Thank you for standing by. This is the conference operator. Welcome to Zymeworks Second Quarter 2024 Results Conference Call and Webcast. As a reminder, all participants are in a listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions] I would now like to turn the conference over to Shrinal Inamdar, Director of Investor Relations. Shrinal, please go ahead.

Thank you, operator. Good afternoon, and thank you for joining our second 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 the accompanying oral commentary. Forward-looking statements are based on 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 part of the SEC. In a moment, I will hand over to Bijal Desai, our VP of Finance and Strategy, who will be discussing recent corporate updates, along with our financial results for the second quarter 2024. Following this, Dr. Paul Moore, our Chief Scientific Officer, will talk about key highlights for our second quarter, including the investigational new drug application therapies, ZW171 and ZW191 by the FDA. At the end of the call, Bijal, Paul and Ken Galbraith, our Chair and CEO, will be available for Q&A as well as Pranshul Chauhan, Associate Medical Director for early-stage development for ZW171. As a reminder, the audio and slides from this call will also be available on the Zymeworks website later today. I will now turn the call over to Bijal.

Thanks, Shrinal, and thank you, everyone, for joining us today for our second quarter 2024 earnings call. I will begin today's call with an overview of key achievements from our development programs as well as our financial results. In the second quarter, we achieved key milestones regarding the global regulatory review of our late-stage assets, zanidatamab, including being granted priority review of the Biologics License Application, or BLA, for zanidatamab as second-line treatment for biliary tract cancers or BTC, in the United States with a target action date of November 29, 2024. Similarly, the European Medicines Agency has validated the marketing authorization application for zanidatamab in second-line BTC and regulatory reviews for zanidatamab in BTC remain underway in China. We are pleased to have received a milestone payment of USD8 million in July under the terms of Zymeworks, Asia Pacific license and collaboration agreement with BeiGene in conjunction with zanidatamab BLA acceptance in China. Our partner, Jazz has confirmed that the pivotal Horizon GEA-01 trial evaluating zanidatamab in first-line gastroesophageal adenocarcinoma or GEA is ongoing, and enrollment remains on track. Based on a blinded assessment of progression events, Jazz estimates top-line progression-free survival or PFS data will be available in second quarter 2021. Jazz continues to track events in the trial relative to the initial protocol assumptions. Near-term, we look forward to a potential approval for zanidatamab in second-line BTC in the United States and based on the expected timeline and subject to approval, Jazz is aiming to launch zanidatamab in the United States for second-line BTC in the fourth quarter of 2024. Together with our partners, we look forward to opportunities where we can continue presenting promising data that support deep and durable responses, further highlighting zanidatamab's potential to provide meaningful benefits for patients. This includes the first ever…

Thank you, Bijal. So today, I'm delighted to be talking about our growing oncology pipeline, which is currently built on two fundamental pillars: modality focus and therapeutic area focus. To date, we have targeted three areas of high unmet medical need, ecological cancers, lung cancer and cancers of the digestive system, while balancing EDP and T cell engagers across these various therapeutic areas. We believe this approach ensures both the broad and comprehensive coverage of these challenging diseases. Moving forward, as we continue to progress with the development of our early-stage assets, we believe that expanding on both our modality and therapeutic areas of focus will be key in driving the growth of our pipeline in the coming months and years. This includes leveraging our deep technical expertise to combine and adapt various modalities with the aim to improve patient outcome. You will hear more about that on our plans for growth and expansion later in the year, including the nomination of our fifth product candidate, a trispecific T-cell engager or TriTCE. Our strategic balance of wholly-owned ADCs and T cell engagers targeting clinically validated antigens like folate receptor alpha, NaPi2b and mesothelin underscores our commitment to delivering innovative treatments that meet the highest standards of care, not only as monotherapy but also in combination with agents that have already shown previous activity and benefit. ZW171 and ZW191 are both designed to optimize efficacy starting with its election targets with the highest level of expression. As you can see here, across ovarian cancer, mesothelin fol receptor and NaPi2b are expressed at relatively higher levels compared to other targets such as [indiscernible], providing a broad and comprehensive coverage of ovarian cancer, something which also holds in non-small cell lung cancer. We believe that the relatively high tumor expression levels are crucial…

That's great. Thank you, Paul. We're excited to see how our data-driven approach for designing and developing both ZW171 and ZW191 translates into our respective Phase I studies, and we remain dedicated to advancing transformative therapies with IND submissions for ZW220 and ZW251 in 2025, as well as nominating our tri-TCE product candidate later this year. On another business update, we're pleased to announce the appointment of Leone Patterson as Executive Vice President, Chief Business Officer and Chief Financial Officer effective September 1st. Ms. Patterson brings more than 20 years of public company biotech experience with a proven track record of guiding strategy, finance, operations, and government through multiple phases of growth. Leone's expertise in planning and executing successful financial strategies will be key as we continue to plan for the next period of growth and expansion for the company. We're pleased to announce that our partner, Jazz, has initiated the Phase III EMPOWHER, trial, which is designed to evaluate zanidatamab in combination with chemotherapy after progression on INHERTU, where there's an opportunity for zanidatamab to be the first HER2-targeted therapy to demonstrate efficacy and safety in breast cancer patients after INHERTU treatment. Together with our partners, Gaz and Beijing, we look forward to sharing more data on zanidatamab's efficacy this year during peer-reviewed medical meetings where we can further validate zanidatamab's potential to improve the standard of care for these patients. We're also looking forward to the pivotal Phase III readout, top-line data readout in our first-line GEA study by our partner, Jazz, to estimate top-line CFS data will be available in the second quarter of 2025. In the near term, we also look forward to an important catalyst, our upcoming FDUFA date of November 29, 2024, for our zanidatamab filing in second-line BPC in the United States. Before…

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of Stephen Willey at Stifel. Stephen your line is now open.

Yes, good afternoon. Thanks for taking the questions and thanks for getting 171, 191 in the clinic. Just wondering if you can speak to the levels of testing and fully receptor help expression that you're acquiring at baseline for the Phase 1. What are the IHC cut-up values that you're requiring for both? And then is there anything that you might be able to say about the starting ZW171 dose, the cadence of any step-up dosing you'll be using and any requirements for inpatient administration? Thanks.

Sure. Thank you, Stephen. Maybe I'll ask Pranshul, who's the Global [indiscernible] for ZW171 who wants to answer some, but maybe not all of those questions Stephen.

Hi Stephen. Thank you for your question. I can share with you what the key available on clinicalstrials.gov. To start off, I think you asked about the expression levels of [indiscernible] and folate receptor Alzheimer studies. Initially in our dose escalation phase, we'll be analyzing expression levels prospectively. So, there's no cutoff as such as some of these are yet to be validated for [Indiscernible] for example. Your second question regarding dosing strategy, this is something that we haven't made available publicly yet. However, we do intend to explore various dosing formats of ZW-171 in clinic. And your -- what was your last -- these would be questions, Stephen, sorry.

Just a question of any starting to step-up dosing and then any inpatient administration requirements?

The starting dose is something we haven't shared publicly yet. There will be requirements for inpatient in small subset patients during the dose escalation phase, and this is mandated by regulatory requirements in our discussions with the regulatory bodies. However, we do intend to work at different strategies for dosing, where we will explore dosing with hospitalization requirements later on in the study.

Okay. Could I just ask a clarification question, so just -- so that I'm clear? On the mesothelin side, and I guess maybe even on the folate receptor alpha side, you will be enrolling tumor types that you know to be enriched for expression of each of these target antigens and then you'll be retrospectively looking at expression levels via IHC?

Exactly.

Okay. Thank you for taking the questions.

Thank you.

Thanks Stephen.

Thank you. Our next question comes from Yigal Nochomovitz from Citi. Yigal, your line is now open. Q – Unidentified Analyst: [Indiscernible]:

No, two great questions. Paul, would you like to answer both of those questions.

[indiscernible]: And then regarding your question about using that across three different targets. We feel all of those three targets could benefit within our disease indication from ADCs with this type of payload. And so where our preclinical data supports that when we benchmark it against competitor programs or prior programs, both the efficacy profile and the breadth of patients that we can tackle with this payload balance with the antibody really looks very favorable. So that supports our moving forward in the clinical of all three programs. Q – Unidentified Analyst: Thanks. That’s helpful.

Thank you. Our next question comes from the line of Akash Tewari from Jefferies. Akash, your line is now open. Q – Unidentified Analyst: Hi. This is Ivy on for Akash. Jazz announced yesterday, that data from Horizon G801 was pushed back from late 2024 to Q2 2025. Does that mean that enrollment is progressing slower than originally anticipated? Or is it just related to not enough PFS events getting accumulated as prespecified by the interim analysis protocol? And have you disclosed any of the number of events for PFS to be accumulated for the preplanned interim announcement? Thank you.

Yes. And as to your first question, I think Jazz was very clear on the guidance as in their earnings call because I did listen to it. And they were very clear that enrollment is on track and the delay in unblinded study was related to getting to the required number of events to unblinded study, which is currently targeted in our estimates being Q2 2025. And the answer to your second question is no, there's no disclosure of the actual number of events. Q – Unidentified Analyst: Okay. Understood. Thank you.

Yes. No worries.

Thank you. Our next question comes from the line of Brian Cheng at JPMorgan. Brian, your line is now open.

Thanks for taking our question. This is Sean on for Brian. So firstly, on 171, we saw that the Phase 1 was posted on clinicaltrials.gov. How should we think of the side effect profile based on the target you selected? Just curious if there's any additional preclinical insights that you can share? And how many doses are you evaluating? And I have a quick follow-up.

Paul, do you want to take the first question about the preclinical characterization, the tolerability of mesothelin what might have seen?

Yes. That's a good question because others -- is a target that almost very highly expressed on cancer takes. There is some level of normal expression of mesothelin. And so you have to think carefully about how you differentiately target the tumor with avoiding the normal. And so that's why we spend so much time preclinically trying different formats to get a format that gave us that better window, where we wouldn't have activity on low-expressing models that represent normal tissue levels of mesothelin, but has very potent and doesn't compromise the anti-tumor activity on the mesothelin positive tumors, high expressing. And that we've seen in our preclinical profile, we've taken the molecules into non-human privates. We've done a lot of other valuation of the molecules on regarding safety. And there, we haven't seen evidence of toxicity. Of course, we have to -- going into the claim, we'll have to monitor that. The attention there that's part of the dosing strategies that Pranshul alluded to that we'll be evaluating. But so far, really, we really try to come up with the design of the mode to address exactly what you're asking.

And I'll let Pranshul answer the second question about the number of dose levels planned for the Phase 1 study.

Yes. So we can't evaluate six different levels. This may increase or decrease based on the safety and tolerability profile and DLT evaluation period is 21 days for the study. And -- but we will continue to gather safety and tolerability data as long as the participant remains on trial and there to remain on trial until the toxicity or progression. I hope that answers your question.

I think you had another question, Sean.

Yes. Thank you for the clarification. I just have a quick modeling question. So we saw that the catch run rate hasn't changed. But with Zanizo now discontinued, is there any near-term impact that we should model for the R&D expenses? Thank you.

Yes. There will obviously be a subsequent decline in some of the expenses that would have been related to continue spending on [indiscernible] to complete the plan Phase II study and prepare for our registration study. So that will decline over the next period of time. And again, that's approximately $30 million that was allocated, which coincidentally matches the initial repurchase program from our share repurchase program. So we would expect that, that will be released from future R&D expense, and we'll be using that capital to reallocate to the share repurchase program over time.

Thanks for taking our questions.

You are welcome.

Thank you. Our next question comes from the line of Jon Miller at Evercore. Jon, your line is now open.

Thank you very much for taking the question. I'll start on the deal program. I know you mentioned you'll be looking at mesothelin expression retrospectively in some of these patients. I guess, what are your expectations for those mesothelin negative patients, presumably there would be an absence of expected activity there. But does the absence of sufficient antigen, I know you said you don't see tax from a sales perspective, a normal expressing intention, but can you drive CRS or T cell exhaustion by circulating T cells if you don't have a good antigen sync to sop up the bispecific to the tumor itself. And sort of separately, maybe relatedly, you note in the slide that you have a potency even in the presence of soluble mesothelin and I'd love to get a little bit more color on that. Is that driven by the blending mode? Do you not buy in [indiscernible] or is there something else going on that's helping you maintain activity.

Thanks, Jon. Paul, do you want to address both of those questions for mesothelin?

Yes. Sure. So maybe on the first question about patients that you wouldn't have mesothelin target or it would be limited as possible. I mean, my most of the tumor types that we're going in to have some level of mesothelin. So we would probably not think as possible, unlikely, but you're right, it period happen. And I think then with your question about the that then leading to potential deleterious effects through T cell exhaustion or having a negative part of the design, consistent with other T cell engagers as well, but we also make sure on 171, you don't get T-cell activation, the interaction that we've got with the CDC is very low affinity, and it's not -- it requires first that you coengage 2, binding sites on mesothelin to really set the molecule down the mesothelin target population, and then you engage the CD3 and then that gives you the activation. And that's pretty comprehensively looked at. So I'm not so worried about that being a negative effect. The other part about the soil mesothelin there, we tested that in vitro and you basically just combined with mesothelin and there's -- there's very limited impact on the killing and you can still get to maximum levels of killing. And I think, again, that there is partly visibility-driven effect that we have and the fact that to get any impact on activity, you really need to be launched or binding to a cellular surface as opposed to a soluble protein. So that -- happy to share more data on that with you and discuss it further join. The data speaks to that and support that mechanism in...

Make sense. I would love to talk more about the detail there, but not on the Q&A session here. I guess -- can I ask a follow-up on the folate receptor alpha program. One of the things you said in the prepared remarks was that you were specifically looking for a payload that would support a higher antibody dose. And I guess I'm curious why that's intrinsically valuable, given that blocking FRα isn't in itself affected. So what's the benefit to giving a higher dose versus a lower dose, if aggregate payload toxicity is similar?

Yes, it's a good question. I think there's -- there partly the thinking is that the higher the dose that you can get into a patient, the more chance you've actually got of getting the drug to target. So you may be aware that lower doses you've got just to penetrate through into the tumor, only 1% to 2% of the antibody actually gets to site. So the higher dose you've got in a patient, the more than you've got getting a threshold level of antibody ADC into that tumor. And that also gives me an opportunity to also promote as well. That's why it's so important on the front end of the antibody as well. That's why we bring up this point about us having better on canalization, because you also want what does get to the tumor to also internalize there efficiently. So that's where our thinking on the design there is. And by having a more moderate tailor or potency similar to DXD that allows you to get that higher dose into a patient so that you've got that better amount of drug that can then get to tumor.

Makes sense. And then I guess one final one on the share repo. I guess I'm just curious about this as a use of capital given expectations for 5-plus programs in the clinic and a very -- obviously, a very active drug discovery effort, is there really excess capital at this point to return cash to shareholders versus driving value through clinical development?

No, good question. I think if you look at our current operations now, obviously, ZW171, ZW191 are going very fast and are well funded, ZW220, ZW251 are on schedule to go into the clinic next year. They're well funded beyond that, the fifth indication and what's in Paul's portfolio behind that, which we call advanced right now is well funded and moving forward. So we think we're adequately funding all the opportunities we have in front of ourselves and are quite happy with the level of R&D investments. Strategically made the decision to claw back the capital allocation we had for Zani-Zo to complete the Phase 2 and prepare for a registration study for the reasons we outlined. And that happens to provide about $30 million of cash, which doesn't need to be allocated to the remaining portfolio 5x5 or Paul's advanced portfolio. We've looked for a little while about opportunities that might be outside to use for that capital. But I think right now, the most thoughtful capital allocation we can make with our current valuation, the Catalyst in front of us, the strength of our cash runway, the optimism we have about the outlook being positive going forward is to, again, invest in ourselves, which we think will boost total shareholder return. And we're certainly convinced that a thoughtful capital allocation process as with periodic buybacks and a smart R&D strategy can coexist in a biotech company. And hopefully, that's the way to optimize total shareholder return over the long-term, and that's what we're committed to. And we've seen the opportunity now uniquely to do it in front of some Catalyst in 2024 and 2025 with some cash that we surely think is excess for now. And therefore, we're going to utilize that in a shareholder program to invest in ourselves. And we think that's of a benefit to all of our shareholders. And that's what we've chosen to do.

All right. Thanks very much.

You’re welcome

Thank you.

[Operator Instructions] Our next question comes from the line of Robert Burns at H.C. Wainwright. Robert, your line is open.

Absolutely. Thanks and congrats. Three from me if I may, with regard to 171, from a go/no-go signal perspective in the dose escalation, what are you looking to achieve in particular with regards to ovarian cancer and NSCLC? And would GavicEl [Ph] demonstrated in ovarian chance or be a good reference point for us.

Good question. I'll let Pranshul decide how we wants to answer that question about what we're looking for.

Yeah. Very good question, I think initially, we want to assess the safety and tolerability of our assets. Paul's group has spent a lot of time in a lot of time and thought into the design of the structure. We feel we have a strong candidate that we're bringing to clinic. So the focus would be on a tumor-targeting agent that shows safety and tolerability. So that's the core of the Phase 1 study. We will gather data on efficacy in these tumor types. And these will be measured using reasons criteria to measure our objective response rate. We'll be gathering other data such as PFAS data and OS data, but the fundamental of the Phase 1 study is to focus on safety and tolerability.

Thank you.

Thank you. I'm showing no further questions in the queue, at this time. I would now like to turn it back to Shrinal, for closing remarks.

For closing instructions, I hand back over to Ken for closing remarks.

That's great. Well, thank you very much for taking time today and listening to questions, and we very much look forward to reporting on progress against our milestones for the remainder of 2024. And please stay tuned. And we'll provide some updates on progress throughout the course of the year. Thank you very much.

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