Good day, and thank you for standing by. Welcome to the Zymeworks Third Quarter 2023 Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised today’s conference is being recorded. I would now like to hand the conference to your first speaker today, Shrinal Inamdar, Director of Investor Relations. Please go ahead.

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

Thanks, Shrinal, and thank you, everyone for joining us today for our third quarter 2023 earnings call. With that, I will begin today’s call with an overview of our financial results. This afternoon, Zymeworks reported financial results for the three and nine months ended September 30, 2023. The nine months ended September 30, 2023, Zymeworks’ net loss was $104.2 million, or $1.53 per diluted share, compared to a net loss of $185.1 million for the same period in 2022. The decrease in net loss of 44% was primarily due to revenue from our collaboration agreement with Jazz and an increase in interest income, as well as a decrease in research and development expense. This was partially offset by an increase in general and administrative expense and an increase in income tax expense. Revenue for the nine months ended September 30, 2023 was $59.1 million, compared to $10 million for the same period in 2022. Revenue for the nine months ended September 30, 2023 included $56.3 million for development support and drug supply revenue from Jazz, and $2.8 million for research support and other payments from our partners. Revenue for the same period in 2022 included a $5 million research license fee from our Atreca licensing agreement and $5 million from our partners for research support and other payments. Research and development expenses for the nine months ended September 30, 2023 were $118.1 million, compared to $155.6 million for the same period in 2022. Excluding stock-based compensation and 2022 restructuring expense, research and development expense decreased on a non-GAAP basis by $31.4 million in the nine months ended September 30, 2023, compared to the same period in 2022. This decrease was primarily due to a decrease in expenses for zanidatamab as a result of our transfer of this program to Jazz…

Thank you, Chris. Before I move on to our early stage programs, I’d like to spend a few minutes first talking about data highlights from this quarter on our lead candidate zanidatamab shown here on this slide. Data presented by our partners Jazz and BeiGene at the European Society for Medical Oncology Annual Congress highlight zanidatamab’s continued efficacy and tolerability. Two abstracts were presented. The first described clinical results from the ongoing global open-label Phase 1b/2 study for zanidatamab plus chemo and tisle, an anti-PD-1 monoclonal antibody for first line treatment of HER2-positive gastric/gastroesophageal junction adenocarcinoma. With an overall response rate exceeding 75%, this study resulted in encouraging data for the triplet regimen, with a median duration of response of 22.8 months and a median progression free survival of 16.7 months. The second abstract described quality of life outcomes from the Phase 2b HERIZON-BTC-01 study evaluating patients with zanidatamab treated HER2-positive biliary tract cancers in patients with centrally confirmed HER2-amplified tumors. We previously reported data from this Phase 2b study where zanidatamab as monotherapy in this patient population had a confirmed overall response rate of 41.3% and 51.6% in the IHC 3+ patients, as well as a median progression fee for survival of 5.5 months. As we continue to monitor other development stage candidates for GEA, we have yet to see data reported in first line GEA patients comparable to the Phase 2 data for zanidatamab on chemo with or without a PD-1 inhibitor. We believe the differentiated mechanism of action from our bispecific HER2 antibody zanidatamab is responsible for the encouraging and durable patient responses we have seen in our GEA study conducted to date. Having reviewed the current results from other development candidates, including those presented at ESMO, we believe that the potential for positive outcomes from HERIZON-GEA-01…

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

Hey guys, thanks so much for taking my question. I’m going to start on the new GPC3. I guess we’re seeing some interest there for another CAR T’s especially, but also like radio ligand approaches, TCRs, et cetera. But also Roche failed in the indication. So can you give us a little bit more color on what the opportunities are specifically for an ADC, for your version of an ADC here relative to other modalities against this same target? And then maybe secondly, I noticed that you said this quarter that your runway could extend beyond 2026, and I’m just wondering what levers are on that potential for going beyond 2026? Does that require additional partnerships or milestones that you’re not baking in? What’s new this quarter that’s leading you to think you could push it even further?

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

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

Got it. Makes sense. Thanks so much, guys.

Yes. You’re welcome.

Please stand by for our next question. Our next question comes from Yigal from Citi.

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

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

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

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

Got it. Thanks very much.

Thank you. [Operator Instructions] Our next question comes from Charles from Guggenheim Securities.

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

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

Great. Thank you.

Thank you. [Operator Instructions] And our next question comes from Akash from Jefferies.

Hi, this is Ivy on for Akash. Thanks for taking our questions. We just have one quick question. So how does the Merck-Daiichi data in CDH6 change your appetite to go after FR alpha in ovarian cancer? Thanks.

Yes. No, we saw that data and it looks very encouraging for a TOPO1i-based payload, that data and for ovarian cancer, we have looked at the expression profile of that target, and we feel both the folate receptor alpha and the NAPi2b expression in ovarian cancer and other cancers is supportive of also pursuing those antibody based drug conjugates. So we think that it doesn’t deflect from our motivation and excitement about those targets. We think that the profile is supported, especially when you compare it to the profile of [indiscernible]

Okay. [Operator Instructions] Our next question comes from Stephen from Stifel.

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

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

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

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

Very good. Thank for take the questions.

Thank you. [Operator Instructions] Our next question comes from Brian Cheng from JPMorgan.

Hey guys, thanks for taking my call this afternoon. We spoke a lot about your thoughts around the strategy with your ADCs in the pipeline in the past. When you think about ZW251, I’m just curious, do you see this asset as an asset that you can potentially take it all the way to the finish line or is this asset something that you want to see proof of concept first and then engage a partner to partner it off, given the indication or target? And then on top of that, just a housekeeping question, you’re looking at your INDs that are in the plan with two programs rolling out next year and also to after in 2025. How should we think about your expense trajectory and any color that would be super helpful for us from the modeling perspective. Thank you.

No, two good questions. I think strategically on the portfolio, and we’ve tried to be very transparent about this, so investors can understand the rationale and obviously the prospects of the entire 5 by 5. And it also makes it easier for us to have very open and active discussions with potential collaborators. So you can see that at least with the four agents we’ve nominated now, there is a bit of a therapeutic concentration around both on the ADC and multi-specific side around focused on gynecological cancer patients and also on lung cancer patients. And that’s not unintentional. Those are two areas where we think we could make some strides with the agents we have both on T cell engagers and on ADCs in those areas. I think when you look at other areas that we have experience in with zanidatamab, definitely on the GI side, between GEA and BTC, it made sense for us to look for an opportunity that was consistent with some of our experience. So HCC was a natural thing for us to look at. We obviously look for a less unencumbered and proven space. So I think GPC3 as a target is well understood. But I think we have the first chance to take an ADC approach to HCC with a TOPO payload and we’re excited about that for GPC3. So I think there was some sense that we have some experience in the GI space. HCC is something that we can broaden into a little bit, but we definitely have a concentration in gynecological cancer and lung cancer that when we talk to potential partners about multiproduct collaborations, it’s obviously around those therapeutic categories. HCC is probably the one opportunity in GPC3 that we have the very active interest in collaborating, but probably…

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

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

Great. That’s super helpful. Thanks, Ken.

You’re welcome. Thank you, Brian.

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

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

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