Hello. Thank you for standing by. This is the conference operator. Welcome to Zymeworks First 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. You may begin.

Thank you, operator. Good afternoon, everyone and thank you for joining our third 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 Leone Patterson, our Executive Vice President and Chief Business and Financial Officer. Leone joined our leadership team in September 2024 and today Leone will be discussing recent corporate updates along with financial results for our third quarter 2024. Following this, Dr. Paul Moore, our Chief Scientific Officer, will talk about key highlights for our third quarter, including the initiation of a first patient dose in the Phase 1 trial of our first bispecific 2 plus 1 [ph] mesothelin T cell engager ZW171. At the end of the call, Leone, Paul and Ken Galbraith, our Chair and CEO, will be available for Q&A. As a reminder, the audio and slides from this call will also be available on the Zymeworks website later today. I will now turn the call over to Leone.

Thank you for the introduction, Shrinal, and thank you all for joining us today. I'm very pleased to have joined the Zymeworks team at such a pivotal time of growth and at a time when we are on the cusp of many exciting developments still to come as you close out the rest of 2024 and a series of new developments anticipated in 2025 which underpin our long-term growth strategy. I look forward to talking more about these milestones as we continue to execute on our R&D pipeline and corporate objectives. If you could now turn your attention to slide five where I will touch on recent key achievements across our development program. Starting first with our wholly owned pipeline, we received FDA clearance for our IND applications for both ZW171 and ZW191 in August this year. Since then, over the past few months, our global clinical development team has been working very quickly and efficiently to enable dosing of the first patient with ZW171 as part of our global Phase 1 clinical trials. Later, during today's call, Paul will provide more details on the clinical trial design for ZW191, as well as providing an update on the progress we have made in the clinical development of ZW171 across North America, Europe, and the Asia-Pacific region. We also had the opportunity to present more promising preclinical data on our wholly owned pipeline at the ENA conference earlier this month in Barcelona for both ZW220 and ZW251, which Paul will go through in more detail later in the call. These preclinical data highlight the transformative potential of our novel approach to designing ADCs utilizing our proprietary payload 519 and highly differentiated antibodies, and we look forward to updating on the anticipated IND filings for both ADCs in 2025. Moving on to…

Thank you, Leone. So I'd like to start off by talking about some of the preclinical work Leone mentioned earlier in the call, which we presented last week at the ENA conference in Barcelona. For ZW220, we were pleased to share data which demonstrates that 220 exhibits robust activity across a wide range of NaPi2b expression levels in vitro and then showing also significant antitumor efficacy in patient derived xenograft models of ovarian, endometrial and non-small cell lung cancer. In these preclinical models, 220 was highly active at a single dose of 6 mg per kg across the models tested. In these studies, we evaluated between four and eight models per indication and based on tolerability data, the 6 mg per kg is actually considered a conservative dose for 220, suggesting room for dose optimization in future preclinical studies. Importantly, 220 also displays bystander mediated killing activity as shown in this slide in two different in vitro models. First, on the bottom left of the slide we observe bystander activity against the NaPi2b negative cell line in a classic 2D culture model system with 220 which incorporates our proprietary Topo1 payload at DAR4, demonstrating bystander activity comparable to that observed with version of 220 incorporating DXd at DAR8. Furthermore, 220 also effectively inhibits the growth of heterogeneous NaPi2b expressing 3D spheroid models comprising a mix of NaPi2b positive and NaPi2b negative tumor cells. This demonstration of strong bystander killing in vitro we believe is a critical attribute of 220 when targeting tumors with potentially non-uniform expression of NaPi2b. Our ADC also demonstrates a well differentiated safety profile. Compared to higher potency Topo1 inhibitor ADCs such as dosing incorporating Exatecan, 220 has shown a more favorable safety profile in preclinical toxicology studies with a maximum tolerated dose of greater than 90…

That's great. Thank you, Paul. I'm very pleased with all the progress we've made so far this year, and we're only just getting started on the clinical development for some very interesting targets in patient populations with significant unmet need. With that being said, there's still plenty more time left in 2024 and we plan to make full use of this time to continue building on our momentum so far this year and complete a few more significant pipeline events before the end of the year. First, I also share in Paul's enthusiasm for updates we plan to make during our upcoming R&D Day in December, where we'll officially nominate our new Trispecific T-cell engager product candidate. This nomination is a significant milestone for us to complete the 5 by 5 portfolio almost two years ahead of the initial schedule and certainly highlights the continued growth and diversification of our pipeline as we expand our new modalities and novel treatment approaches. In addition to some of these updates, I also want to highlight that our partner Jazz has initiated a pivotal Phase 3 trial named EmpowHER, evaluating zanidatamab patients with HER2-positive breast cancer whose diseases progressed on previous T-DXd treatment. This is a major step forward in potentially bringing new potential treatment options to patients with metastatic breast cancer. Internally, we're extremely proud of the potential impact zanidatamab could have for patients across multiple tumor types in oncology based on the breadth of clinical activity seen today, which really showcases how this targeted therapy is able to bind to HER2 and kill tumors with a very unique mechanism of action. Having discovered and developed zanidatamab at our labs in Zymeworks, our teams have been taking some learnings from the screening, optimization and clinical development of this unique bispecific antibody and…

Thank you. [Operator Instructions] Our first question comes from the line of Stephen Willey with Stifel. Your line is open.

Yeah. Good afternoon. Thanks for taking the questions. Maybe a couple for Paul and/or Ken. With respect to the ongoing Phase 1 trials for 171 and 191, just curious how you're thinking about dose optimization? Are you going to be backfilling specific dose levels in the escalation phase to generate the exposure data, you need to select a Phase 2 dose for expansion, or do you think it's more likely you'll be carrying two doses forward into the expansion phase? And then I just have a follow-up.

Yeah. Good question, Steve. I think the way we think about it is in the dose escalation phase, we hope to really have a chance to have a good high-quality set of patients with diversity around tumor types, diversity around expression levels that really let us understand the tolerability profile. And that's both for 171 and 191. I think our expectation is that in addition to backfilling and having a chance to explore some alternative doses in dose escalation, we're likely going to have to move forward into the expansion cohorts and optimize more than one dose in specific cohorts, maybe one or maybe two of those cohorts. But I think it's really necessary to do that so that by the time we leave a Phase 1 study, we have a very clear understanding of the tolerability profile and a very clear understanding of the optimum dose to take forward. I think we've seen examples of other companies who have tried to accelerate or maybe go a little too fast in that process. And then again, that doesn't help you accelerate to a registration study or accelerate to a potential filing or approval pathways. I think we've given ourselves a pretty big clinical footprint in Phase 1, as you've seen from 171, 191 geographically, a number of sites that should allow us to quickly recruit and study a pretty broad range of patients. If you look at the target patient populations we have for both 191 and 171 on Phase 1. So, I think we can move very quickly at the same time, make sure we collect enough patient data to be very clear about the tolerability profile, very clear about signs of activity, and very clear about the optimum dose that we want to take forward and not leave Phase 1 with any of those questions unanswered.

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

Yeah. No, thanks, Stephen. And thanks for pointing that out -- about the careful design that we've incorporated in the preclinical data that supports that we have this flexibility to hopefully have a little bit more therapeutic index than potentially others with different design. I think regarding combination strategies, we're pretty much thinking about that for all three programs, because we do hope that we will be able to move up in earlier lines. So, I think we're thinking quite broadly there. We don't particularly specify one over the other. I think for all three we're thinking that way. Obviously, in the treatment paradigm of the disease indication that you're going against that that will drive the specific combination partner molecules. So, whether that's VEGF inhibitors or PARP inhibitors in the context of ovarian cancer or PD1 inhibitors in the context of non-small cell lung cancer, those are the types of combinations that we're thinking about and we think are compatible with the design strategy that we have.

All right. Thanks for taking the questions.

Thank you. Please stand by for our next question. Our next question comes from the line of Akash Tewari with Jefferies. Your line is open.

Hi, thank you for taking my question. This is Phoebe on for Akash. Just one on Xani. The DESTINY-Gastric03 study in HER2-positive gastric cancer is reading out in July of 2026, but it's being studied with chemo and/or immunotherapy and just wondering how you view this regimen and if it's a threat to Xani at all. Thank you.

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

Thank you.

Thank you. Please stand by for our next question. Our next question comes from the line of Yigal Nochomovitz with the Citi. Your line is open.

Hi, guys. This is Ashiq Mubarack on Yigal. Thanks for taking my questions and appreciate the update today. I had one on how we should be thinking about timelines to data or maybe more generally your philosophy about data sharing related to the holly owned pipeline, especially the lead mesothelin and FR alpha programs. I'm just wondering if we should be expecting maybe an early look at the dose escalation cohorts or if your philosophies more are going to be along the lines of generating a robust dose escalation package or maybe even expansion package before sharing that data with us.

Yeah. Thanks for the question. I think we do have a very specific philosophy obviously -- undertaking these first two Phase 1 studies for 171 and 191, you can see that we do have the advantage of very tolerable molecules based on preclinical data which allows us to have what you might think is a higher starting dose than you might have seen with other agents in similar classes. And that's obviously an advantage to try to go more quickly to an active range while studying the tolerability profile. We also have very broad global footprint with many active sites that we're bringing online now, which again allows us to hopefully not only collect a quality and diverse dataset of patients across the population we want to study, but also do that on a very timely basis. That being said, we've not given any guidance to where early data will be given, and I don't think we'll do that until we're comfortable that we have a large enough dataset to make some conclusions about the dataset and the product that we'd like to share in a peer reviewed scientific or medical meeting, which is where you'll see it all, not by a former press release or investor call. So, once we feel comfortable, we've got a data set that we'd like to share and likely that we've had an abstract accepted, then I think we're quite comfortable sharing publicly that we're going to share that in a scientific medical meeting. Obviously, seen recent examples of companies who can do that quite quickly. And again, it depends on how quickly we can recruit patients, what that data tells us and what conclusions we'd like to share with the scientific and medical community in a peer reviewed manner. And so, I think we won't provide guidance until we're a little more certain about the timeframe to do that. But please be assured we're trying to collect a quality, diverse, substantial dataset in Phase 1, including dose escalation. And if we do that well and timely, there might be a lot that we can understand from the drug at a very early stage. And then we're happy to share that with the scientific medical community that understanding as quickly as we can.

Got it. That's very helpful. And if I could ask one more, apologies if I missed this. But as I recall, the stock repurchase program allows for up to $60 million, unless I'm mistaken. And with the sort of $30 million -- first $30 million tranche already done, I'm just wondering how you're thinking about deploying the second $30 million, if that should be expected maybe over the near term, or if that'll be more over a multiyear horizon, depending on market conditions and so on.

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

Got it. Thanks very much.

Thank you. Please stand by for our next question. Our next question comes from the line of Brian Cheng with JPMorgan. Your line is open.

Hi, team. Thanks for taking our question this afternoon. And Leone, congrats on joining the team. Maybe just one related to the ongoing Phase 1 for 171 and 191. Can you talk about some of the criteria that you'll be looking for in terms of efficacy before moving into larger expansion stage? And I might be asking this question a little bit earlier, but could we be expecting some clinical data at your R&D Day in December? And I have a follow up. Thank you.

Yeah. Thanks for the question. Again, we haven't given any guidance as to whether -- when to expect clinical data for 171 and 191. We are interested because these are Phase 1 studies in understanding the tolerability and adverse event profile and that obviously takes some work in moving up in doses to understand adverse events as relate to the dose response. I doubt that's going to be in place by the time we get to our R&D Day. And it was not the intention of the R&D Day to share initial data 171, 191 we -- these are adverse -- tolerability studies. So that's the most important factor for us to understand that. Obviously, we look for signs of clinical activity, especially at doses that we think are more optimal for activity. We think a very important factor, especially with T-cell engagers, is the ability to drive a much more durable response than maybe you see with chemo and also with some ADC. So, understanding not only the ORR, but also DOR is extremely an important factor. And we have seen instances of where a very high initial response doesn't end up being durable for the patient population. So having an understanding of that takes a little bit more time potentially. So, I doubt you'll see anything at our R&D Day. But I think once we have enough data to tell us something and inform us about tolerability, adverse event profile, initial activity, and at least some idea of durability, which requires a little bit more follow up than maybe you see from some early dose escalation interim disclosures, then we're happy to share that in a peer reviewed meeting. And when that happens, we'll follow our data and obviously, make it public when we think we're in a position to share that data. But I don't think as you come to R&D Day in December 12th expecting to see initial clinical data in 171 and 191.

Okay. And then maybe just one more heading into the BTC's PDUFA date next month and GEA's top line next year. Just from a modeling perspective, how should we think of your partnership revenue near term?

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

Great. Thank you.

Yeah. Thank you.

Please stand by for our next question. Our next question comes from the line of Jon Miller with Evercore ISI. Your line is open.

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

No. Thanks for the questions. I'll pick them both. So, I think respect to the share repurchase program, I think we carefully consider this before we initiate the first $30 million in August. I think we've been able to retire a little more than 2.5 million shares out of the cap table, which I think can provide a total shareholder return not just immediately, but over time. So, I think we still feel very strongly that we were able to achieve that objective despite the -- obviously the increase in our price during that timeframe. I think we still feel that some of the elements related to our decision to do that still exist. We still believe that although we've had some appreciation since August in the share price, that we still feel very undervalued compared to what we believe the long-term value for the company is. And what we see inside it reflects our confidence in the future outlook of our business, potential of not just Zani, but our wholly owned product candidate portfolio. And I think the long-term value of even our further preclinical development pipeline, which you hear more about at R&D Day. I think the repurchase program is obviously one component of the overall capital allocation strategy we need to think about. I mean ideally first we need to make sure that we sufficiently fund the core business that we have, of all the exciting R&D opportunities we have inside the company. That's always our first priority. I think if we do see opportunities to also provide some upside of total shareholder return, we are required to look at that and consider it. But I think we've accomplished the objectives we had. I think we, obviously, have the ability at any time to go ahead with…

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

Yeah. Thanks, Jonathan. Yeah. No, thanks for the opportunity to clarify. So, I think in our design and our thinking, we really do value the importance of the front end of the antibody and its ability to recognize target and internalize. So, we do take quite a lot of care and we really value that aspect of the ADC. But we also appreciate that within the tumor microenvironment, not all the tumor cells are going to necessarily have high expression. And so that's where things such as bystander activity are also a very important contribution to the mechanism. And then beyond that, within the ADC field, there's also the chemo effect that you can also get from the design of your ADC and getting that balance between the potency of that ADC, that payload, as well as the release of that payload at a tolerable pace is very much also baked into the design of our features. So, we can get the on-target effect, we can get bystander effect, and then we can potentially get some chemo effect as well. And that's how we try and factor that all into the design. And then it's also balanced by the DAR and then the tolerability profile where you're getting. You don't want to run into issues of intolerability that others have seen with the higher potency payloads.

Thank you. Please stand by for our next question. [Operator Instructions] Our next question comes from the line of Derek Achila with Wells Fargo. Your line is open.

Hey, guys. Thanks for taking the questions and congrats on the progress. Just two quick ones from us. I guess, first, what do you plan to cover at the R&D Day in terms of potential expansion into autoimmune disease? I guess, is there going to be a discussion around certain targets of interest? And then second question, just in terms of your target selection process for the Tri T-cell engager, I guess maybe just run us through that. And what type of preclinical data might you highlight at the R&D Day for the development candidate you plan to nominate next? Thanks.

Yeah. Maybe I'll let Paul answer both of those if he wants. Whatever order you want.

Yeah. Yeah. Sure. Yeah. So, I think, Derek, the first question was the scope of what will present on the autoimmune programs. And as we mentioned before, we see great opportunity for bispecifics, our technology in the autoimmune space. And we do have certain specific programs that we're pursuing. So, we will be talking -- our plan, our anticipation is that we will talk about specific programs in addition to where we can take the technology and moving forward even beyond that. So that will cover the autoimmune space. And then on the Trispecific T-cell engagers, they are -- we have different toggles that we can pull on the design sort of the most in the Trispecific space. I think the one that we've been talking about most and you're most familiar with is the CD28 CD3 Trispecific platform or TriTCE Co-Stim. And there -- when we're thinking about the target there, we do appreciate that we want targets that have a profile that is more biased towards tumor expression and less normal expression. So we do appreciate there you have to take care. But the way that we've designed that molecule differently that others have thought about with deploying CD28 is that our CD28 engagement only occurs when you have the CD3 engagement and you have engagement of the tumor target. So, in some ways we're not really that different. Even though we've got that extra punch on the CD28, we're not really any different than how others think about target pairing with T-cell engagers. Of course, we have advances and we have things we think we can improve the therapeutic window moving forward. But for initial targets, we like very much the targets that we've already shared, the DLL3 and the CLDN18.2. We think the tolerability profile has been very encouraged to us as we've progressed those through preclinical development. So hopefully that answers it. We certainly are thinking about targets beyond those applications, beyond those as well. But again, it really depends on the platform that we're leveraging and somewhat the profile of the target antigen as it fits into that platform.

Got it. Thank you so much.

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

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

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