Zymeworks Inc

NASDAQ:ZYME

Earnings Call Analysis

Stable Finances Amidst Pipeline Growth

In 2023, the company experienced a decrease in general and administrative expenses, primarily due to reduced headcount and severance expenses, leading to savings of $70.4 million compared to $73.4 million the previous year, and saw an increase in other income net by $14.1 million. With $456.3 million in cash and cash equivalents, the firm expects to fund operations until the second half of 2027. Looking ahead, they foresee potential extended financial runway through partnerships with Jazz and BeiGene, with eligibility for tiered royalties on net sales between 10-20% and 10-19.5% respectively, pending zanidatamab's regulatory approval.

Streamlined Operations and Increased Fiscal Discipline

The company has shown a prudent reduction in expenses, with general and administrative costs decreasing to $70.4 million from $73.4 million in the previous year. This decrease in expenditure is primarily attributed to lower headcount and reduced professional services fees, although offset by an uptick in technology and facilities expenses. Other income net concurrently increased by $14.1 million, and income tax expenses fell by $11.5 million, thanks to advantageous changes in U.S. tax regulations.

Solid Financial Foundation and Extended Runway

With about 70.6 million shares of common stock and sizable cash reserves totaling $456.3 million, the company is comfortably funded well into the second half of 2027. This financial stability is bolstered by anticipated regulatory milestone payments and potential future revenues from tiered royalties ranging between 10% and 20% on Jazz’s sales of zanidatamab and between 10% and 19.5% on BeiGene's sales.

Innovative Drug Development Efforts

The company is making strides with its novel TOPO1 inhibitor platform and impressive drug candidates like ZD06519, which has shown promising efficacy in multiple models and tolerability in healthy mice. Another hopeful, ZW191, has exhibited strong antitumor activity in non-small cell lung cancer models, further underlining the depth of the pipeline.

Advances in the Pipeline and Continued Innovation

Key developments are unfolding with the company’s fifth IND candidate, an expected T-cell engager designed to enrich its robust product pipeline. The continuous R&D efforts are poised to deliver next-generation candidates across various tumor types, solidifying the company’s commitment to addressing unmet medical needs.

Strategic Considerations and Adaptive Planning

The company is carefully navigating the complicated HER2 targeted space, remaining agile in the face of competitive developments. Management's discipline to temporarily pause and gain clarity on external events before proceeding, demonstrates a level-headed approach to ensuring commercial opportunities and successful execution of clinical plans remain intact.

Earnings Call Transcript 2023-Q4

[Operator]

Thank you for standing by. This is the conference operator. Welcome to Zymeworks' Fourth Quarter and Year-end 2023 Results Conference Call and Webcast. [Operator Instructions] The conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Shrinal Inamdar, Director of Investor Relations. Shrinal, please go ahead.

[Shrinal Inamdar, executive]

Thank you, operator. Good afternoon. I'd like to welcome you all to our fourth quarter and year-end 2023 results conference call. Before we begin, I'd 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 presentation slides and the accompanying oral commentary. These forward-looking statements are based upon our current expectations and various assumptions and are subject to the usual risks and uncertainties associated with companies in our industry and at our stage of development.

For a discussion of these risks and uncertainties, we refer you to our latest SEC filings are found on our website and as filed with the SEC. In a moment, I'll hand over to Dr. Chris Astle, our Senior Vice President and Chief Financial Officer, who will be discussing recent scientific and corporate updates, along with our financial results for the fourth quarter 2023, including certain non-GAAP measures. A discretion of our non-GAAP measures and a reconciliation to the most directly comparable financial measures as determined in accordance with GAAP are described in our press release, which is available on our website at www.Zymeworks.com under the Investor Relations tab.

Following this, Paul Moore, our Chief Scientific Officer, will talk about key expected milestones that underpin another potentially transformative year for Zymeworks, both the expected upcoming regulatory approvals and launches and more broadly through executing on our development strategy for our early stage product candidates. At the end of the call, Chris and Paul will be joined by our Chair and Chief Executive Officer, Ken Galbraith for Q&A.

As a reminder, the audio and slides from this call will also be available on the Zymeworks website later today. I'll now turn the call over to Chris, our Senior Vice President and Chief Financial Officer. Over to you, Chris.

[Christopher Astle, executive]

Thanks, Shrinal, and thank you, everyone, for joining us today for our Fourth Quarter and Full Year 2023 Earnings Call. With that, I will begin today's call with an overview of key achievements from our development programs over the course of 2023 as well as our financial results. Throughout 2023, we successfully positioned Zymeworks as a full leader in the development of antibody-drug conjugate or ADCs and multispecific antibody therapeutics. We have done so through multiple data catalysts from our Phase II clinical trials of zanidatamab in both gastroesophageal adenocarcinoma, or GEA, and biliary tract cancers or BTC, which validate our protein engineering expertise and antibody screening capabilities.

We are very pleased to see positive results for these patient populations and look forward to further advancements of zanidatamab development in multiple indications, led by our partners, Jazz Pharmaceuticals and BeiGene. These developments, coupled with our work on demystifying the ADC [ dogma ] by reviewing [ 40 ] years of clinical data and taking these learnings to redefine our own approach to develop the next generation of ADCs are key differentiators for Zymeworks as we aim to develop practice-changing therapeutics and indications with high unmet medical needs.

We have significantly accelerated the development time line for our early-stage 5x5 programs with the majority of our product candidates having now been nominated. Most recently, ZW251, our GPC3 targeting ADC being developed for the treatment of hepatocellular carcinomas. We remain on track to accomplish our goal of submitting 2 INDs or foreign equivalent submissions in 2024 for ZW191 and ZW171 and to nominate our fifth candidate, with a planned IND submission in the first half of 2026.

We also remain on track for 2 further IND or foreign equivalent submissions in 2025 for ZW220 and ZW251. We have strategically expanded the global footprint of our early-stage development team by establishing a presence in the key locations of Ireland, California and Singapore in preparation for our clinical development plans. This has allowed us to retain top talents and establish fit-for-purpose facilities, which will enable us to accelerate pipeline development as we move forward with our 5x5 program.

Execution on our strategy throughout 2023 has allowed us, together with our partners to target late 2024 for the pivotal Phase III top line readout from HERIZON-GEA-01, where we will see progression-free survival data. Our partners Jazz and BeiGene also remain on track to complete the Biologics License Application, or BLA submission for zanidatamab in second-line BTC by the first half of 2024 in the United States and in the second half of 2024 in China, with the goal of potentially launching zanidatamab in the United States and China in 2025 or sooner.

We would also like to highlight that as per recent guidance provided by our partner, Jazz, the Phase III confirmatory trial to evaluate zanidatamab as first-sign treatment for patients with metastatic BTC has now been initiated. We see the anticipated commercialization of zanidatamab as a near-term opportunity with more than $2 billion in revenue potential, starting with potential approval in BTC which remains an area of particular unmet patient need. We agree with the thoughtful approach taken by our partners to seek to take zanidatamab to market initially in BTC as it may enable us to go-to-market strategy and potentially expedite the regulatory review process for other indications where zanidatamab can leverage SBLA filings.

GEA would be the second indication, which has a much larger patient population estimated to be 63,000 HER2-positive cases annually in the United States, Europe and Japan. Jazz has expanded their clinical efforts for zanidatamab in breast cancer, where there remain many opportunities in both the early stages and late stages of disease. We're also very excited about the potential for zanidatamab to provide a chemo-free regimen, which we know would be of great value to patients, and we look forward to data from the [indiscernible] program and Jazz's collaboration with MD Anderson.

As you can see from this slide, there are many opportunities beyond these indications in other HER2-expressing tumors, which makes zanidatamab, a potentially very rewarding financial investment, both for our partners and for shareholders of Zymeworks while also supporting our goal to improve the standard of care for difficult-to-treat diseases for patients with high unmet needs.

Beyond zanidatamab, we are pleased to be starting the year having nominated 4 of the 5 product candidates that we set out to define a year ago. Today, we have a broad and differentiated pipeline with novel candidates focused on validated targets in areas of significant interest, which continue to provide multiple opportunities for business development and collaborations. We remain committed to advancing the development strategy for our pipeline of unencumbered product candidates, all of which have the potential to increase the standard of care for patients in disease areas with high unmet need and with commercially attractive targets.

We believe the next 6 to 18 months are set to be transformational for Zymeworks as our partners approach potential regulatory approvals and launches and more broadly through the advancement of our differentiated early-stage product candidates. Our Chief Scientific Officer, Dr. Paul Moore, will talk more about the future of our pipeline. But first, I would like to spend some time on our financial results.

This afternoon, Zymeworks reported financial results for the fourth quarter and year ended December 31, 2023. Zymeworks' net loss for the year ended December 31, 2023, was $118.7 million or $1.72 loss per diluted share compared to a net income of $124.3 million for the year ended December 31, 2022. The net loss in 2023 as opposed to net income in 2022 was primarily due to nonrecurring upfront fee revenue from our collaboration agreement with Jazz in 2022, which was partially offset by higher collaboration revenue, lower operating expenses, higher interest income and lower income tax expenses in 2023.

As reported, our revenue for 2023 was $76 million compared to $412.5 million in 2022. 2023 revenues included $71.5 million for development support and drug supply revenue from Jazz and $4.5 million from our other partners for research support and other payments. Revenue for 2022 included $375 million in upfront fees from Jazz, $24.3 million in development support payments from Jazz and a $5 million upfront fee from a tracker as well as an $8.2 million in research support and other payments from our other partners.

Research and development expense was $143.6 million in 2023 compared to $208.6 million in 2022. The decrease was primarily due to a decrease in expenses for zanidatamab, our transfer agreement and amended and restated collaboration agreement with Jazz. This was partially offset by an increase in preclinical expenses primarily with respect to preclinical product candidate, ZW171 and ZW191 and higher zanidatamab overdosing program costs.

Salaries and benefit expenses decreased due to lower head count in 2023 and nonrecurring severance expenses. General and administrative expenses were $70.4 million compared to $73.4 million in 2022. The decrease was primarily due to a decrease in salaries and benefits expenses due to lower head count, lower nonrecurring severance expenses in 2023 and a decrease in expenses for professional services. This was partially offset by an increase in other expenses related to higher depreciation on facilities and higher technology spend in 2023.

Other income net increased by $14.1 million in 2023 compared to 2022 due to income earned on higher cash resources and the higher rates of return in 2023. Income tax expense decreased by $11.5 million in 2023 compared to 2022, primarily due to a reduction in United States taxes under the global intangible low tax income rules in 2023. In 2023, we incurred a net loss compared to a net income in 2022, primarily due to the income from the Jazz partnership in 2022.

As of March [ 1 ], 2024, we have approximately 70.6 million shares of common stock outstanding and $5.1 million pre from the warrants issued in December 2023. As of December 31, 2023, we had $456.3 million of cash resources, consisting of cash, cash equivalents and marketable securities comprised of $157.6 million in cash and cash equivalents and $298.7 million in marketable securities. Based on current operating plans, we expect our existing cash resources as of December 31, 2023, and when combined with receipt of certain anticipated regulatory milestone payments will enable us to fund operations into the second half of 2027.

For additional details on our quarterly and year 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. Our strategy of refocusing the business and building a diverse clinical stage product pipeline of ADCs and multispecific antibody therapeutics continues to provide a solid foundation, helping to achieve our long-term goal of identifying additional product candidates and seeking valuable partnership options with a strong financial position of $456.3 million as of the end of December 31, 2023. And this, together with certain anticipated regulatory milestones gives us an expected runway into the second half of 2027.

We may also be able to extend this runway through potential additional regulatory and commercial milestone payments in connection with our partnerships with Jazz and BeiGene and in addition, pending regulatory approval, we are eligible to receive tiered royalties between 10% and 20% on Jazz's annual net sales of zanidatamab and between 10% and 19.5% on BeiGene's sales. No development or commercial milestone payments or royalties have been received today.

With that, I'd like to hand over to our Chief Scientific Officer, Dr. Paul Moore, who will talk about our novel topoisomerase inhibitor or TOPO1 payload, which is the foundation of the 3 of our ADC candidates and speak more broadly about the key milestones for our early-stage pipeline. Over to you, Paul.

[Paul Moore, executive]

Thank you, Chris. And as you said, I want to start by focusing for our TOPO1 inhibitor platform for which we recently published a manuscript in molecular cancer therapeutics. First of all, it's important to recognize there are significant challenges with repurposing older [indiscernible] not originally to develop for ADCs. Limitations in their biophysical properties, pharmacokinetic and pharmacodynamic profiles, often result in heightened toxicity levels diminishing their suitability for ADC applications.

As such, our team has started to design novel compound, specifically with characteristics amenable to bioconjugation to an antibody and they behave like small molecule chemotherapeutics, after they are released from the antibody to optimize the full therapeutic potential of this treatment modality. But many on this call will know, in recent years, the field of ADCs has seen a resurgence, largely driven by the clinical benefit observed in patients treated with ADCs incorporating Camptothecin [indiscernible] TOPO1 in [indiscernible].

Advances in the design and engineering of ADCs as mechanisms for targeted drug delivery have widened therapeutic application of this modality and the difference it could make in patients' lives. With this in mind, we would like to highlight our novel Camptothecin ZD06519, specifically designed for its application in ADC payload.

Commonly held notion in ADC development is that increasing potency and bystander activity hold a potential advantage of effectively targeting tumor cells with lower antigen expression. However, it's important to consider that more potent and more [ memorable ] payloads may also lead to increased toxicities, potentially requiring a reduction in the antibody dose, a challenge we have seen for many prior assets in the clinic. We believe that higher antibody dose with a moderately potent topoisomerase inhibitor payload, could be a preferred strategy to overcome antigen sync effects and enhance tissue penetration, ultimately leading to increased payload delivery into tumor cells.

In addition to linker design and payroll potency, intrinsic payload properties such as metabolic stability, to set stability to transporters to a crucial role in ultimately determining the efficacy and safety profile for patients. New molecular entities such as Camptothecin payloads can be selected to address these factors and optimize the overall therapeutic profile of ADCs based on the antibody, target and indication. Striking the right balance between ADC efficacy and tolerability remains an ongoing challenge making a critical factor in designing a new ADC platform, ultimately enhancing the likelihood of clinical success.

To [indiscernible] this novel Camptothecin payload with optimal properties we leverage insight from gain from 60 years of Camptothecin structure activity relationship data to generate a library of approximately 100 compounds featuring different substituents with the C7 and C10 positions. A panel of Camptothecin analogs with different substituents at the C7 and C10 positions of the Camptothecin core were then prepared and tested in vitro. Selected compounds spanning a range of potency and hydrophilicity were elaborated into drug linkers, conjugated trastuzumab and evaluated in vitro and in vivo.

ZD06519 was selected based on its payload properties as a free molecule and as an antibody conjugate, which include moderate payload potency of approximately 1 nanomolar, low hydrofibicity, strong bistandard activity with fast plasma stability and high monomeric ADC content. When conjugated to different tumor targeting antibodies via clinically validated [ NCTGFT-based ] linker, ZD06519 demonstrated impressive efficacy in multiple xenograft models to note worth the tolerability in healthy mice, rats and [indiscernible] primates.

In the context of addressing pure outcomes often associated with inter tumor heterogeneity, our focus has been on designing an ADC with a payload characterized by moderate potency with by standard properties. Our hypothesis revolve around the notion that our payload heightened membrane permeability facilitates its infiltration into neighboring tumor cells as illustrated in preclinical studies. The strategic design aims to enhance response rates across diverse expression profiles without compromising safety due to toxicities.

This slide places out these 2 characteristics. One is target dependency, which is shown in the [ left ] craft with the desire to have enhanced activity on target expressing sell-ins indicated in blue relative to target negative sellings indicated in orange. Something you see nicely achieved with our select payload indicated within the box. On the right, you see data evaluating by standard activity, another important feature we wanted to incorporate it. In these assets, what we are looking for is a decrease in the viability of tumor-targeted antigen-negative cells in cold culture with target antigen positive cells showed [indiscernible], but limited impact on the viability of tumor antigen negative cells for [indiscernible] shown in red.

Again, as indicated within the box, we chose a payload demonstrating these features to make sure that when the payload is released, it enabled to also enter inhibit nearby cancer cells regardless of [indiscernible] antigen expression and hence maximize antitumor activity. Our TOPO1 inhibitor platform is one of several proprietary Zymeworks related [indiscernible] platforms. TOPO1 inhibitor based technology show a meaningful clinical benefit in their wide range of solid tumors including hard to treat solid tumors that have been validated across many targets.

Based on empirical findings under [ own ] preclinical data, we believe our novel payloads could provide us with improved efficacy and tolerability and have utilized ZD06519 and 3 of our ADC product candidates. ZW191, an ADC that targets full receptor often expressed in tumors including ovarian, other gynecological and non-small cell lung cancer is [ belt ] using a drug conjugate platforms, including our novel TOPO1 -based payload technology. A drug antibody ratio okay, selected to balance tolerability and efficacy. The Folate receptor alpha monoclonal antibody incorporated in ZW191 was generated in-house selected based on enhanced generalization characteristics to enable targeting of high, mid to low level of Folate receptor Alpha expression.

Receptor alpha is a clinically validated target, data supports its expression in approximately 75% of ovarian carcinomas and 70% of non-small cell lung cancer. Our preclinical data is encouraging with strong antitumor activity demonstrated across a range of patient-derived non-small cell lung cancer, with ovarian [indiscernible].

ZW220, an ADC that targets sodium-dependent phosphate transporter 2b or NaPi2b expressing non-small cell lung cancer, ovarian cancer is like ZW191 built using our proprietary TOPO1 inhibitor-based payload technology. DAR4 was selected to balance tolerability efficacy to not be -- to be targeting monospecific antibody incorporated in ZW220 was generated in-house and selected based on favorable mining profile, enhanced internalization properties to enable targeting both high and low expressing NaPi2b expressing tumors.

NaPi2b is found in approximately 95% ovarian and 85% of non-small cell lung cancer with anti-tumor activity being demonstrated to patient-derived cell lines and growth inhibition in PD steroid non-small cell lung cancer [indiscernible]. The bystander effect of the TOPO1 payload may help address NaPi2b heterogeneity across different cancers.

The overall differential design of ZW220, featuring our TOPO1 based payload with moderate potency and mid-range AR, we believe will overcome issues associated with prior ADCs targeting NaPi2b. ZW251, potential first-in-class ADC molecules designed for the treatment of Glypican-3 expressing hepatocellular carcinoma, which incorporates the same Zymeworks proprietary bystander active TOPO1 payload utilizing 191, 220 with a DAR4 was selected to balance tolerability and efficacy. With ZW251 antitumor activity observed in multiple patient-derived new [indiscernible] models of HCC, reflecting a range of GPC3 overexpression. GPC3 with GPI-anchored cell surface [indiscernible] antigen overexpressed in most hepatocellular carcinoma patients and displays minimal normal adult tumor expression, making it appealing ADC target.

We are encouraged by published research demonstrating the potential of GPC3 targeting antibody in HCC patients with evidenced by tumor localization of high-beam radio labeled codrituzamab, prior clinical stage, anti-GPC3 [ mab ] and believe that antibody drug conjugate-based target of GPC3 could enable a novel and effective approach to treatment of hepatocellular carcinoma.

Our ADC design for strong promise for clinical efficacy, leveraging a payload derived from a validated class of toxins specifically Camptothecin incorporating a known linker, the MC-GGFC base linker. This strategic approach capitalizes on the established efficacy associated with the chosen toxin class ensuring a solid foundation for potential therapeutic success. Furthermore, the utilization of a known linker enhances predictability and reliability of our ADCs performance, providing confidence in its potential clinical utility. Combining these elements in 191, 220 and 251, we believe we are poised to deliver a robust therapeutic solution to address unmet medical needs across various tumor types. These 3 candidates, along with our 2 plus 1 mesothelin targeting bispecific T-cell engager, ZW171, which is novel anti-CD3 specificity provide us with multiple data catalysts in the next 24 months to showcase our innovative and debt orientated approach.

We look forward to sharing insights from our preclinical and clinical development at medical conferences for every year, including AACR, where 5 abstracts have been accepted for presentation. Abstracts accepted from our multi-specific antibody therapeutics team include 2 presentations focusing on our tried TCB [indiscernible] platform, a next-generation trispecific T-cell engager platform with integrated CD28 co-stimulation for which we will present data both in the platform itself and in the context of 2 tumor targeting antigens, [ cloud 18.2 and DLL3 ], highlighting enhanced mechanistic and added tumor activity over clinical benchmark CDC bispecifics, targeting the same antigens and also showcasing the versatility of the platform.

From our ADC team, abstracts include updated data on ZW191, a fully-receptor alpha targeting antibody drug conjugate, showcasing strong preclinical activity across multiple full receptor alpha-expressing indications. We will also be sharing progress we have made on designing functionally screening panels of bispecific ADCs to identify those optimally formatted to overcome challenges associated with individual tumor target heterogeneity.

Lastly, for our ADC [indiscernible] with ACR we will also be presenting data on the development of 3D cancer cell experimental models for the in vitro functional calculation of cytotoxic antibody drug conjugates to enable deep model selection.

In addition, zanidatamab zovodotin remains ready for our Phase II clinical trial in combination with pembrolizumab at RP2D of 2.5 mg per [ kg ] every 3 weeks based on data from the Phase I clinical trial. However, the initiation of the planned Phase II study has been deprioritized, pending more clarity from the evolving clinical landscape.

We continue to explore potential development and commercial collaborations for zanidatamab zovodotin. We look forward to continuing to share our progress at additional conferences as well as nominating our final product candidate and our 5x5 portfolio this year. Looking ahead for 2024, as Chris touched on earlier on the call, we viewed zanaditumab as a near-term de-risk value driver for the company with the BLA for BTC expected to be completed in the first half of the year by our partners Jazz.

Following on from this, we look forward to the continued development of zanidatamab for first-line treatment of BTC with the confirmatory trial initiated by Jazz. [indiscernible], our partners BeiGene, are also expected to submit their BLA with the NPA in China for treatment of HER2 amplified inoperable and advanced or metastatic BTC in the second half of the year. Aside of BTC, we also expect to share the pivotal Phase III data readout for zanidatamab in GDA for the HERIZON-GEA-01 study targeted for late 2024.

Our partners at Jazz are hosting an R&D Day focused entirely on zanidatamab on March 19, we can hear more of other development plans for zanidatamab. Ahead of a potential launch for zanidatamab in second leg PTC in the U.S.A. during 2025 earlier. On our earlier-stage programs, we're on track to advance our development plans for our unique and differentiated product pipeline with 2 INDs for our mesothelin targeting bispecific antibody ZW171 and our fully receptor alpha targeting TOPO1 inhibitor-based ADC ZW19. We are also on schedule to nominate our fifth IND candidate later this year, which we anticipate being a trispecific T-cell engager.

Beyond these near-term milestones, we are continuing our IND-enabling work for our [indiscernible] based ADC for ZW251 or GPC3-targeting TOPO1 ADC, both on track for anticipated IND submission in 2025. We are very fortunate at Zymeworks to have a wealth of experience and proprietary technology, which provides the foundation for continuous innovation for our next generation of candidates for ADCs, multispecific antibody therapeutics and beyond.

We look forward to talking more about how we can leverage our clinically validated technologies and harness the flexibility of our proprietary platforms as we -- as a foundation to solve biological challenges with new mechanisms of action at our R&D Day planned for the second half of this year.

Despite the accelerated development of our pipeline, we maintained our strong financial position and remain financially disciplined with projected cash resources to support operations into the second half of 2027. We feel very comfortable with this cash run move we have to be able to support our R&D initiatives. We continue to evaluate opportunities to broaden or accelerate our development efforts through the formation of strategic partnerships and collaborations.

We are excited for what comes next both with zanidatamab as top line data becomes available and as it moves through the process of potential regulatory approvals initiated by our partners, Jazz and BeiGene and for our early-stage assets that -- as they head into the clinic. With that, I'd like to thank everyone for listening, and I'll turn the call over to the operator to begin the question-and-answer session. Operator?

[Operator]

[Operator Instructions] Our first question will come from the line of Stephen Willey from Stifel.

[Stephen Willey, analyst]

I guess maybe just to start, can you just perhaps expand a little bit on the prioritization of [indiscernible], -- and then I guess what specific clarity are you looking to gain here from the clinical landscape before you make a firm no go decision on whether to move forward with the Phase II? And then I just have a follow-up.

[Kenneth Galbraith, executive]

Yes. Let me take that, Stephen. So I think Look, I think 2 years ago, we didn't have an R&D portfolio to manage now we do, which is now comprised of the 5 x 5 programs and [indiscernible]. And we need to get good and disciplined about being able to manage priorities within the portfolio as well as the individual programs. And I think there's 2 reasons we need that skill. One is we need to be able to take advantage of opportunities to accelerate individual programs within the pipeline where we can. And as of right now, we have no higher priority than to try and accelerate our next 2 programs in the clinical studies this year and get momentum in the dose escalation stage of those programs.

So if we have an opportunity to potentially move up and accelerate ZW191, our full receptor Alpha ADC and [indiscernible] our mesothelin 2+1 T cell engager, then -- and if that takes a little bit more time and focus and attention to do that, then we need to be able to shift to take advantage of those opportunities, and we definitely see the potential for that. So that's the one thing we will do.

Now, in addition to this, we're definitely committed to the targeted therapy space in non-small cell lung cancer. That's why we have 3 or 4 programs in that area, but specifically in the HER2 targeted space, there has been a couple of external developments that we need to reflect on. One is, as you're aware, there is a competitive program that's now in front of [ data purview ], which could have the potential to get a label on a part of the clinical population, we were hoping to study with our planned Phase II study. So I think we do want to see if we can get clarity on that with a regulatory action from FDA, which likely isn't that far away.

In addition to that, there was some recently reported data on an ADC against a different target, which claim to have some benefit in the HER2 low population in non-small cell lung cancer, which is an important part of the future commercial opportunity. So I think when we have internal data or in this case, external events happen, I think it's a good discipline for us to pause to get clarity and just to make sure that we can both execute the clinical development plan that we had outlined for this specific program and also to make sure that the commercial opportunity at the end of that clinical development program is still intact.

And so I think this is a situation where we see both at the same time, there's an opportunity to potentially accelerate 2 of our programs. We should see if we can do that. And at the same time, pause to get some clarity on some external events, which is not a long time period away. And I think that's a discipline that the company has to have. It has to have the ability to exercise that on an ongoing basis as this portfolio advances in and grows with more compounds, and this is really the first time we're doing it, but I think we need to make sure that we're disciplined at this.

And I think given both of those things, we'll look forward to reporting as soon as we can on the outcomes for both of those reselling priorities, both the potential to accelerate certain programs and pause new clarity on another program. It's a scale we need to be good at and exercise as often as we think is necessary with either internal data or with external events. And I think, hopefully, is a responsible way to manage our portfolio, and we'll continue to do this as we go forward.

[Stephen Willey, analyst]

Okay. That's helpful. And then just with respect to ZW171. Can you just talk a little bit about the pace of dose escalation you'll be pursuing in the clinic. I guess, the level of confidence that you have in the step-up dosing regimens that you'll presumably be implementing in the protocol? And then just how you're thinking about the incidence rate of Grade 3 CRS that you're willing to tolerate?

[Kenneth Galbraith, executive]

Okay. I'll let Paul decide how much of that he'd like to answer. So go ahead, Paul. Good question.

[Paul Moore, executive]

Yes, sure. No, for sure. Great question, Steve. And right now, we're developing a clinical protocol. I can't really get into too much specifics on that. But what we've really -- we've spent a lot of time thinking about the design. Our team has spent a lot of time thinking about the design of this molecule to essentially overcome the limitations or the challenges that you mentioned. So first of all, we are using low affinity CD3 that hasn't -- that is a novel proprietary CD3 that we feel from its properties that we've looked at in preclinical studies, balances the level of activity with [indiscernible].

We've also implemented the structure of the molecule such that we're really trying to target the higher expression tumor cell population is a low-level mesothelin expression that could be on normal tissue using the 2+1 design. And that we really screened imperially for that particular 2+1 design. So we think we've done everything we can preclinically to sort of derisk the program and the design. And then as we move into the clinic, for sure, we have -- we can take advantage of a lot of prior programs of T cell engagers wire that into our design and be ready for -- if we do see cytokine release, we'll be ready for it. But again, we're hopeful that through the design that we will limit that and allow us to be able to dose this molecule to a dose where we can get antitumor activity efficacy. That's not really been seen so far with mesothelin targeted T cell engagers.

[Operator]

One moment for our next question. Our next question will come from the line of Akash Tewari from Jefferies.

[Unknown Analyst]

This is [indiscernible] on for Akash. I have a couple of questions. So first, from the AACR abstract, we noticed that you were going into a DLL3 targeting trispecific T-cell engager and small cell lung cancer. So just first, why are you interested in the target? And can you talk about how you think this will hold up versus other competitors like [indiscernible] which showed ORR of 48% in relapsed/refractory. And then also, we've seen significant safety concerns for [indiscernible] assets. How much confidence do you have that yours can avoid or mitigate these AEs? And lastly, what sort of PFS signal do you want to see at the end of the year with HERIZON-GEA-01 so that you feel comfortable that you'll hit on [indiscernible].

[Kenneth Galbraith, executive]

I think for the third part of your question, I think this physical design is publicly available for the PFS endpoint. So you're welcome to look at that. I think based on what we saw in KEYNOTE-811 from the [ track ] both chemo arm, we feel very comfortable with the design with respect to PFS. Obviously, earlier this year, you saw the announced some Jazz guiding that they were adding 200-odd patients to the OS endpoint, but not to the PFS endpoint. So that shows that we feel reasonably confident in the design of the study right there. And I think beyond waiting until we get the data later this year and release that data, we won't be able to comment on your last question. And I think for the first 2 parts of your question, I'll pass it over to Paul, and he can decide how much of that he would like to answer.

[Paul Moore, executive]

Yes. Thanks, Ken, and thanks for the question. So yes, so what we'll be presenting is this data using our CD3, CD28 trispecific. So it's a 1-arm CD3, 1-arm CD28 and 1-arm tumor antigen. And as you correctly pointed out, one of those molecules is targeted to DLL3, and we'll be sharing data on that. The attraction of that target for us is that has obviously had clinical benefit with bispecifics, but we feel that gives us a nice benchmark in which to compare our program too. So there are the bispecifics, what additional benefit do you get from adding in CD28 and I think what we'll show is that preclinically, we do see the benefit of adding the co stimulation, and we can enhance efficacy while balancing what was very important for us in the design of this molecule was balancing the potential for any sort of T cell activation independent of engagement with the tumor antigen.

And our engineering team spent a lot of time working on that, working with the position of the CD3 and CD28, so that we only get CD28 activation when we get engagement with tumor antigen and engagement with the CD3. So that really, we think, can overcome some challenges that you see with the CD28 bispecifics, where that sort of dependence of the first engagement of CD3 is not there. So that we really are excited about that. We feel that we've got the right sort of balance there. And now we test against the [indiscernible] with the idea of being that we can benchmark that at least at this point, preclinically against the clinical stage bispecifics, and we'll share some of that data at AACR.

[Operator]

Our next question comes from the line of Yigal Nochomovitz from Citigroup.

[Yigal Nochomovitz, analyst]

Just a question on the 5 new INDs. Obviously, heavy focus on the TOPO1, and you haven't yet disclosed the fifth one, the IND in 2026. Any broad thoughts there in terms of whether that's going to lean more towards another TOPO1 ADC -- are you going to CD3 direction or potentially something else.

[Kenneth Galbraith, executive]

Yes, good question. I think we have 3 ADCs going in the clinic for the next 2 years that are all with our proprietary 519 payload and our philosophy of great antibodies and designing stability the linker. So I think in those Folate receptor Alpha, the NaPi2b and GPC3 [indiscernible] comfortable that, that proves our ADC engineering capabilities against those targets of that payload. And I think we do like the diversity of being both companies who can engineer next-generation ADCs, but also take bispecifics further, which we do in a format which is trispecific.

And so I think we like the 2+1 mesothelin-targeted TCE and I think we'd like to earmark for the fifth one of those. We've not nominated that yet, but we'll do so during the course of this year to reserve that for the potential to show the TriTCE capabilities that Paul has described. So I think that's what we'd like to do. So we would expect that, that 5x5 program ends up being 3 ADCs and 2 [indiscernible] engagers so that we can show the capabilities of the companies on both sides of the R&D lab that we work in and will all be good individual agents on their own, interesting targets, still remain very therapeutically focused in the 3 areas that we seem to be concentrating on, which is thoracic, which can be non-small cell lung cancer or small cell or eventually HNSCC in [indiscernible] cancer, where we tend to focus on ovarian and endometrial cancer at the same time.

And then the third area GI, which uses our GI experience from [ zani ], which obviously, you can see we're adding HCC to that with 251 and eventually hope to add other opportunities in pancreatic and colorectal. So it will be strictly in those therapeutic areas, likely [indiscernible] TCE, but we have not named it yet, and we'll do so later this year.

[Yigal Nochomovitz, analyst]

Okay. And then just more from a strategy perspective as you embark on these 5 INDs, how are you thinking about the development here? Will you take each of these forward to a certain point independently and then consider external opportunities? Or are you going to take them all forward full force in late-stage development yourself. Obviously, it's early and a lot of questions aren't answered, but is there a high-level view as to how you might plan forward with this portfolio of 5 new INDs in terms of maintaining the rights versus partnering?

[Kenneth Galbraith, executive]

Yes. I think the capital plan we put together post the Jazz deal provided the bandwidth to take 5 new agents as we're doing into clinical studies and to get Phase I data to understand clinical validation of what we had thought was a good scientific thesis and developed preclinically. So we definitely have the bandwidth in the capital plan to do that ourselves. And I think we've constructed a very good global early-stage development group, which allows us to focus on doing that in a very nimble way with all 5 of those programs with a high percentage of the patients being recruited outside the U.S., which we think makes it quicker and it is less expensive in the capital plan to do that, but I think we have the bandwidth to do that, but it's obviously everyone that the interest in novel antibody-drug conjugates, especially with the proprietary payload we have and the philosophy you have is of keen interest to potential partners looking to expand in that area. .

And I would say T cell engagers that are novel, like the ones that we have with both the 2+1 format and the CD28 [indiscernible] factor are both of interest as well, growing interest among potential partners. So we need to move forward on our own because we have the ability to do that and get clinical data on all 5 of those. But I think there are opportunities and will continue to see opportunities for us to see the value in potentially partnering on one or more of those programs earlier than clinical data being available, and we continue to have those discussions and understand how that interest can help us broaden our programs, accelerate them, monetize a good value for some of the work we've done, share risk with partners. And so we'll continue to do that while we execute this clinical development program that we've set out with the 5 new INDs over the next period of time.

[Operator]

Our next question will come from the line of Brian Cheng from JPMorgan..

[Lut Ming Cheng, analyst]

On ZW191, can you talk about your latest thinking about the Phase I trial designed specifically, especially around the Folate receptor alpha expression, how wide-ranging could we expect in terms of the expression in the first study? And then I have a quick follow-up.

[Kenneth Galbraith, executive]

Yes. I think for that program, we'll wait a little bit until it's up on clinicaltrials.gov. And I think once you see it there, we'll be happy to maybe explain a bit more around that. Obviously, our approach with ZW191 and the Folate receptor alpha space was to try and find a way to explore that biomarker to its fullest in terms of the breadth of potential indication, targeted patient populations that were available and also to try and find a way to find activity and efficacy regardless of expression level in all of those targeted tumor sites

So that was the design that we had in mind. That's why we optimize the antibody in a certain way. It's why we applied the payload we did, and it's why we took the linker strategy we did. So obviously, in a clinical setting, we would like to explore the breadth of that molecule and its applicability in Folate receptor Alpha to the fullest extent, which means multiple tumor types, regardless of expression level. Eventually, in the Phase I program will work our way to allow us to do that in the dose expansion stage that we have in mind with the cohorts that we have planned.

And I think we fortunately set up a large enough clinical infrastructure globally to be able to explore that fully in a quick nimble, cost-effective manner in multiple countries and many, many sites, which we can expand also to follow that. But beyond outlining the specific cohorts, I think we'll wait until there's public information available on in trials and then revisit that once we're recruiting patients.

[Lut Ming Cheng, analyst]

Okay. And then on partnerships, how should we think about the potential collaboration revenues coming from, any collaboration that you are potentially eligible for over the course of 2024 and 2025. And then on -- we noticed that you have a J&J partnership here on the bispecific in prostate. Can you give us an update on where you are in the Phase I?

[Kenneth Galbraith, executive]

So I think in the second part of the question, that's something that J&J is responsible for, and that's not something that we would comment on. I think for the first part of the question, you're aware from the deal that we announced with Jazz that we have, we're entitled to up to $525 million of milestone payments based on successful approval of zanidatamab in the major territories, Japan, U.S. and Europe. We've not specifically guided on the magnitude of each of those associated with each of those related to PCC or GEA for a third indication or geography. So you'll have to wait until those start to be received and paid to get guidance on those.

But obviously, with the current plan that we understand from Jazz with a successful Phase III readout in GEA and a successful approval in BTC and a confirmatory study underway now in BTC, which might be followable on more of a global basis as opposed to U.S.

We see the potential to earn almost all of those within a pretty reasonable time period. And I think once we start to report those, I think that will fill in a little bit more and more. We can't guide beyond that. So that's how we think about it. With respect to the legacy deals, we've always received some lumpy revenue out of those deals because they're not really in control of them. So we would expect that over the next period of time as some of those programs advance in the clinic, especially the important ones like the Exelixis and J&J as well as some of the other ones, which are going to advance some preclinical into clinical, which is not in our controlled timing, but you'll see additional amounts being paid as milestones against those legacy deals.

And we still have interest from others in accessing the Azymetric program or expanding their current deals, and we'll always consider that it's not the focus of the company today, those additional capital infusions for us could be helpful to continuing to develop on our R&D portfolio. So as we receive them, then we'll report them and we don't really guide on them ahead of time.

[Operator]

One moment for our next question. And our next question will come from the line of Jon Miller from Evercore ISI.

[Jonathan Miller, analyst]

Just to build a little bit on that last bit. Can you confirm which of those [indiscernible] not which, but how much of that aggregates any milestone is included in the current runway guidance? And maybe confirm that there aren't any sales royalties in that runway. And then secondly, I'd love to ask about the trispecific candidate you talked about for the end of this year. Fair to assume based on the fact that you're not announcing what it is and that you've got [indiscernible] at AACR that it's not, in fact, a DLL3 tri-specific coming at the end of the year?

[Kenneth Galbraith, executive]

Yes. I would just say that we have a number of potential programs that we could nominate. So I wouldn't rule out DLL3, but until we formally nominate a program, we would just not provide the guidance. We do like the idea of a [indiscernible] going to the clinic as a part of the 5x5 and be able to show that in the clinic. It will be on target with the therapeutic areas that we've tended to concentrate on right now, which is in thoracic or GI or in gynecological cancer. I think when you have the chance to see the DLL3 data at AACR on the poster around the TriTCE, it's a pretty interesting and compelling mechanism, and we do see something very different with that structure than we've seen with other agents in clinical development, but we're going to continue to reflect on that data, additional data and other opportunities to find what we hope is a good opportunity to prove our TriTCE technology with a clinical agent in clinical studies, and we'll nominate that before the end of this year, but I would not rule out DLL3 from a perspective of it's really interesting what we see preclinically from that mechanism in that target.

And second part of your question, again, there's no -- the cash [indiscernible] always a funny thing to calculate. There's no commercial piece of royalties or commercial milestones in any part of that from the BeiGene deal or Jazz deal or new partnerships. We do as a part of the cash runway, risk adjust that include certain regulatory milestones as we expect that they are more likely to be received than not. So there is a portion in that, which is risk adjusted. But we feel comfortable with the cash runway guidance in getting the second half of 2027 on that basis. And I don't think there's any concern that we can't run the business to get there with the discipline and the programming that we have around the R&D spend. And to the extent that there's any milestone [indiscernible] that cash runway.

But there's a lot of upside. There's no commercial piece in there, and there's a lot of upside in the potential impact of regulatory milestones when they realized in full and the timing that's in the cash runway.

[Jonathan Miller, analyst]

Got it. That makes sense. Kind of one more. I just wanted to clarify your body language a little bit because I feel like I'm getting a sort of both directions here. In the [indiscernible] a couple of times on the call, you talked about the potential for other [indiscernible] opportunities, both this runway expansion as a potential opportunity to drive the platform forward. You've also spoken about having a lot of optionality in terms of the preclinical assets that you haven't yet nominated, but it also seems like you are focused on finding good internal pipeline of focus there more than on those legacy deals where you were doing discovery work for other folks.

So I just wanted to get a sense for your willingness and plans on advancing those other preclinical things that you don't pick to move forward internally and out-licensing [indiscernible] finding partners for them more rapidly than your guidance on the internal pipeline would seem to suggest. Is that something that's on your radar or not as much priority?

[Kenneth Galbraith, executive]

Yes. It's very much on our radar. So I think we've tended to be pretty active on partnering discussions up and down the portfolio and whether that's with [indiscernible] whether it's with the 5 x 5, whether it's the earlier stage pipeline opportunities beyond the 5 x 5 and a combination of all of those, and I think we like to have discussions just to understand what the optionality is. We definitely have the capital plan to continue to finance a pretty good R&D portfolio on our own as we go forward. I'm very cognizant of the fact that I think with respect to [indiscernible], if you go back in history, I think that the company could have accelerated some of the [indiscernible] developments, broaden out the clinical applications and been more competitive if they had partnered sooner than we did with Jazz.

And obviously, we're quite happy with the Jazz partnership, it's a good part of the terms were, I think, in excess of expectations. But I think the company had an opportunity back in 2020 and 2021 to partner sooner, which I think would have helped competitiveness, especially in a world where Daiichi partnered with Azy and created a much bigger competitor in the HER2-targeted space. And so I think we're always in a position of wanting to move forward in ourselves because we can, realizing there's interest from a number of parties to work with us on specific assets or a broader collaboration and just understanding how that partnership could allow us to create more value than we could ourselves and sometimes it's accelerating or broadening or picking up some timing. .

I'm also aware of a year ago in the ADC space, if you ask as we compete with that would be [ T-Gen ] Aminogen, Ambrx. Quickly a year later, those have almost turned into Pfizer, AbbVie and J&J. So we just need to be cognizant of, I think, something we could have done with [indiscernible] to put it in a better position didn't. And I think we've made a nice recovery of that with our relationship with Jazz.

But I think we just always think about how a partner can help us move our development forward in a broader and more accelerated way that might be something we can't do on our -- on our own. And quite frankly, with the interest there is now in ADCs and T cell engagers broadly and our platforms to create other agents beyond that. There's some interesting optionality for us to make those decisions to go alone ourselves longer to partner specific assets, to partner some assets and keep US rights in partner next U.S. bases, do something broader around a series of ADCs as Daiichi did with both AstraZeneca and Merck. And I think it's our duty as management to make sure that we're actively understanding what those options are and inviting partners to let us know how they could work with us to make us -- put us in a better position from a competitive standpoint.

And we'll continue to have those discussions. And as with Jazz only make the right deal at the right time with what we think is the right partner and make sure we exceed our own expectations of what that transaction looks like and helps us, if I can give that guidance.

[Operator]

Next question will come from the line of Derek Archila from Wells Fargo.

[Unknown Analyst]

This is Adam on for Derek today. So maybe just on the rolling DLA submission for [indiscernible] in second line [ DTT ]. Can you walk us through what has already been submitted, what remains to be submitted and the timing around those steps? And then with the accelerated approval path, would this potentially put approval sometime in late 3Q, early 4Q of this year. If so, is there an opportunity to launch in the U.S. before 2025?

[Kenneth Galbraith, executive]

Yes. Thanks for the question. I can provide the guidance that Jazz has provided. So they started the rolling submission before the end of last year. They haven't been specific about which modules were started with. One of the obligations prior to completing the submission was to get the confirmatory study in BTC up and running. And if you go on clinical trials, you'll see it -- it was there. Starting last week, so you can see the nature of the confirmatory study, you can see that they're starting to actively recruit at sites. So we -- and we'll continue to see more sites build with that.

They've guided that they will complete the rolling submission during the first half of this year. And when they've done that, we'll let them announce that they've done that. Obviously, we would need to wait for the submission to get accepted to understand if it qualifies for priority review, which we would expect it would, but that's something we need to wait for the termination and that would obviously determine the PDUFA date, as you've seen with some recent submissions -- some of those happen on a more accelerated basis well in advance of the PDUFA date.

And this is clearly an area where in this patient population, second-line [indiscernible], there is no HER2-targeted therapy and we expect the data set, while small, was very compelling. And so we would hope that would be a subject of a timely review, but that's obviously up to JAZZ to provide the guidance as to when the submission is complete and for FDA to provide guidance on the nature of the review and the PDUFA date and then undertake the review. So we're quite comfortable with Jazz's execution on this and their speed, and I think they're prosecuting this in the right way in the U.S. And with respect to China, BeiGene has guided that they will complete their submission in the second half of this year. And then obviously, we have the Phase III readout from the first-line GA study with [indiscernible], which top line data will be available this year and a positive subject of supplemental BLAs and more global filing for [indiscernible] around the world beyond BTC.

[Unknown Analyst]

Great. And then maybe just one on the HERIZON readout in late 2024. Just for clarity, will this include data from all 914 patients? Or will this only be data from the original 714 patient target enrollment.

[Kenneth Galbraith, executive]

Yes. So the PFS endpoint is still based on the original patient population, which was 714 patients, and there was a predefined number of events to look at the PFS endpoint, and that has not changed from the original design that was made available some time ago. Jazz did add 200 patients to the patient population for the OS endpoint readout only. And the requirement there is to ensure that those patients are fully enrolled before the PFS endpoint is unblinded. So the PFS number of events will be based on the 714 patients and the events. If there are -- obviously, the safety will include all the patient's efficacy will be based on the 714 patients and number of events for PFS, and the other 200 patients will be important only for the OS endpoint. .

[Operator]

[Operator Instructions] And there appears to be no further questions in the queue. I'd like to turn the conference back over to Ken for closing remarks.

[Kenneth Galbraith, executive]

That's great. Thank you. Thank you for your time and attention, everyone. I think we're making really good progress in 2024, and we expect a really exciting rest of 2024 year. We really invite you to join us at AACR and have a look at our posters and have some high-quality signs there and a number of areas, and we're really excited to be able to report that to you at AACR and look forward to seeing you all at again, future medical meetings or investment conferences. As required and providing more progress at our next quarterly earnings update or before then. So thank you for your time and attention and look forward to talking to you again.

[Operator]

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