ZW220 was highly active at a single dose of 6 mg per kg across the models tested. In these studies, we evaluated between 4 and 8 bottles per indication. And based on tolerability data, the 6 mg per kg is actually considered a conservative dose for ZW220, suggesting room for [ those ] optimization and future preclinical studies.

Importantly, ZW220 also displays [ bystander ] remediated killing activity, as shown in this slide, in two different in vitro models. First, on the bottom left of the slide, we observed bystander activity against the NaPi2b negative [ cell life ] in a classic 2D culture model system with ZW220 which incorporates our proprietary [indiscernible] payloaded DAR4, demonstrating bystander activity comparable to that observed with a version of ZW220 incorporating [indiscernible]. Furthermore, ZW220 also effectively inhibits the growth of heterogeneous [ Napi2b ] expressing 3D spheroid models, comprising a mix of NaPi2b positive and NaPi2b negative tumor cells. This demonstration of strong by standard killing in vitro, we believe is a critical attribute of ZW220 when targeting tumors with potentially nonuniform expression of NaPi2b.

Our ADC also demonstrates a well-differentiated safety profile compared to higher potency [ Topo-1 ] inhibitor ADCs such as dosing corporate [indiscernible], ZW220 has shown a more favorable safety profile in preclinical toxicology studies with a maximum tolerated dose of greater than 90 mg per kg in nonhuman primates and greater than or equal to 200 mg per kg in rats. This indicates the potential for high dosing in humans, which could further enhance its therapeutic impact. Taken together, we've incorporated several key features to optimize the efficacy and safety of ZW220, the low drug-to-antibody ratio and moderate stability of the antibody linker provide a good balance between tolerability and antitumor activity, minimizing potential untargeted or off-tumor toxicities. The strong internalizing antibody have developed ensures [ secretion ] tissue penetration and cellular trafficking, improving our antibody tumor activity, especially in tumors with NaPi expression. Lastly, the Fc-gamma receptors [indiscernible] antibody design minimizes the risk of off-target toxicities, particularly for uptake by normal macrophages. This design contributes to the overall safety profile of ZW220, which as I showed, has been well tolerated in both nonhuman primates and rats. All the features discussed above related to the design of ZW200 provide a clear differentiation from other NaPi2b ADCs in early development and gives us confidence in the potential of ZW220, to be best-in-class as we transition ZW220, from preclinical development into early stage clinical studies next year. We remain on schedule with our preclinical development of ZW220, to support an IND filing and for applications in the first half of 2025.

Moving on to other data presented at the [ triple ] meeting, [indiscernible] ENA on ZW251, another ADC incorporating our 519 payload, that data continues to demonstrate significant potential for ZW251 addressing unmet needs in hepatocellular carcinoma and other GPC3 expressing tumors. ZW251 is designed to selectively bind, internalize and kill GPC3 expressing tumor cells or Glypican-3 expressing tumor cells, this precise mechanism of action, coupled with the antitumor efficacy we've observed reinforces its potential as a targeted therapy for [ Glypican-3-expressing ] cancers. One of the most promising aspects of ZW251 is its robust antitumor activity observed across a broad panel of hepatocellular carcinoma's xenograft models, including both cell line-derived xenografts and patient-derived xenograft models. Importantly, ZW251 demonstrates a dose response of antitumor effect with a single 8 mg per kg dose showing activity in 5 out of 6 [indiscernible] derived models and 9 out of 12 PDX hepatocellular cancer models. This includes models with lower or heterogeneous [ litigant weight ] expression, underscoring the breadth of its therapeutic potential in targeting tumors with variable antigen presentation. Our team selected the drug to antibody ratio, or DAR, before this ratio provides an optimal balance between safety and therapeutic impact. In fact, the DAR 4 molecule has demonstrated a compelling breadth of anti-tumor activity in vivo which is crucible for maximizing its efficacy across diverse tumor types. This broad target [ media ] activity across this range of hepatocellular cancer models continues to validate the strength of our ADC platform.

In terms of safety, ZW251 has been well tolerated in repeat dose toxicology studies in nonhuman primates, exhibiting dose-proportional PK. This positive safety profile, along with its robust preclinical efficacy positions ZW251 well for clinical advancement. Looking ahead, we expect our preclinical development to support an IND submission in the second half of 2025 and we believe ZW251 has the potential to provide a much needed therapeutic option for patients with hepatocellular carcinoma and other GPC3 expressing tumors. We're excited to continue developing this promising candidate that help make a meaningful impact in oncology. By the end of 2025, we expect to have all three of our 519 payload ADCs in early clinical development. We look forward to understanding how the design of our optimized antibody and proprietary payload might translate these promising preclinical findings into clinical efficacy for our ADC candidates.

At Zymeworks, the time and care to ensure we have a deep understanding of [ target biology ] allows us to innovate on elements of our ADC, which we think could make a meaningful difference for efficacy, but importantly also for tolerability. Together, we believe that these design features could allow us to optimize at higher protein doses than other ADCs, ultimately maximizing the potential of these therapies to improve the standard of care for patients. Increased tolerability would also allow us to explore combination regimens for our candidates with the hope that we can reach first line patients to really make a difference and extend progression-free survival and overall survival for these patients. Notably, we made a conscious decision not to repurpose existing molecules like [ Exotica ] for our ADCs. Instead, we aim to create a proprietary TOPO1 payload with characteristics ideally suited for an ADC potentially allowing our candidates to outperform efficacy seen to date with drugs that utilize a repurpose period. These characteristics include moderate potency, which we believe could have a two-pronged effect of: one, enabling [ cutting ] dose [indiscernible] activity to enhance potential efficacy, while two, also limiting damage for conjugated drug accumulates in some novel tissues and therefore, increasing also tolerability. By reviewing ADCs that have been explored in the past, we believe our design philosophy is consistent with learnings from prior clinical data. We have observed that increased potency for other repurpose payloads such as [indiscernible] seems to limit its maximum tolerated dose relative to moderate potency TOPO1 inhibitor payloads which may limit the potential of the higher potency payloads to get into the efficacious dose range.

Another feature we have factored into our design to potentially maximize tolerability and efficacy of ADCs with linker stability. Historically, increased antibody linker stability has demonstrated improvements in preclinical therapeutic [ in debt ], but these spendings have not translated into the clinic. We believe that moderate linker stability has employed the most clinically approved ADCs will limit normal tissue exposure to conjugated drug also contributing to improved tolerability. Regarding DAR and drug antibody ratio, we studied both DAR 4 and DAR 8 versions of all three of our ZW519 payloads before carefully selecting the most appropriate DAR for each base each molecule based on our understanding of target biology, the targeted patient population and the results of our preclinical studies.

Lastly, and importantly, our efforts have been concentrated on optimizing antibody properties particularly internalization and tumor penetration. We firmly believe that the key to ADCs being effective and tolerable and ultimately reaching those early lines of therapy is ensuring an appropriate protein dose. We also carefully considered the potential benefit of incorporating Fc mutations on our antibodies based on the target population and that data supported by preclinical studies.

From our preclinical work and empirical review of clinical data over the past 40 years, we believe that our approach is differentiated from other ADCs currently under development. We believe the primary factor is ensuring an appropriate protein dose within the optimal range. Together, we believe that these design features could allow us to optimize at higher protein doses than other ADCs, ultimately maximize the potential of these therapies to improve the standard of care for patients in both monotherapy settings and for combination therapy as well as in earlier lines of treatment. We are very much looking forward to evaluating these novel design features and their effective tolerability and efficacy. With using, again, relative to clear benchmarks from peers and highly validated targets. The first of which will be our Phase I clinical trial of our ADC's ZW191.

Based on the encouraging preclinical findings, we are moving forward to validate these results in the clinical setting. We anticipate dosing the first patient this year in our Phase I open-label multicenter study of ZW191 registered under NCT06555744n in clinicaltrials.gov. The study is actively recruiting and aims to enroll 145 participants with advanced solid tumors, including ovarian, endometrial and non-small cell lung cancers across North America, Europe and the Asia Pacific region. The study is designed to evaluate the safety, tolerability, pharmacokinetics and preliminary antitumor activity of standing doses of ZW191. Part one of the study will evaluate the safety and tolerability of ZW191. Part two of the study will evaluate safety and explore the potential of antitumor activity of ZW191, according to the RESIST evaluation criteria while continuing to evaluate the safety and tolerability. Inclusion, criteria includes pathologically confirmed ovarian cancer, endometrial cancer, non-small cell lung cancer and/or progressive disease refractory to all standard of care that confer clinical benefit measurable disease per RESIST. We look forward to reporting first patient dose in the near future and discussing progress in the coming earnings calls.

With regards to 171 or ZW171, as Leone mentioned earlier in the call, it was only in August that we were announcing the FDA clearance to move forward with Phase I clinical trials for ZW171. The speed of efficacy and our team's ability to move ZW171 forward to first patient being dosed in such a short time is a credit to the dedication and collaboration of our global hubs. Since we last presented our earnings, we have been working towards activating sites in North America, Europe and the Asia Pacific region and our Phase I trial for ZW171. In this slide, you will see that we have made progress here with clinical sites activated in North America. As a reminder, for our clinical trials for ZW171, we expect to recruit 160 patients globally which we anticipate will present us with a high level of diversity in patient characteristics, including expression levels across tumor types. We believe this diversity should result in higher quality data sets and hopefully, more conclusive results for retrospectively determining expression cutoffs. We look forward to talking more about the work our team conducted to support selection of the starting dose for ZW171 at SITC next week. As we have previously communicated, internally, we have a very clear target product profile for our candidates. And so the ability to initiate dosing closer to the expected efficacious dose means that [ it ] provides the potential to understand kinds of efficacy as well as tolerability more clearly fairly on in the study. This is especially important as we continue to keep financial and scientific discipline within the organization in order to focus on the candidates that have the best chance of success in being meaningful treatment options for patients.

Our R&D engine has continued to work in the background on the next wave of innovative modalities in therapeutic areas where patients with significant unmet needs are lacking effective treatment options. With this in mind, we will continue to advance assets that have the highest potential to change the standard of care or to move on to other promising candidates where we can innovate further with the hope for better therapies for patients.

Finally, I'm also pleased to share an update about our upcoming R&D Day, we will provide in-depth updates on our growing portfolio of solid tumor targeting antibody drug conjugates and T-cell engager molecules. This will be a unique opportunity for us to showcase the progress we've made in advancing our innovative pipeline. And we are thrilled to be joined there with several key opinion leaders from the oncology people. Together with our management team, these experts will discuss the latest developments and our ongoing R&D and clinical activities, underscoring our commitment to delivering transformative therapies for patients.

One of the highlights of the day will be the formal nomination of the latest product candidate from our 5x5 portfolio, our trispecific T-cell engager. This will mark the final nomination in our ambitious 5x5 R&D strategy with a projected IND filing in the first half of 2026. This nomination is a major milestone for us, reinforcing the strength of our T cell engager platform. We'll also discuss our strategy for our continued focus on solid tumors, while also expanding into new therapeutic areas particularly in hematological cancers and autoimmune inflammatory diseases. These areas represent a natural extension of our core strength, and we see tremendous potential to apply our technology platforms to these new indications.

Lastly, we'll provide updates on our preclinical development progress, which includes potential IND filings for new product candidates in 2026 and beyond. This progress is a testament to the innovation happening within our labs and position us well for continued growth of an exciting R&D portfolio in the years ahead. We were excited to share these developments at our R&D Day and look forward to highlighting the advancements that will drive the next chapter of our company's growth.

And with that, I'll hand it to Ken for closing remarks.

[Kenneth Galbraith, executive]

Great. Thank you, Paul. I'm very pleased with all the progress we've made so far this year, and we're only just getting started on the clinical development for some very interesting targets in patient populations with significant unmet need. With that being said, there are still plenty more time less than 2024, and we plan to make full use of this time to continue building on our momentum so far this year and complete a few more significant pipeline events before the end of the year.

First, I also shared in Paul's enthusiasm for updates we plan to make during our upcoming R&D Day in December, where we'll officially nominate our new trispecific T-cell engager product candidate, [ it's a nomination ] of a significant milestone for us to complete the 5x5 portfolio, almost two years ahead of the initial schedule and certainly highlights the continued growth and diversification of our pipeline as expanded in new modalities and novel treatment approaches.

In addition to some of these updates, I also want to highlight that our partner, Jazz, has issued a pivotal Phase III trial named EMPOWER, evaluating zanidatamab in patients with HER2-positive breast cancer whose disease has progressed on previous [ TDSC ] treatments. This is a major step forward in potentially bringing new potential treatment options to patients with metastatic breast cancer. Internally, we're extremely proud of the potential impact zanidatamab could have for patients across multiple tumor types in oncology based on the breadth of clinical activity seen to date, which really showcases how this targeted therapy is able to bind the HER2 and kill tumors with a very unique mechanism of action. Having discovered and developed Zanidatamab in our labs in Zymeworks, our teams have been taking some learnings from the screening, optimization and critical development of this unique bispecific antibody, and we look forward to continue reporting on progress of how we hope to replicate this level of optimization efficacy with our wholly owned pipeline.

The success of [indiscernible], a target HER2 agent also give us reassurance that highly expressed targets are where we want to focus on developing future therapeutics. We believe that high and fair levels of expression are important when developing highly targeted candidates and moving away from previously used chemo like treatments. The decision to develop candidates for these highly expressed [indiscernible] targets such as [indiscernible] and GCP3 means that we can quickly and effectively understand if there's a correlation between efficacy and expression levels across tumor types as well as benchmark our data against previously developed candidates. Looking ahead, Jazz has estimated a top line progression-free survival data for the ongoing Phase III HORIZON GO1 study will be available in the second quarter of 2025.

Finally, we're eagerly anticipating the PDUFA date of November 29, 2024, for zanidatamab in second-line HER2-positive [ biliary tract ] cancer in the U.S. This potential approval in the United States would be one of the most substantial achievements for [ Zyme ] in its history and in collaboration with our partners, Jazz Pharmaceuticals and BeiGene Beijing, a critical step forward for [ biliary tract ] cancer patients who currently have limited treatment options. Jazz is scheduled to hold their Q3 earnings call within the next week, and we encourage you to follow that for any further developments or guidance related to Zanidatamab.

Before we move on to Q&A, I'd like to acknowledge this is the first earnings call since Leone's joined us at Zymeworks in September. She's a very experienced executive leader in biotech and has already had a positive impact in many aspects of our operations, working in collaboration with our management team. We're very fortunate to have [ tracked her ] design, and I look forward to working closely with her alongside the wider leadership team on building Zymeworks further.

I'd also like to take a moment to thank Mr. Hollings Renton, who will be stepping down from the Board in December. For his significant contributions to our company over the past 8 years and also being a great adviser for me during my tenure as CEO. Hollings' guidance has been invaluable in shaping the directional growth of our business. He's done an amazing and successful career in the sector and we're very grateful for his dedication to our mission at Zyme. As we continue to evolve as a company, I'd like to highlight that over the past 18 months, we have welcomed 6 new members to our Board of Directors as part of the Strategic [ border press ] process. These initiatives are a reflection of our commitment to ensuring we have the right mix of experience and expertise to guide our next phase of development and growth. The Board remains diverse, strong and well positioned to support our long-term objectives as we continue building on our momentum.

With those closing remarks, I'd like to thank everyone for listening, and I'll turn the call over to the operator to begin the question-and-answer period.

[Operator]

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

[Stephen Willey, analyst]

Maybe a couple for Paul and/or Ken. With respect to the ongoing Phase I trials for ZW171 and ZW191, just curious how you're thinking about dose optimization. Are you going to be backfilling specific dose levels in the escalation phase to generate the exposure data you need to select a Phase II dose for expansion or do you think it's more likely you'll be carrying two doses forward into the expansion phase. And then I just have a follow-up.

[Kenneth Galbraith, executive]

Yes. Good question, Steve. I think the way we think about it in the dose escalation phase, we hope to really have a chance to have a good, high-quality set of patients with diversity around tumor types, derision expression levels that really let us understand the tolerability profile, and that's both for ZW171 and ZW191.

I think our expectation is that in addition to backfilling and having a chance to explore some alternative doses and dose escalation, we're likely going to have to move forward into the expansion cohorts and optimize more than one dose in specific cohorts, maybe one or maybe two of those cohorts. But I think it's really necessary to do that. So by the time we leave a Phase I study, we have a very clear understanding of the tolerability profile and a very clear understanding of the optimum dose to take forward. And I think we see an example of those other companies who have tried to accelerate or maybe go a little too fast in that process. And then again, that doesn't help you accelerate to a registration study or accelerate to a potential filing or approval pathway. So I think we've given ourselves a pretty big clinical footprint in Phase 1, as you've seen from ZW171, ZW191, geographically a number of sites that should allow us to quickly recruit and study a pretty broad range of patients. If you look at the target patient populations we have for both ZW191 and ZW171 in Phase 1. So I think we can move very quickly and at the same time, make sure we collect enough patient data to be very clear about the tolerability profile, very [ clear ] about signs of activity and very clear about the optimum dose that we want to take forward and not leave Phase 1 with any of those questions unanswered.

[Stephen Willey, analyst]

And then I know Paul touched on this a bit in the prepared remarks, but obviously, the preclinical data you have for all the ADCs in your preclinical tox models would suggest that you've got a much wider TI versus some of the other ADCs that we've seen with [ TOPO ] payloads using equivalent DAR. So just wondering how that informs your development strategy, specifically in terms of how you're prioritizing combinations for each of these three assets? And I guess, is there any one of these ADCs in particular that you think might warrant a more accelerated path to a combination-based development strategy?

[Paul Moore, executive]

Yes. Thanks, Stephen. Thanks for pointing that out about the careful design that we've incorporated in the preclinical data that supports that we have this flexibility to you'll hopefully have a little bit more therapeutic index than potentially others with different design. I think regarding combination strategies, we're pretty much thinking about that for all three programs because we do hope that we will be able to move up in earlier lines. So I think we're thinking quite broadly there. We don't particularly specify one over the other. I think for all three, we're thinking about [ we ]. So obviously, in the treatment paradigm of the disease indication that you're going against that, that will drive the specific combination partner molecules. So whether that's [ AGF ] inhibitors or [ PARP ] inhibitors in the context of ovarian cancer or PD-1 inhibitors in the context of non-small cell lung cancer. Those are the types of combinations that we're thinking about and we think are compatible with the design strategy that we have.

[Operator]

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

[Unknown Analyst]

This is [ Phoebe ] on for Akash. Just one on Zani. The DESTINY-Gastric03 study in HER2-positive gastric cancer is reading out in July of 2026, but it's being studied with chemo and/or immunotherapy. I'm just wondering how you view this regimen as benefit [indiscernible] for Zani at all.

[Kenneth Galbraith, executive]

I think we've been obviously carefully following potential competitive programs to Zani and all the indications of interest for us from some time period now. And I know our partners, Jazz, and BeiGene are doing the same thing. I think with respect to any view ourselves, we feel very strongly about the clinical data that we've generated to date on zanidatamab and its potential as monotherapy as we have in our [ PTC ] filing and also [ sort of in gastric ] cancer, is our ability to combine with other product modalities and really seem to generate much higher levels of response in that patient population and generate much more durable responses that have been seen by either approved therapies or some of those under development, like you've mentioned, with a tolerability profile, which is very good compared to some of those other agents which might be under development. So we feel very confident in the data center around Zanidatamab with respect to where we are. And obviously, our upcoming clinical data readouts will hopefully confirm some of that confidence we feel behind Zanidatamab and beyond that, I don't really feel in a position to comment about other companies' data sets where we may not have access to all the data. But with respect to the data we have on [ Zani ], we feel very comfortable and confident with Zanidatamab's ability based on the clinical data set to date to really make a difference in this patient population [indiscernible], and we're looking forward to having that readout next year, obviously.

[Operator]

Our next question comes from the line of Yigal Nochomovitz with Citi.

[Ashiq Mubarack, analyst]

This is Ashiq Mubarack on for Yigal. I had one on how we should be thinking about time lines to data or maybe more generally your philosophy about data sharing related to the wholly owned pilot pipeline, especially the lead mesothelin and [ FR alpha ] programs? I'm just wondering if we should be expecting maybe an early look at the dose escalation cohorts or your philosophy is more going to be along the lines of generating a robust dose escalation package or maybe even an expansion package before sharing that data with us.

[Kenneth Galbraith, executive]

I think we do have a very specific philosophy. Obviously, we've -- undertaking these first two Phase I studies for ZW171, ZW191. You can see that we do have the advantage of very tolerable molecules with some preclinical data, which allows us to have what you might think is a higher starting dose than you might have seen with other agents in similar classes, and that's obviously an advantage to try to go more quickly to an active range while setting the tolerability profile. We also have a very broad global footprint with many active sites that we're bringing online now, which again allows us to hopefully not only collect a quality and diverse data set of patients across the population [ you want to ] study but also do that on a very timely basis. That being said, we've not given any guidance to where early data will be given. And I don't think we'll do that until we're comfortable that we have a large enough data set to make some conclusions about the data set and the product that we'd like to share in a peer-reviewed scientific or medical meeting, which is where you'll see it all not by a former press release or investor call. So once we feel comfortable we've got a data set that we'd like to share and likely that we've had an abstract accepted, then I think we're quite comfortable sharing publicly that we're going to share that in the scientific medical meeting. Obviously you've seen recent examples of companies who can do that quite quickly. And again, it depends on how [indiscernible] going to fruit patients, what that data tells us and what conclusions we'd like to share with the scientific and medical community in a peer-reviewed manner and so I think we won't provide guidance until we're a little more certain about the time frame to do that, but please be assured, we're trying to collect a quality, diverse substantial data set in Phase I, including dose escalation. And if we do that well and timely there might be a lot that we can understand from the drug at a very early stage. And then we're happy to share that with the scientific medical community, that understanding as quickly as we can.

[Ashiq Mubarack, analyst]

And if I could ask one more. I apologies if I missed this, but as I recall, the stock repurchase program allows for up to $60 million, unless I'm mistaken. And with the sort of $30 million [indiscernible] $30 million tranche already done. I'm just wondering how you're thinking about deploying the second $30 million, if that should be expected maybe over the near term or that will be more over a multiyear horizon depending on market conditions and so on?

[Kenneth Galbraith, executive]

Yes, there was an authorized $50 million share purchase program. We did activate $30 million of that, which again gave us a little bit of optionality and flexibility to complete that first and then decide what to do with the rest. There's no strict deadline or a necessity for completing the second phase. So I think we will continue to evaluate market conditions and our financial position and other factors and working with the Board decide when it may be the right time to initiate the second part of that. It's a very carefully evaluated decision. Obviously, we did this in early August, and we felt very strongly that there was a strong rationale for doing it, including the fact that we felt that our share price was undervalued compared to what we saw in the company as important factors in enterprise value. We still feel that way today, even though the shares have appreciated substantially since August. We do have the ability to complete the entire full $60 million share purchase program and maintain our projected cash flow [indiscernible] second half 2027. But I think well now, we'll do what we did last time, which is just carefully assessed our financial position. look at a number of factors before we make that decision. And as we did last time, we'll be very definitive when we start. And again, you won't hear much about it until we're complete that. So if there's an update, we'll obviously hear about that publicly as required. But right now, we feel comfortable with what we did. We think it was an appropriate thing to do with the cash we had available, and we think there was a strong rationale for improving total shareholder returns with the action we took -- still feel we're in a very undervalued position compared to what we see inside the company. But we'll just take a moment to reflect before we think about initiating the second tranche. Again, there's no time line or requirement or necessity for us to continue on that. We will always have the ability to initiate that whenever we and working with our board decides if it is an appropriate thing to do for our shareholders.

[Operator]

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

[Lut Ming Cheng, analyst]

Maybe just one related to the ongoing Phase I for ZW171 and ZW191, can you talk about some of the criteria that you'll be looking for in terms of efficacy before moving into a larger expansion stage? And I might be asking this question a little bit earlier, but could we be expecting some clinical data at your R&D Day in December. And I have a follow-up.

[Kenneth Galbraith, executive]

We haven't given any guidance as to whether when to expect clinical data for ZW171 and ZW191. We are interested because these are Phase I studies and understanding the tolerability and adverse event profile, and that obviously takes some work and moving up in doses to understand adverse events as it relates to the dose response. I doubt that's going to be in place by the time we get to our R&D Day, and it was not the intention of the R&D data share initial data ZW171, ZW191. These are adverse tolerability studies. So that's the most important factor for us to understand that. Obviously, we look for signs of clinical activity, especially at doses that we think are more optimal for activity we think a very important factor, especially for T cell engagers, and the ability to drive a much more durable response than maybe you see with chemo and also with some ADCs. So not understanding not only the ORR, but also [ DOR ] is extremely an important factor, and we have seen instances of where a very high initial response doesn't end up being durable for the patient population. So having an understanding of that takes a little bit more time potentially. So I doubt you'll see anything at our R&D day. But I think once we have enough data to tell us something and inform us about tolerability adverse event profile, initial activity and at least some idea of durability, which requires a little bit more follow-up than maybe you see from some early dose escalation interim disclosures, then we're happy to share that in a peer-reviewed meeting. And when that happens, we'll follow our data and obviously make it public when we think we're in a position to share that data, but I don't think you should come to R&D Day in December 12 expecting to see initial clinical data in ZW171 and ZW191.

[Lut Ming Cheng, analyst]

And then maybe just one more. Heading into the PTCs [indiscernible] date next month [indiscernible] top line next year. Just from a modeling perspective, how should we think of your partnership revenue near term?

[Kenneth Galbraith, executive]

Yes. I think probably, we've already publicly disclosed as much as we're able in our agreements with Jazz, I can't really say much more about that until we start to get paid milestones and receive them or get paid and receive royalties. We can't really say much more about that. I think on time lines and guidance with respect to top line on Zani, I will refer you back to Jazz and again, also BeiGene, especially Jazz for next week. They've already made some guidance around potential peak sales. But I would look for updates on them on development time lines, approval time lines, future filing time lines and any revenue guidance they want to provide, that's where they have to [ Jazz ] and they have their call next week. So I would just pay attention to that.

[Operator]

Our next question comes from the line of [ Jon ] Miller with Evercore ISI.

[Unknown Analyst]

I guess I'll just first build on the earlier question, maybe [indiscernible] on share repo. I know it seems like you're not in any rush to get started with the second half. But did the first half of share repo achieve the goals that you hope to achieve with those purchases. And then beyond that, it seems like you're suggesting a strong potential for more [ BD ] or other sources of funds in the upcoming years? And I'd love to get a little bit more color on that. What kind of deals are you interested in discovery collabs, licenses on the 5x5 or collaborations and development there on the legacy tech. What are the things that you're looking at when you talk about the potential for future deals? And I do have a follow-up.

[Kenneth Galbraith, executive]

So I think in respect to the share repurchase program, I think we carefully consider this before we initiated the first $30 million in August. And I think we've been able to retire a little more than 2.5 million shares out of the cap table, which I think it can provide a total shareholder return, not just immediately, but over time. So I think we still feel very strongly that we were able to achieve that objective despite the -- obviously, the increase in enterprise during that time frame. I think we still feel that some of the elements related to our decisions to that still exist. We still believe that although we've had some appreciation since August in the share price that we still feel very undervalued compared to what we believe the long-term value for the company is and what we see inside and this reflects our confidence in the future outlook of our business, the potential of not just Zani, but our wholly owned product candidate portfolio, and I think the long-term value of even our further preclinical development pipeline, which you'll hear more about at R&D Day.

I think the repurchase program is obviously one component of the overall capital allocation strategy we need to think about. I mean, ideally first, we need to make sure that we sufficiently fund the core business that we have of all the exciting R&D opportunities we have inside the company, and that's always our first priority. I think if we do see opportunities to also provide some upside of total share of return, we are required to look at that and consider it. But I think we've accomplished the objectives we have. I think we obviously have the ability at any time to go ahead with a further share repurchase program when we consult with our Board and make that known. Right now, we're just taking a little pause to consider that with a number of other factors in consideration.

I think with respect to partners of [indiscernible]. I think we've tried to be very clear. I think with the 5x5 program, and you'll hear the last nomination of R&D Day. We've obviously got a really exciting portfolio of agents that we like a lot, and we're moving into clinical data. We're almost two years early in formulating that portfolio into clinical studies through nomination in clinical studies, which is great. I think you'll hear at R&D day. We have a whole host of other opportunities in the preclinical pipeline, and we've also been working on advancing much closer to IND so we can see a very broad and exciting portfolio in front of this. We realize that not all of those are going to work out the way that we might have expected. So there will be some attrition rate in that portfolio. That's the natural part of our business, you can't be 100%.

I think the other thing we realized is that the more exciting that portfolio looks, we can't possibly do all of that ourselves. So though it's wholly owned today, we do expect that we will have to bring in partners and collaborators to help us move that forward, either accelerate some of the time frames use some of their capital, our clinical resources to move this along. And we're carefully considering how we overlay the continued growth of the R&D portfolio, not just the 5x5 but beyond that with potential partnerships and collaborations to get the right mix of capital we can allocate to the program of our own capital versus sharing risk and capital as others versus retaining commercial rights for ourselves. I think very clearly within a data map, we decided to out-license that program outright to BeiGene and Jazz and not have a commercial role. I think in the future, we're looking to retain some additional rights longer in development and potentially give us the commercialization option later. And so doing that on a portfolio basis is something that we're really thinking about very carefully and so I expect, as you learn about the portfolio and look at how it might even grow beyond the 5x5, there are some natural points in time for us to think about adding some partners to help us move that portfolio forward. And those are things we've been thinking about all year, things we'll continue to think about. I think once we find the right partner who is interested in moving those assets forward with us in the way that we think they should be moved forward, and we can get paid appropriately for our efforts to date and continue to have upside as we work with partners to move those forward. But I think we're quite happy to look at partnership possibilities at that time.

The nice thing about having a strong financial position is that we can do that within a time frame that generally we can set ourselves. And I think there's some advantage in making sure you can find the right partner for the right set of products at the right time in the right deal structure that works for our shareholders. That's one of the reasons that we try to put ourselves in a strong financial position and continue to be in a strong financial position going forward into those discussions.

[Unknown Analyst]

And then maybe more on the science side. In the prepared remarks, you spoke both about your interest in focusing on targets where there's strong antigen expression on the tumor cells, good sensitivity there, where there's previous validation of the target. But then you also talked a little bit about your ability to be tolerable enough, effective enough to get good effect even in targets where there's maybe more modest antigen expression. I know some of the ADC targets you're looking at do have some variable androgen expression between certainly between indications, but even between patients within indications that do express those targets. So can you talk a little bit more about the pushes and pulls there? How you expect to be able to identify patients? Do you expect to have to be stratifying by expression how do you expect your advances in the ADC field to enable those broader populations compared to focusing on those patients where there's really strong expression.

[Paul Moore, executive]

So I think in our design and our thinking, we really do value the importance of the front end of the antibody and its ability to recognize target and internalize. So we do take quite a lot of care and we really value that aspect but we also appreciate that within the tumor microenvironment, not all the tumor cells are going to necessarily have high expression. And so that's where things such as by standard activity are also a very important contribution to the mechanism. And then beyond that, within the ADC field, there's also the chemo effect that you can also get from the design of your ADC and getting that balance between the potency of that ADC, that payload as well as the release of that load at a tolerable pace is very much also baked into the design of our features, so we can get on target effect, we can get bystander effect and then we can potentially get some chemo effect as well. And that's how we try and factor that all into the design. And it is also balanced by the DAR and in the tolerability profile [ you're getting ]. You don't want to run into issues of intolerability that others have seen with the higher potency payloads.

[Operator]

Our next question comes from the line of Derek Archila with Wells Fargo.

[Derek Archila, analyst]

Just two quick ones for me. I guess, first, what do you plan to cover at the R&D Day in terms of potential expansion into autoimmune disease I guess, is there going to be a discussion around certain targets of interest?

And then second question, just in terms of your target selection process for the [ TRI ] T cell engager, I guess, maybe just run us through that? And what type of preclinical data might you highlight at the R&D Day for the development candidate you plan to nominate?

[Kenneth Galbraith, executive]

Yes. Maybe I'll let Paul answer both of those of you, if he wants, whatever order he wants.

[Paul Moore, executive]

Yes. So I think, Derek, the first question was the scope [indiscernible] present on the autoimmune programs. And there, as we've mentioned before, we see great opportunity for bispecific, our technology in the autoimmune space. And we do have certain specific programs that we're pursuing. So we will be -- our plan, our anticipation is that we will talk about specific programs in addition to where we can take the technology and moving forward even beyond that. So that will cover the autoimmune space. And then on the tri-specific T cell engagers, they're -- we have different toggles that we can pull on the design sort of the most in the tri-specific space, I think the one that we've been talking about most and you most remember is the CD28, CD3 trispecific platform or try [ TCE Costin ]. And there, when we're thinking about the target there, we do appreciate that we want targets that have a profile that is more biased towards tumor expression and less normal expression. So we do appreciate there, you have to take care. But the way that we've designed that molecule differently than others have got about with deploying CD28 is that our CD28 engagement is only occurs when you have the CD3 engagement, and you have engagement of the tumor target. So in some ways, we're not really that different even though we've got that extra punch on the CD28, we're not really any different than how others think about target peering with T cell engagers. Of course, we have advances and we have things where we think we can improve the therapeutic window moving forward. But for initial targets, we like very much the targets that we've already shared, the [ DLL3 ] in the cloud at [ 18.2 ], we think the tolerability profile has been very, very encouraged to us as we progress those through preclinical development. So hopefully, that answers it. We certainly are thinking of big targets beyond those applications beyond those as well. But again, it really depends on the platform that we're leveraging. And somewhat the profile of the target antigen as it fits into that platform.

[Operator]

Thank you. Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to Ken for closing remarks.

[Kenneth Galbraith, executive]

That's great. Thank you, operator. So thank you, everyone, for listening to our call today. As always, we're extremely excited about the future for Zymeworks. We still think there's a lot of time left in 2024 for us to get some additional milestones and events behind us. So we look forward to doing that. And again, we look very much forward to seeing all of you either in person or virtually for December 12 R&D Day, where we'll be able to give a really great update of the 5x5 programs with some KOLs providing some landscape analysis and also a good overview of where our long-term R&D strategy is beyond the 5x5, and we really need to accelerate that view just because we're almost two years ahead of schedule in constructing the 5x5 portfolio. So we've been thinking about this for some time frame and happy to share our vision for Zymeworks on a longer-term basis on R&D perspective and look forward to seeing all of you there in December 12, again, in person or virtually. So thank you very much.

[Operator]

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.