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Presentation

Zymeworks Inc. misses on earnings expectations. Reported EPS is $-0.76 EPS, expectations were $-0.51.

Operator: Thank you for standing by. This is the conference operator. Welcome to Zymeworks Second Quarter 2023 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 Diana Papove, Director, Corporate Communications at Zymeworks. Diana, please go ahead.

Diana Papove: Good afternoon, and welcome, everyone. My name is Diana Papove, Director of Corporate Communications here at Zymeworks. Today, we will discuss our half year 2023 financial results, as well as provide an update on our ongoing business. 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, 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. As a reminder, the audio and slides from this call will also be available on the Zymeworks website later today. Now, I will turn the call over to Chris, our Senior Vice President and CFO.

Chris Astle: Thanks, Diana, and thank you everyone for joining us today for our second quarter 2023 earnings call. I’ll be presenting prepared remarks and participating in the Q&A today. Our Chair and Chief Executive Officer, Kenneth Galbraith; and our Chief Scientific Officer, Paul Moore, will also be available for Q&A at the end of the call. With that, I will begin today’s call with an overview of our financial results followed by a review of a few recent developments and updates across our business. This afternoon, Zymeworks reported financial results for the second quarter and six month period ended June 30, 2023. Zymeworks’ net loss for the six month period ended June 30, 2023 was $75.5 million, or $1.13 per diluted share compared to a net loss of $137.2 million for the six month period ended June 30, 2022.

The decrease in net loss of 45% was primarily due to revenue from our collaboration agreement with Jazz, a decrease in research and development expenses and an increase in interest income, which were partially offset by an increase in general and administrative expenses. Revenue for the six month period ended June 30, 2023 was $42.6 million compared to $7.4 million for the same period in 2022. Revenue during this period included $40.9 million for development support and drug supply revenue from Jazz. Net of a credit issued to Jazz for amendments to our partnership agreement and $1.7 million for research support and other payments from our other partners. Revenue for the same period in 2022 included $7.4 million in research license fees, research support, and other payments from our other partners.

Research and development expenses for the six months ended June 30, 2023 were $85.3 million compared to $118.5 million for the six months ended June 30, 2022. Excluding stock-based compensation and 2022 restructuring expense, research and development expense decreased on a non-GAAP basis by $27.9 million in the first half of 2023 compared to the same period of 2022. This decrease was primarily due to lower manufacturing expenses for zanidatamab and a reduction in development costs. As a result of the terms of our amended collaboration agreement with Jazz, partially offset by an increase in preclinical expenses compared to the same period in 2022. In addition, salaries and benefits expenses decreased compared to the same period in 2022, due to lower headcount in 2023 and lower non-recurring severance expenses.

For the six months ended June 30, 2023, general and administrative expenses were $38.6 million, compared to $27.3 million for the same period in 2022. General and administrative expenses increased by $11.3 million for the six months ended June 30, 2023, compared to the same period in 2022, or a $7.8 million increase on a non-GAAP basis, excluding stock-based compensation and non-recurring restructuring expenses. This increase was primarily due to an increase in professional services expenses, partially offset by decrease in salaries and benefits costs, as a result of lower headcount in 2023 following our prior year restructuring activities. Overall our total employee headcount has been reduced by almost 50% over the last 18 months, from 455 full-time employees as of December 31 2021, to 237 full-time employees as of June 30, 2023.

Our cash resources consisting of cash, cash equivalents and marketable securities were $431.4 million as of June 30, 2023, a net reduction of $60.8 million from December 31, 2022. For the six months ended June 2023, our cash used in operations was negatively impacted by working capital movements, primarily due to higher levels of receivables, which we expect to partially reverse by the end of 2023. During the second quarter, there are a number of financial impacts on our balance sheet due to our amended collaboration agreement with Jazz in May 2023. As of June 30, 2023, we have approximately $46 million in receivables from Jazz, reflecting reimbursement for zanidatamab development costs, which we expect to be reimbursed subsequent to the end of the second quarter.

In addition we received $15.4 million from Jazz for purchase of prepaid expenses for zanidatamab development contracts that will be transferred to Jazz, which has been deferred on our balance sheet as of June 30, 2023 and will be offset against the related prepaids when the underlying agreements are legally transferred to Jazz. Moving forward, the accounting for our Jazz collaboration should be simplified given that the majority of zanidatamab development expenses will be incurred directly by Jazz. Any continued zanidatamab development expenses incurred by us and reimbursed by Jazz will be reflected as a reduction in operating expenses rather than collaboration revenue. We continue to expect further development support and drug supply payments from Jazz which we will continue to be reported as collaboration revenue.

Due to the transfer of a significant number of our employees dedicated to zanidatamab development, to Jazz, we recently decided to vacate our existing Seattle office location and have secured a fit for purpose office facility in Bellevue to accommodate our remaining Seattle based workforce. The majority of the financial impact relates to this decision will be reflected in our Q3 financial results. With the continued focus on the balance sheet and the significant transformative impacts of the non-diluted inflows from our licensing and collaboration agreements with Jazz and BeiGene, we continue to expect to have cash resources to fund planned operations at least the end of 2026 and potentially beyond. As of August 9, 2023, we had approximately 67.79 million shares of common stock outstanding.

During the second quarter, we issued 3.35 million shares of common stock pursuant to our at-the-market facility for net proceeds of $26.2 million. For additional details on our quarterly and six month ended results 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 Now, I’d like to spend a few minutes talking about our recent business highlights. The first half of 2023 is highlighted by several important developments that reflect progress in our product pipeline. Together with Jazz, we presented full clinical results from our Phase 2b study of zanidatamab monotherapy in previously treated HER2-amplified biliary tract cancer at the American Society of Clinical Oncology Annual Meeting in June in Chicago.

We also announced our next expected investigational new drug application candidate ZW220, a NaPi2b-targeted topoisomerase 1 inhibitor antibody drug conjugate scheduled for IND filing in the first half of 2025. This announcement is the most recent step in our 5 by 5 goal of having five new INDs for preclinical development candidates from our ADC and MSAT product portfolio filed and approved to commence clinical studies by 2027. Our other preclinical development candidates ZW171 and ZW191 currently remain on track with expected IND filing in 2024. We were also pleased to announce that industry veteran Carlos Campoy has joined our Board of Directors. Carlos is a skillful, thoughtful, and performance driven financial executive with a successful track record in leading culturally diverse pharmaceutical and biotechnology organizations through complex transformational changes in the U.S. and internationally.

We look forward to his input as a member of our Board. We’re also pleased to report that both of our regional hubs in Dublin and Singapore are operational and will be instrumental in clinical study execution for our early stage R&D portfolio over the next several years in Europe and the APAC regions. Our early stage development organization in the United States continues to expand in both Bellevue and our planned new hub in California in light of our planned U.S. clinical study. Now, I’d like to spend a few minutes talking about our R&D portfolio. Our presentations at ASCO represent an important milestone in the development of zanidatamab and in our partnership with Jazz and BeiGene. Multiple abstracts were presented, including data from the HERIZON-BTC-01 Phase 2b pivotal study zanidatamab monotherapy in previously treated HER2-amplified BTC patients.

The results were published simultaneously in Lancet Oncology. Presentations at ASCO also included updated results from a Phase 1b/2 study of zanidatamab in combination with the docetaxel as a first-line therapy for patients with advanced HER2-positive breast cancer. In the ASCO presentation for the Phase 2b pivotal study, we announced that data from 80 patients with HER2-amplified BTC defined as in situ hybridization positive, immunohistochemistry, [2 plus or 3 plus] (ph), demonstrated a confirmed objective response rate of 41.3%. With the Kaplan Meier estimated median duration of response of 12.9 months. The KM estimated median PFS was 5.5 months, with a range of 0.3 to 18.5 months. As our lead investigator, Shubham Pant, MD, Professor of Gastrointestinal Medical Oncology and Investigational Cancer Therapeutics at The University of Texas MD Anderson Cancer Center, noted in our press release announcing the results, a confirmed ORR of 41.3% median duration of response of 12.

9 months and median PFS of 5.5 months represents a significant step forward for second-line treatment of HER2-amplified BTC, where current chemotherapy treatments have been reported to provide only a 5% to 15% ORR and median PFS of 1.4 to 4 months. Additional presentations on zanidatamab are planned for the second half of 2023, including two poster presentations, recently accepted for presentation at the European Society of Medical Oncology or ESMO in Madrid this October. In partnership with Jazz, we will be presenting quality of life outcomes from the Phase 2b HERIZON-BTC-01 study evaluating patients with zanidatamab-treated HER2-positive biliary tract cancer. In partnership with BeiGene, updated results from the Phase 1b/2 study of zanidatamab plus chemotherapy and tislelizumab as first-line therapy for patients with advanced HER2-postive gastric/gastroesophageal junction adenocarcinoma will be presented.

These results provide data with a longer follow-up period from the original data presented on this clinical study at ASCO 2022. The future potential milestone and royalty payment from our zanidatamab licensing and collaboration agreement with Jazz, and our agreement with BeiGene remain unchanged and are expected to continue to be a significant source of non-dilutive capital for Zymeworks as zanidatamab progresses towards the final stages of regulatory review, which would include additional regulatory and commercial milestones as well as double-digit royalties of up to 20% of sales. We continue to support efforts and regulatory interactions by each of Jazz and BeiGene for initial regulatory filings for potential accelerated approval of zanidatamab in second-line BTC.

As announced by Jazz yesterday, they have alignment with the U.S. FDA on a confirmatory study in first-line metastatic BTC to support Jazz’s U.S. regulatory efforts. With an initial focus in BTC and gastric, we believe that zanidatamab has the potential to improve the current standard of care and address a large unmet need in a range of HER2 positive cancers. HERIZON-GEA-01, the pivotal trial evaluating zanidatamab in first line GEA is ongoing and top line data are expected in 2024. Much of our progress in the first half of 2023 has been a reflection of our goal to have five novel therapeutic candidates in clinical studies by 2027. We are building a very exciting pipeline based on the strength of our technology platform and look forward to our expected IND filing for ZW171 and ZW191 in 2024.

We also remain on-track to initiate a Phase 2 clinical study of zanidatamab zovodotin or zanizovo plus pembrolizumab in HER2 positive non-small cell lung cancer patients. In addition, we continue to explore a pathway for further clinical development of zanizov in post T-DXd breast cancer patients likely in collaboration with a strategic partner. As discussed, we have nominated ZW220 as our third preclinical development candidate in our 5/5 objectives and are moving forward with a planned IND filing in the first half of 2025. We believe that NaPi2b represents an excellent target for TOPO summarized 1 based antibody drug conjugate and a potential first in class opportunity. NaPi2b is highly expressed in 64% of serious ovarian cancer and 68% of lung adenocarcinomas as well as being a relevant biomarker of interest in other solid tumors.

ZW220 is another example of therapies that are built on Zymeworks’ drug conjugate platform technology, leveraging cysteine conjugation with a cleavable traceless linker to enable potential optimization of the appropriate drug to antibody ratio or DAR, that are novel topoisomerase 1 inhibitor payload technology. The monoclonal antibody incorporated in ZW220 was developed in house and selected based on its favorable binding profile and efficient internalization and payload delivery. The DAR in ZW220 was selected to balance efficacy and tolerability by incorporating an average of four topoisomerase 1 inhibitor payloads for antibody. We look forward to the continued development of our early stage R&D portfolio and to reporting on the continued progress.

We do expect to have opportunities throughout the second half of 2023 to provide presentations at medical and scientific meetings on our progress with zanizov ZW171, ZW191, ZW220, and other product candidates. On the partnering front, we expect to continue to pursue partnerships where advantageous to progress our preclinical development programs and to broaden our clinical development program for zanizov. As we leverage our focused R&D engine, we intend to continue our work to generate candidates with the potential to be co-developed with partners. For these development programs, we will continue to seek attractive economics with upfront payments that help fund development of our in house candidate well as attractive royalty and commercial milestones and/or retained commercial rights to such product candidates in the United States.

In summary, we remain on-track for important achievements and milestone opportunities during the remainder of 2023 and especially 2024 when we expect top line data from the first line GEA Phase III study of zanidatamab to be reported. With that, I’d like to thank everyone for listening to our prepared remarks, and I’ll turn the call over to the operator to begin the question-and-answer session. Operator?

Operator: Thank you. [Operator Instructions]. And our first question will be coming from Jon Miller of Evercore. Your line is open.

Jon Miller: Thanks so much for taking the question, guys and congrats on the progress with the financial belt tightening, especially. Maybe two from me. Could you speak a little bit to the bar in first line BTC as opposed to second line BTC? What are you looking for in OS there? And how are you thinking about those two populations differently? And then secondly, on the new, announcement ZW220, can you speak a little bit more to the design there? What’s driving your excitement for the target and, maybe why you chose a lower DAR versus 191.

Kenneth Galbraith: Yes. Thanks, Jon. I’ll take the first question. So obviously, you saw our pivotal data in second line BTC that we announced late last year, and had more detail at ASCO. And, again, it was a pretty impressive compelling, response that we saw from zanidatamab as monotherapy in patients who had to fail a therapeutic regimen that included, gemcitabine, which could also have included a PD-1 regimen, which about a quarter the patients did. The results were in confirmed responses were pretty much the same between folks who had a prior PD-1 who are in those who didn’t. Obviously, it’s a pretty compelling picture that we saw from the second line BTC patient population, and that’s why we’re working very hard with Jazz and BeiGene right now to complete the regulatory interactions we need to and get those filings in.

When we think about our first line BTC, treatment, a patient population. We’re obviously looking to understand how moving into an earlier line of therapy for patients and working in combination with other standard of care, which in this case, in most parts of the world, is a PD-1 plus gemcis could really improve upon, what zanidatamab has powerfully done on its own as monotherapy. So, I don’t think we’ve talked it about the nature of that clinical study, I’m sure we will once it’s filed and the confirmatory studies up and running. And I don’t think we’ll talk much about, what we’re looking for other than zanidatamab monotherapy is pretty powerful in that second line patient population. And we would expect it moving up into an early line of therapy in combination with other agents.

Could be a pretty interesting, opportunity to change the standard of care. For that patient population, we know zanidatamab got a great tolerability profile to demonstrate that efficacy. As monotherapy when that allows additional agents to be added to a therapeutic regimen and still be tolerable for patients. We know from the detailed subpopulation data that was published out of the topaz study earlier this year that specifically patients with the RBB2 mutation did not do very well on a survival curve. And so we really think the right approach for that patient population is a HER2 targeted therapy in combination with other agents of standard of care. And we’re really excited to run that study and see what we can do to improve the standard of care and won’t define it ahead of that.

For the ZW220 question, I’m going to let Paul talk a little bit about that ADC and how it was constructed and why we’re excited to move that program forward into the 5+5.

Paul Moore: Yeah. Well, thanks, Ken. Thanks for the question, Jon. Yes, maybe just pointing out some of the differences or some of the design features of the molecule. So, obviously, the target is NaPi2b. That is reasonably well validated as a target that’s highly expressed in ovarian cancer and non-small cell lung cancer. And our preclinical package, really supports the ability to target that molecule with the ADC that we’ve developed. Some other key features of our molecule, the payload that we’ve selected there is our topoisomerase inhibitor payload that Zymeworks has developed and has the features that we feel is important to support an ADC, in particularly for cancer types like ovarian and non-small cell lung cancer. We think the topoisomerase inhibitor approach is appropriate for getting, hopefully favorable responses in the clinic.

Then we did a lot of preclinical work to side on the DAR, you asked a question about the DAR, why do we pick DAR4? And there, what we found was that we really could dose very high safely in non-human primates. We went up to 90 mgs per kg with that dose and repeat dosing and didn’t see any evidence of any toxicity, no evidence of thrombocytopenia, which — so that was favorable. And then what we also observed with that DAR was very nice activity in various tumor models, T-DX models for ovarian cancer. So that taken together really supported our decision on that molecule.

Jon Miller: Makes sense. Thank you.

Operator: Thank you for your question. One moment while we prepare for the next question. And our next question will be coming from Yigal Nochomovitz of Citigroup. Your line is open.

Yigal Nochomovitz: Hi, thanks. If you could just spend a little bit more talking about 220. Obviously, there’s been some news in the space with NaPi2b recent high profile failure. So can you just talk about a bit more about your commitment to the target and more specifically how your molecule, may differ, both in terms of the degree of site specific conjugation, the payload, obviously, it’s your own antibody. If you could just comment on that, given the competitive dynamics for that target. Thank you.

Chris Astle: Yeah. I’ll let Paul extend upon that if you can, Paul. I’m sorry. Paul, your line’s muted, I believe.

Paul Moore: Sorry about that. So just getting back to the questions. What I mentioned previously, so in our drug compared to the Mersana drug, so there the payload is one key difference. So, in our drug, we’ve used topoisomerase inhibitor that we had developed internally. And so, that’s different than what Mersana had used . They had used Auristatin payload, and previously, Roche or Genentech, it also targeted, NaPi2b and used [metastatic] (ph) inhibitor. So, we feel like using a payload here, there’s a key difference from our molecule in what’s been previously attempted. And we think that that topoisomerase is favorable for the tumor types that we’re looking into. And also we see a very favorable balance of safety and efficacy in our preclinical setting.

So, we think that’s very important. We also then take time to think about the DAR, but I mentioned here we’re going with a little bit of a lower DAR than what Mersana had used. So we feel that also differentiates from us, the backbone antibody. We also mentioned we’ve developed internally by the time works and really selected to support, internalization and payload delivery. And so we feel comfortable with the antibody. And I think what I also mentioned was in the preclinical setting, what we observed when we went to, high doses we’ve entered many mix per kg, repeat dosing with the DAR4 ADC, we saw no new evidence of thrombocytopenia, which could be sort of a signal that you could potentially help bleeding, toxicity we did not see that. So, we think overall with the safety profile and the design of the molecule with a TOPO payload, then that really puts us in a good position to tackle patients that over expressed not to be in the clinic.

Yigal Nochomovitz: Okay. Thank you very much. And then just one specific question as you look with your partnership with BeiGene, assuming that [Zyme] (ph) gets commercialized in China, how will that work from the manufacturing perspective? Will that be produced by BeiGene and their Biologics facility, or will that be done, on your side?

Kenneth Galbraith: No. zanidatamab is manufactured by Wuxi, and has been supplying ourselves in BeiGene with clinical material. And in a commercial setting, Wuxi will supply both BeiGene and Jazz, for the initial, launch quantities. And, obviously, if you’ve read our collaboration with Jazz, you’ll see they have the ability to set up their own manufacturing at some point, and we’ll do a tech transfer to them. And obviously BeiGene would have the same ability to do that. So right now, we we’ve controlled that process all the way along for the benefit of our partners, and so we’ll be setting up commercial arrangements that allow Wuxi to supply BeiGene and Jazz, directly. So, I think we’re very comfortable on a supply basis. And for the initial filings that are being made by BeiGene and Jazz, the CMC module was prepared by us because we did all the work, and that’s already been prepared.

So, it’s not a rate limiting factor too. So an initial filing by BeiGene or an initial filing by Jazz, which you hope are not that far away.

Yigal Nochomovitz: Okay. Thanks Ken.

Operator: Thank you for your question. One moment while we prepare for the next question. And our next question will be coming from Charles Zhu of Guggenheim. Your line is open.

Charles Zhu: Hey guys. Thanks for taking the question and congratulations on all the progress. Fully appreciate that this is in partnership with BeiGene, but regarding zanidatamab and gastric cancer, can you help us set expectations for the upcoming Phase 1b/2 data at ESMO as well as how you think the recent update from the KEYNOTE-811 study may frame the competitive landscape for HERIZON-GEA. Thanks.

Kenneth Galbraith: Yeah. Great question, Charles. I just don’t know if I can answer it. So for the second part, we obviously had a top line data release on KEYNOTE-811. That data, I understand it’s going to be at ESMO, although some of it’s being discussed with regulators now, from the top line data release, it appears that regimen was only statistically significant or clinically meaningful depending upon what we read in the PD-L1 positive patient population in HER2. So, obviously, we’ll await to see that data at ESMO and see what that means for us. I think they aren’t exactly comparable studies. They’re not head-to-head, but also not comparable. The patient populations are different. Don’t forget. We have esophageal cancer patients in our study in addition to gastric and gastric esophageal junction.

So it’ll be hard to make a direct comparison between those two. But obviously we’ll take a look at what that data looks like. Obviously, in all the work we’ve done in GA with zanidatamab, we find it works effectively so far in our early clinical studies, regardless of PD-L1 status, which I think would be an advantage for it to be used. We obviously added an arm of our Phase 3 HERIZON-GEA-01 study to include tisleli in a randomized fashion so that we could clearly understand what adding PDO-1 to zani in chemo might mean and for which group of patients. And I think the randomized data will tell us that. I’m glad we added that arm. I think as you’ll remember from, last year, we had an early data release on the small Phase 2 study that BeiGene had initiated.

Looking at zani plus chemo plus, tisleli, it was very immature data, so it was hard to interpret anything out of it. This is again a year later. So I think you know, even though it’s a small study you need to be careful with that. I think you’ll start to be able to tease out, what adding a PD-1 to zani plus chemo could mean for a patient population who’s PD-L1 positive, and we’ll just have to wait for that abstract to be presented or poster presented. Also at ESMO, in October, in Madrid, and we wouldn’t want to say anything before that data has to be presented. And so we’ll just have to await that October Madrid.

Charles Zhu: Got it. Great. Sounds great. And thanks again for taking the questions.

Kenneth Galbraith: You’re welcome. Thank you.

Operator: Thank you. [Operator Instructions]. One moment for the next question. Our next question is coming from Derek Archila of Wells Fargo. Your line is open.

Unidentified Analyst: Thank you. Hey guys, congratulations on the quarter. This is Adam on for Derek. Just a couple of questions from us today. Maybe if we can get an update on the plans for zanizovo’s Phase 2 combo trials, in non-small cell lung cancer and breast cancer, has an anti PD-1 been chosen yet. And if not, does it make sense to move forward with the same checkpoint inhibitor for both indications, or would you expect to proceed with different CPIs for that study? Thank you.

Kenneth Galbraith: No, good question. Thanks, Adam. As we said in the script, we’re moving forward to initiate our study of zanizov plus, PD-1 in the non-small cell lung cancer space. And I don’t think we’ll talk more about which PD-1 or the design of the study until it’s up and running, but we’re doing everything necessary now to get that initiated this year and to start recruiting patients on that study for the breast cancer study, which we’re still interested in looking at. We’re still working out the right combination agent and the right pathway and our ability to get access to the right patient population. So, until we do that, we won’t broaden out that study. It’s also obviously a more complicated and longer term study than the non-small cell lung cancer study.

So, we’re going to continue to be active in conversation with potential partners who might be able to come on and support that in a way that we can’t because we need to balance capital allocation between not just zanizov, but the other five new medicines that are coming into the clinic in the next period of time. So we’ll update that as we go forward. But I think once the study’s up on quick trials and once we’ve initiated the first patient, then we’ll have more to say about that study. We do still plan to and have an abstract accepted to discuss Phase 1 data from zanizov because now we’ve closed that trial off. And so we did have an abstract accepted at a medical meeting before the end of this year. And once those titles are made public, we’ll talk a little bit more about which conference and what that data set will look like.

Unidentified Analyst: Great. Makes sense. And then maybe on, DW-191, given its potential to target tumors pretty much independent of FR alpha receptors expression models. Can you maybe walk us through your current thinking on the trial design? Like in particular, how it may compare to other FR alpha programs, like, [Mervs, Marcella] (ph). Thank you.

Kenneth Galbraith: Yeah. Thanks very much. Again, I don’t — I think we’ve worked out, what we think is an appropriate initial clinical plan of dose escalation and dose expansion cohorts of where we’d like to study that ADC. And you’ll recall that this ADC was designed, to try and take advantage of the multiple tumor types for this to target of interest. And take advantage of the fact that there are, different expression levels in this patient population that you might want to target, not just high expressers. And so we’d like to, as early as we can in Phase 1, understand our ability to work across multiple tumor types to be effective. To work across, high expressers in all of those tumor types and to work towards how we see we might impact, medium and low expressers across those tumor types.

So I think once this study is up on clinical trials, we’d be happy to talk more about the design of how this study is going. I mean, obviously, there is a current product commercially available in a certain patient population here. So, how we go about testing that patient population is a little more complicated. And so we have some thoughts on how to do that. That’ll be a part of the clinical study. It’s unfortunate what’s happened to the Mersana molecule, so late in clinical development. But, having studied [ZW] (ph) for a long time as a biological target, we did have the same complication that there might be a competitive product there ahead of us which does make the clinical development of regulatory pathway more complicated, unfortunate clinical study outcome, for that agent, and that company, but certainly makes the opportunity attractive from being a cleaner and more simple clinical development and regulatory pathway and the ability for us to if we go quickly with the right molecule, be in a position where we could be first in class, in that indication.

So, it’s actually a more exciting thing for us to pursue. And one of the reasons we’re trying to accelerate this, to move as quickly as we can, with our TOPO payload and the antibody we designed, the DAR we selected, and our understanding of the target and our preclinical packages day, which looks excellent.

Unidentified Analyst: Great. Thank you.

Kenneth Galbraith: You’re welcome.

Operator: Thank you for your question. One moment while we get ready for the next question. And our next question will be coming from Brian Cheng of JP Morgan.

Brian Cheng: Hey, guys. Thanks for taking my questions today. As you get closer to the IND next year, can you provide a little bit more granularity on, your preparation work and site selection for 191 and 171. What else is left to do in the next couple of months? And, as we think about the cadence of, trial initiation, which program is expected to reach the clinic first? And, is there any rationale whether which one should go first or not? Thanks.

Kenneth Galbraith: Yeah. Thanks, Brian. I think we’ve given all the guidance we can on timing, right now. So both of these will be up and running in 2024 and recruiting patients and ZW220 and NaPi will be up and running in the first half of 2025. So, I don’t want to get more specific in that until we feel comfortable that we can be so that you will not probably be later this little later this year to give more updated guidance on timing. What we have done, I think has hopefully put ourselves in a position to run a very efficient translation from preclinical into clinical studies. So, we have a great preferred provider relationship with Wuxi to make all of these molecules, which means I think as we go forward with ZW220, you’ll probably see that go faster from translating from selection into clinical studies.

So that’s one thing we’re counting on. And working in one supplier on the CDMO side. I think on the CRO side, we have the same idea to work with a preferred one group as a preferred provider and take advantage of multiple clinical studies coming on track at the same time. We’ve definitely positioned ourselves with some clinical and regulatory expertise in boosting in for Asia Pacific and in Dublin for Europe to be able to start these studies with a global thought process in mind from the very beginning. We obviously have a strong, U.S. group as well, but I think you will hopefully see us take advantage of global access to patient populations of interest given the multiple tumor types that exist that we’d like to study in 171 and 191. And I think by setting that up early, you can go much more efficiently in Phase 1 to find all those patient populations and multiple dose expansion cohorts.

And you can go much faster from going from Phase 1 into a Phase 2 process, by already having a global footprint established with KOLs and all the major reasons. So, we’ve been planning very carefully around, speed and quality and efficiency of development for all five of these molecules that we intend to bring into the clinic. And 171 and 191 are hopefully just the first two to be able to prove that we did the right planning and execute those in a quality and efficient manner. And I’m sorry not to be able to get more specific guides about which one’s filed first and which one’s recruiting first and when that is in 2024, but we’ll give that guidance as soon as we feel comfortable that we can be, as accurate as possible at that probably later this year.

Brian Cheng: Okay. Maybe just building on what you said earlier on 220, can you provide some comments on how 220 could potentially be differentiated than other companies out there evaluating NaPi2b. So is there any specific learnings that you received from, your competitor failing earlier last month? Is there any insights that you came that could allow you to make some tweaks, heading into the study in 2025. Thank you.

Kenneth Galbraith: Yeah. I think we’ve been studying the biology of this target for a long time period to get to this stage. We’ve obviously followed any programs which have been in the clinic in this area besides the [Mersana] (ph) Genentech compound. And I think, we had a very set mindset of what we thought would make a great ADC against this target. And I think, you try to learn along the way, but I think some of the elements that are designed into this, were specific to how we thought this target should be approached in the first place. I don’t think we changed anything specifically in response to what we saw. We did benchmark obviously, against the two compounds wherever we could to understand the differentiation that we’re able to tease out preclinically, but I’ll ask Paul, if he wants to expand upon that statement at all?

Paul Moore: No. I think you’re right, Ken. I think a lot of the same features in our molecule, we feel addresses some of the previous limitations, but, we certainly will bear in mind and take stock of what others have learned and back of that in maybe in the design of the study. But really in the design of the molecule, we feel very comfortable where we’ve landed with the molecule and it addresses, prior limitations and hopefully can provide good patient outcome.

Kenneth Galbraith: And we have spent time trying to understand co-expression in patient populations between folate receptor and NaPi to understand it because it’s not very well understood and the extent that there is, whether it’s high and low or low and high or what it is. So, I just still think that’s a work in progress for us. I think one of the most complicated things we had in our business case to push this forward was, facing the same developments and regulatory pathway where someone’s already ahead of you in this commercially available product and you can’t test that population the same way you would. All of the others, and unfortunately, for this other agent, that’s gone away, but it definitely makes the business case for moving forward in a clinical development regulatory pathway easy for us to explore, the full breath of ovarian cancer, non-small cell lung cancer without commercial product being available in a quick fashion.

So, it actually looks like a more promising program for us than we think. How we selected the antibody the linker strategy, the payload, in order to say the target we think we’re on the right track.

Brian Cheng: Great. That was very helpful. Thank you.

Operator: Thank you. One moment we have a follow-up question coming from the line of Yigal Nochomovitz of Citi. Your line is open.

Yigal Nochomovitz: Thanks for taking the follow-up. Just two quick follow-ups on NaPi2b. Any early work on a on a biomarker Richmond strategy for this target. And then second, you mentioned ovarian and non-small cell lung. I think in the past, your competitor, Mersana, had indicated that non-small cell lung, the expression of NaPi2b may be a bit too variable. I’m just curious what your thoughts are on that and which of those tumor types you would want to prioritize in an early Phase 1. Thanks.

Kenneth Galbraith: Yeah. I think our — we won’t talk too much about our Phase 1 strategy until the study is up on clinical trials, which will be in a little bit, but, we’re obviously very interested in — this is a target of interest in both ovarian and non-small cell lung cancer. We’d like the opportunity with the right ADC, which we think we have to understand, what the impact might be in actual patient population. These are obviously both, targets of interest because impression levels in ovarian and non-small cell lung cancer are about 60% in both. So, it gives you different pathway to think about how you would approach this patient population and whether you enrich for enrolment or not. But I think as you see our clinical study, you’ll get a better understanding of what our approach is.

But we think, we like the breadth of a potential indications here. It’s obviously not as broad as 171 and 191, which is probably okay. And thinking about GPC3 and ADC, it’s, you know, it’s a straight, HCC target of interest. So, there is some diversity and variability in the targets that we’re trying to approach. And even now with NaPi, we’re approaching a target where we be the first in class if we move quickly with the right approach, as opposed to folate receptor where there’s somebody there ahead of us and others are pursuing it with the TOPO payload. So different characteristics of each of these programs that we have. So we like the fact that they’re a little bit different. But I think as you see our clinical plan, formulating them in clinical trials, you’ll see, what our approach will be, but we would like to study our particular ADC in both of these patient populations that will vary in non-small cell lung cancer to understand what might be possible.

Yigal Nochomovitz: Thanks.

Operator: One moment, please. One moment for the next question. And our next question will be coming from the line of Stephen Willey of Stifel. Your line is open.

Unidentified Analyst: Hi, guys. This is Tully on for Stephen Willey. I have two quick questions. So, the first one is if I understood correctly, it sounds like you guys are still planning to present data from ZW49 by end of this year. Would it be possible to give us just a big picture color on what this data presentation would entail? And second, so ZW49 in breast cancer, HER2 low breast cancer, or a post in HER2, you said, you mentioned that, you guys would likely conduct this trial with a strategic partner and what would actually define — define it as like an ideal strategic partner? And what would you be looking for in order to make your decision. Thanks.

Kenneth Galbraith: Yeah. Thank you for the question. So we do have an abstract accepted at a medical meeting, before the end of 2023, to present some additional zanizov data from the Phase 1 study. Again, we won’t talk about what that is until the abstract title is made public. So, you’ll just have to wait for that to occur on the timetable, but we’re happy that we have an abstract accepted an opportunity to present some additional data from zanizov in our single agent study Phase 1. I think, as we’ve talked about with zanizov going forward development, we see this as a combination in ADC that can be used in combination with a multitude of agents to generate efficacy and targeted in a patient population, which is the post TXD patient population or space.

It’s what everyone is trying to find a space to fill for physicians and patients in what happens when people progress or fail or intolerant to TXD. And so, obviously, it’s why we’re interested in non-small cell lung cancer. There, the combination was easier to determine in breast cancer. We definitely would like to do some additional single agent activity in HER2 low as well as in to TXD failures, but we thought it was very important to figure out then what is our combination strategy? What is the agent we would combine with and what patient population would that be targeted at and how would we get access to that patient population? And some parts of those answers would be helpful to have a partner execute that program, but until we answer the question about what agent might be looked at in combination, and what the specific setting will be.

It’s hard to conclude those discussions with partners. Like, we’re still working on defining the pathway. And, hopefully, we can do that and broaden out this program, but we do want to go forward with the non-small cell lung cancer in combination with PD-1 and that’s what we’re doing now. And that will get initiated this year, and data will come out of that, on the timelines, and we’ll give guidance about that once we get the study up on clinical trials and once we get our first patient in. And until then, we really can’t say more about that.

Unidentified Analyst: Thank you.

Kenneth Galbraith: Thank you.

Operator: Thank you for your questions today. This concludes today’s Q&A session. I would now like to turn the call back over to Ken for closing remarks. Please go ahead.

Kenneth Galbraith: Yeah. Thank you very much for attending our call and asking questions. I know it’s late in the earning season, but we really appreciate your interest. Hopefully, your takeaways in this call is that we remain right on track with where we thought we would be with an exciting 2024. We’ve confirmed the guidance of our reporting top line data from the HERIZON-GEA-01 study with zanidatamab plus chemo and also plus tisleli. And we look forward to reporting that data next year. I think it really, really is important for zanidatamab. We’re really excited with, Jazz’s optimism about the potential reach for zanidatamab not just in BTC, but GEA breast cancer and beyond that they expressed on their call yesterday, which is great.

We’re right on-track with the two new INDs the first ones for ZW171 and ZW191 next year and starting those clinical studies, which is great. We’re right on track with nominating our third compound, which we want to really aggressively pursue with timing. And we’re working very diligently on the fourth and fifth selection of our portfolio, and we’re hoping that we can round that out, more quickly than maybe we anticipated. And beyond that, we’re still remaining financially disciplined in keeping our cash runway to at least 2026 and beyond so we can pursue this 5 by 5 strategy in a way that allows us to move in an unencumbered fashions and still have discussions around, new partnerships to help us with those five molecules potentially or to work with us on things beyond those five molecules.

But we feel really comfortable with our position right now and we have a lot of opportunities in the remainder of 2023 to share on-going data and results up and down the portfolio from zanidatamab with ESMO to zanizov another conference with other products in the portfolio. And we look forward to the opportunity to sharing that additional progress and data and results at conferences for the remainder of 2023. And thank you for paying attention and look forward to the next update.

Operator: This concludes today’s conference call. Thank you all for participating. You may now disconnect, and everyone have a great evening.