Zymeworks Inc. (ZYME) is a clinical-stage biotechnology company that has been at the forefront of developing innovative, multifunctional biotherapeutics to address unmet medical needs in oncology and other therapeutic areas. With a strong focus on research and development, Zymeworks has built a diverse pipeline of product candidates that leverage its proprietary technology platforms, positioning the company as a key player in the biopharmaceutical industry.
Company Background
Founded in 2003 and headquartered in Vancouver, British Columbia, Zymeworks has undergone a remarkable evolution over the past two decades. The company was originally incorporated in Canada and later redomiciled to Delaware in 2022 as Zymeworks Inc. (formerly known as Zymeworks Delaware Inc.). Since its inception, Zymeworks has devoted substantially all of its resources to research and development activities, including developing its therapeutic platforms and identifying and developing potential product candidates by undertaking preclinical studies and clinical trials. The company has supported these activities through general and administrative support, as well as by raising capital, conducting business planning and protecting its intellectual property.
Financials
Zymeworks has funded its operations primarily through follow-on public offerings, including the issuance of pre-funded warrants, and payments received under its license and collaboration agreements. Prior to its initial public offering (IPO) in 2017, the company also received financing from private equity placements and the issuance of convertible debt, which was subsequently converted into equity securities, and a credit facility. The company reported a net loss of $118.7 million for the year ended December 31, 2023, and through September 30, 2024, had an accumulated deficit of $797.8 million. Zymeworks has incurred significant losses since inception as it has increased its research and development expenditures in connection with the ongoing development of its product candidates and other clinical, preclinical and regulatory activities. The company has not generated any revenue from the sale of approved products as of September 30, 2024, and does not expect to do so until such time as it obtains regulatory approval and commercializes one or more of its product candidates.
For the most recent fiscal year (2023), Zymeworks reported revenue of $76.01 million, a net loss of $118.67 million, operating cash flow of -$118.30 million, and free cash flow of -$122.38 million. In the most recent quarter (Q3 2024), the company reported revenue of $16.00 million, a net loss of $29.85 million, and both operating cash flow and free cash flow of -$68.47 million.
The decrease in revenue in the first nine months of 2024 compared to the same period in 2023 was primarily due to a decrease in development support and drug supply revenue from Jazz related to the transfer of responsibility for the zanidatamab program to Jazz. This was partially offset by $8 million in milestone revenue received from BeiGene and $2.5 million in milestone revenue from GSK.
Key Milestones and Pipeline
One of Zymeworks' key milestones was the initiation of clinical trials for its lead asset, zanidatamab (also known as Zani), a novel bispecific antibody targeting the HER2 receptor. Zanidatamab has demonstrated promising results in various HER2-positive cancer indications, including metastatic gastroesophageal adenocarcinoma (GEA) and biliary tract cancer (BTC). In May 2024, Zymeworks' partner, Jazz Pharmaceuticals, announced that the U.S. Food and Drug Administration (FDA) had accepted and granted Priority Review for the Biologics License Application (BLA) for zanidatamab in the treatment of previously treated, unresectable, locally advanced, or metastatic HER2-positive BTC. This represents a significant achievement for Zymeworks and a potential game-changer for patients with this difficult-to-treat cancer.
In addition to zanidatamab, Zymeworks has built a robust pipeline of early-stage product candidates, including ADC candidates ZW191, ZW220, and ZW251, as well as the bispecific T-cell engager (BiTE) candidate ZW171. These programs leverage Zymeworks' proprietary technologies and have demonstrated promising preclinical results, positioning the company to potentially expand its footprint in the oncology and immunotherapy landscape.
Financial Performance
Financially, Zymeworks reported a net loss of $99.2 million for the nine months ended September 30, 2024, compared to a net loss of $104.2 million for the same period in 2023. The decrease in net loss was primarily due to lower research and development and general and administrative expenses, as well as a decrease in income tax expense, which was partially offset by a decrease in revenue and an impairment charge related to the discontinuation of the zanidatamab zovodotin clinical development program.
Liquidity
As of September 30, 2024, Zymeworks had $374.9 million in cash resources, consisting of cash, cash equivalents, and marketable securities. This strong financial position, combined with anticipated regulatory milestone payments, is expected to provide a cash runway into the second half of 2027, allowing the company to continue advancing its pipeline and exploring potential strategic partnerships.
The company's debt-to-equity ratio stood at 0.0552 as of September 30, 2024, with cash and cash equivalents of $122.36 million. Zymeworks maintains a strong liquidity position with a current ratio of 4.10 and a quick ratio of 4.10 as of the same date.
Challenges and Strategic Reorganization
Zymeworks has faced its share of challenges, including the discontinuation of the zanidatamab zovodotin program and the need to streamline its operations. In 2023, the company underwent a strategic reorganization that involved the transfer of certain assets and personnel related to the zanidatamab program to its partner, Jazz Pharmaceuticals. This move was aimed at simplifying and potentially expediting the clinical development and commercialization of zanidatamab.
Recent Progress and Future Outlook
Despite these challenges, Zymeworks has remained resilient and focused on its long-term growth strategy. The company has continued to advance its wholly owned pipeline, with recent progress including the initiation of Phase 1 trials for both ZW171 and ZW191. Additionally, Zymeworks has presented promising preclinical data on its ADC candidates ZW220 and ZW251 at scientific conferences, further demonstrating the potential of its proprietary technologies.
Looking ahead, Zymeworks is poised to reach a significant milestone with the potential approval of zanidatamab for the treatment of HER2-positive BTC in the United States. Furthermore, the company is slated to host an R&D day in December 2024, where it plans to provide updates on its growing portfolio of solid tumor-targeting ADCs and T-cell engager molecules, as well as formally nominate the final product candidate from its ambitious "5 by 5" R&D strategy.
Zymeworks may be able to further extend its cash runway or fund an expanded R&D scope through potential additional regulatory approval milestone payments in connection with its existing partnerships with Jazz and BeiGene, or new partnerships and collaborations. Pending regulatory approval, the company is also eligible to receive commercial milestone payments based on annual sales of Zani (zanidatamab) and tiered royalties between 10% and 20% on Jazz's annual net sales and between 10% and 19.5% on BeiGene sales.
The company has also implemented a $60 million share repurchase program, of which $30 million has been completed as of October 31, 2024, demonstrating confidence in its long-term prospects and commitment to delivering value to shareholders.
Conclusion
In conclusion, Zymeworks has navigated through various challenges and is now at a critical juncture, with the potential approval of zanidatamab and a robust pipeline of early-stage candidates. The company's commitment to innovation, its partnership strategy, and its strong financial position make it an intriguing player in the biopharmaceutical industry, poised to make a meaningful impact on the lives of patients with difficult-to-treat diseases. While Zymeworks continues to operate at a loss, its substantial cash reserves and potential milestone payments provide a solid foundation for continued research and development efforts in the coming years.