Q2 2024 Zymeworks Inc Earnings Call

Speaker Change: 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.

Operator: After the presentation, there will be an opportunity to ask questions. To ask a question, press star 1 1 on your telephone keypad to join the queue. I would now like to turn the conference over to Shrinal Inamdar, Director of Investor Relations. Shrinal, please go ahead.

Speaker Change: After the presentation, there will be an opportunity to ask questions.

Speaker Change: To ask a question press star 1 1 on your telephone keypad to join the queue.

Speaker Change: I would now like to turn the conference over to Shrinal Inamdar, Director of Investor Relations. Shrinal, please go ahead.

Speaker Change: Thank you, operator.

Shrinal Inamdar: Good afternoon and thank you for joining our second quarter 2024 results conference call.

Shrinal Inamdar: 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 SUT filings as found on our website and as part of the SUT. 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 of 2024.

Speaker Change: 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.

Speaker Change: Board 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.

Speaker Change: For a discussion of these risks and uncertainties, we refer you to our latest SUT filings as found on our website and as filed with the SUT.

Bijal Desai: 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.

Speaker Change: Following this, Dr. Paul Moore, our Chief Scientific Officer, will talk about key highlights for our second quarter, including the investigational new drug application clearances for ZW171 and ZW191 by the FDA.

Speaker Change: At the end of the call, Bijal, Paul, and Ken Galbraith, our Chair and CEO , will be available for Q&A, as well as Pranjshul Chauhan, Associate Medical Director for Early Stage Development for CW171.

Speaker Change: 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.

Bijal Desai: 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 program, as well as our financial results. Similarly, the European Medicines Agency has validated the marketing authorization application for Xanadatamab in second-line BTC, and regulatory reviews for Xanadatamab in BTC remain underway in China. Based on a blinded assessment of progression events, Jazz estimates top-line progression-free survival, or PFS, data will be available in the second quarter 2025. JAF continues to track events in the trial relative to the initial protocol assumptions.

Bijal Desai: 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 program, as well as our financial results.

Bijal Desai: In the second quarter, we achieved key milestones regarding the Global Regulatory Review.

Bijal Desai: of our late-stage asset, Xanadatamab, including being granted priority review of the Biologics License Application, or BLA, for Xanadatamab as second-line treatment.

Bijal Desai: for biliary tract cancers, or BTC, in the United States with a target action date of November 29, 2024.

Bijal Desai: Similarly, the European Medicines Agency has validated the marketing authorization application for Xanadatamab in second-line BTC, and regulatory reviews for Xanadatamab in BTC remain underway in China.

Speaker Change: We are pleased to have received a milestone payment of $8 million USD in July under the terms of Zymeworks' Asia-Pacific Licensing Collaboration Agreement with Beijing in conjunction with Sanadatamab's BLA acceptance in China.

Speaker Change: Our partner JAS has confirmed that the Pivotal Horizon GEA-01 trial evaluating Xanadatamab in first-line gastroesophageal adenocarcinoma, or GEA, is ongoing and enrollment remains on track.

Speaker Change: Based on a blinded assessment of progression events, JAS estimates top-line progression-free survival, or PFS, data will be available in second quarter 2025.

Speaker Change: JAF continues to track events in the trial relative to the initial protocol assumptions.

Bijal Desai: In the near term, we look forward to a potential approval for ZanaDataMap in second-line BTC in the United States. And, based on the expected timeline and subject to approval, Jazz is aiming to launch ZanaDataMap 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 ZanaDataMap's potential to provide meaningful benefits for patients.

Speaker Change: Near term, we look forward to a potential approval for ZanaDataMap in second-line BTC in the United States, and based on the expected timeline and subject to approval.

Speaker Change: Jazz is aiming to launch ZanaDataMap in the United States for second-line BTC in the fourth quarter of 2024.

Speaker Change: Together, with our partners, we look forward to opportunities where we can continue presenting promising data that support deep and durable responses, further highlighting ZanaDataMap's potential to provide meaningful benefits for patients.

Speaker Change: This includes the first-ever overall survival findings from the Phase 2b Horizon BTC-01 Clinical Trial for Xanadatumab presented at the American Society of Clinical Oncology Annual Meeting by our partner JASC.

Speaker Change: Results from this long-term analysis of the trial indicate that Xanadatomab as monotherapy demonstrated sustained and durable antitumor responses in previously treated patients with HER2-positive BTC and support the clinically meaningful benefit of continued treatment with Xanadatomab.

Speaker Change: The safety profile in all enrolled patients remained manageable with favorable tolerability compared with the initial analysis.

Speaker Change: In addition, we are pleased to report significant progress for our wholly-owned pipeline, which transitions two of Zymeworks' early-stage programs into clinical candidates.

Speaker Change: We have successfully cleared IND applications by the FDA for ZW191 and ZW171, with first-in-human studies planned to initiate in the second half of 2024 in the United States

Speaker Change: And we are actively progressing applications seeking regulatory permission to commence clinical studies for ZW191 and ZW171 in other non-U.S. jurisdictions in the second half of 2024.

Speaker Change: With these advancements in mind, following a strategic review of our emerging wholly-owned pipeline,

Speaker Change: We made the decision to formally discontinue the clinical development program of our HER2-targeted antibody drug conjugate, Xanadatamab zovudotin, also known as ZW49 or Zanizo.

Speaker Change: This decision aligns with our commitment to focus on the development of our early-stage programs, which we believe have the potential to be best-in-class and or first-in-class therapeutics.

Bijal Desai: By reallocating our resources, we can focus on accelerating the progression of ZW171 and ZW191 into the dose escalation stage of the respective Phase I clinical trials, as well as the planned IND filings for ZW220 and ZW251 in 2025. Our broader oncology development program continues to be a priority, with two phase one trials anticipated to commence in 2024, including enrollment of patients with non-small cell lung cancer.

Speaker Change: By reallocating our resources, we can focus on accelerating the progression of ZW171 and ZW191 into the dose escalation stage of the respective Phase I clinical trials.

Speaker Change: as well as the planned IND filings for ZW220 and ZW251 in 2025.

Speaker Change: We believe Xanizo remains a promising Phase II-ready asset, and we continue to explore partnering discussions where Xanizo may provide complementary coverage to a pipeline for non-small cell lung cancer, breast cancer, and other indications.

Speaker Change: Our team extends heartfelt gratitude to the patients, families, and healthcare professionals involved in the Xanizo Development Program.

Speaker Change: We remain committed to the highest degree of scientific rigor in our development processes with the goal of focusing on candidates with the potential to deliver the greatest benefit to patients.

Speaker Change: Our broader oncology development program continues to be a priority with two Phase I trials anticipated to commence in 2024, including enrollment of patients with non-small cell lung cancer.

Bijal Desai: Turning to our financial position, this afternoon, Zymeworks reported financial results for the second quarter of year 2024. The decrease in net loss is primarily due to lower research and development and general and administrative expenses, which is partially offset by a decrease in revenue and an impairment charge recognized in 2024 related to xanadatum absovedotum. Revenue for the six months ended June 30, 2024, included $20.7 million in development support and drug supply revenue from Jazz.

Speaker Change: Turning to our financial position, this afternoon, Zymeworks reported financial results for the second quarter of year 2024.

Speaker Change: Zymeworks' net loss for the six months ended June 30, 2024 was $69.3 million, or $0.91 loss per diluted share, compared to a net loss of $75.5 million for the same period in 2023.

Speaker Change: The decrease in net loss is primarily due to lower research and development and general and administrative expenses, which is partially offset by a decrease in revenue and an impairment charge recognized in 2024 related to Xanadat and Mabzovodotin.

Speaker Change: As reported, our revenue for the six months ended June 30, 2024, was $29.3 million, compared to $42.6 million for the same period in 2023.

Speaker Change: Revenue for the six months ended June 30, 2024, included $20.7 million for development support and drug supply revenue from JAS.

Speaker Change: $8 million of milestone revenue from Beijing in relation to the acceptance by the CDE of the NMPA in China of the BLA for Xanadatumab for second-line treatment of HER2-positive BTC.

Speaker Change: $0.4 million from Beijing for research support payments, and $0.2 million from our partners for research support and other payments.

Speaker Change: Revenue for the same period in 2023 included $61 million for development support and drug supply revenue from JADS.

Speaker Change: which was partially offset by a $20.1 million credit issued to JAS for contractual amendments to our partnership arrangement, and $1.7 million from our partners for research support and other payments.

Speaker Change: Overall, operating expenses were $110 million for the six months ended June 30, 2024, compared to $124 million for the same period in 2023, representing a decrease of 11% year over year.

Bijal Desai: The decrease in overall operating expenses resulted from a decrease in both research and development expense, as well as a decrease in general and administrative expense. The decrease in general and administrative expense was primarily due to a decrease in external consulting expenses for information technology, legal fees, and other expenses for advisory services, a reduction in insurance costs, and a decrease in depreciation and amortization expenses compared to the same period in 2023. This was partially offset by costs due to the termination of our long-term facility lease in Seattle in 2024.

Speaker Change: The decrease in overall operating expenses resulted from a decrease in both research and development expense, as well as a decrease in general and administrative expense.

Speaker Change: The decrease in research and development expense was primarily due to a decrease in expenses for Zanadatamab as a result of transfer of responsibility for this program to JADS.

Speaker Change: This decrease, compared to the same period in 2023, was partially offset by an increase in expenses of other development programs

Speaker Change: Primarily, with respect to product candidates ZW171 and ZW251, costs incurred for manufacturing activities to support the IND for ZW220, and other preclinical and research programs.

Speaker Change: Salaries and benefits expenses decreased compared to the same period in 2023 due to non-recurring severance expenses in 2023, which was partially offset by an increase in stock-based compensation expense in 2024.

Speaker Change: The decrease in general and administrative expense was primarily due to a decrease in external consulting expenses for information technology, legal fees, and other expenses for advisory services, a reduction in insurance costs, and a decrease in depreciation and amortization expenses compared to the same period in 2023.

Speaker Change: This was partially offset by costs due to the termination of our long-term facility lease in Seattle in 2024.

Bijal Desai: During the six months ended June 30, 2024, we recorded a non-cash impairment charge of $17.3 million as a result of the company's decision to discontinue the ZanaDataMap Zovudotin Clinical Development Program, which utilized the technology represented by acquired in process research and development assets. As of July 31st, 2024, we had approximately 71 million shares of common stock outstanding and approximately 5.1 million shares of common stock is As of June 30th, 2024, we had $395.9 million of cash resources consisting of cash, cash equivalents, and marketable securities as compared to $456.3 million as of December 31st, 2023.

Speaker Change: During the six months ended June 30th, 2024, we recorded a non-cash impairment charge of $17.3 million as a result of the company's decision to discontinue the ZanaDataMap Zovudotin clinical development program.

Speaker Change: which utilize the technology represented by acquired in-process research and development assets.

Speaker Change: As of July 31st, 2024, we had approximately 71 million shares of common stock outstanding and approximately 5.1 million shares of common stock issuable under pre-funded warrants.

Speaker Change: As of June 30, 2024, we had $395.9 million of cash resources consisting of cash equivalents and marketable securities as compared to $456.3 million as of December 31, 2023.

Speaker Change: For additional details on our quarterly and year-end results, I encourage you to review our earnings release and other SEC filings as available on our website at www.zymerks.com.

Speaker Change: Our strategy of refocusing the business and building a diverse clinical-stage product pipeline of antibody-drug conjugates

Speaker Change: or ADCs.

Speaker Change: Multispecific Antibody Therapeutics continues to provide a solid foundation which we believe will help to achieve our long-term goal of identifying additional product candidates and seeking valuable partnership options where appropriate to assist in global development and commercialization.

Speaker Change: Based on current operating plans, our strong financial position of $395.9 million in cash resources

Speaker Change: as of June 30, 2024.

Speaker Change: Together, with certain anticipated regulatory milestone payments, gives us an expected runway into the second half of 2027.

Speaker Change: We may also be able to extend this runway or fund an expanded R&D scope through potential regulatory approval milestone payments in connection with our existing partnerships with Jazz in Beijing or new partnerships and collaborations which we may choose to form.

Speaker Change: In addition, pending regulatory approval, we are eligible to receive commercial milestone payments based on annual sales of ZanaDataMap and tiered royalties between 10% and 20% on Jazz's annual net sales.

Speaker Change: and between 10% and 19.5% on Beijing's net sales.

Bijal Desai: With that, I'd like to hand over to our Chief Scientific Officer, Dr. Paul Moore, who will provide more details regarding our wholly-owned pipeline and specifically on ZW191 and ZW171 moving into the clinic.

Paul Moore: With that, I'd like to hand over to our Chief Scientific Officer, Dr. Paul Moore, who will provide more details regarding our wholly-owned pipeline, and specifically on ZW191 and ZW171 moving into the clinic. Over to you, Paul. Thank you.

Paul Moore: 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, gynecological cancers, lung cancer, and cancers of the digestive system, while balancing ADCs and T-cell engagers across these various therapeutic areas. Moving forward, as we continue to progress with the development of our early-stage assets, we will leverage our deep technical expertise to combine and adapt various modalities with the aim to improve patient outcomes. You will hear more about that later.

Paul Moore: 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.

Speaker Change: Today, we have targeted three areas of high unmet medical need, gynecological cancers, lung cancer, and cancers of the digestive system.

Paul Moore: While balancing ADC and T-cell engagers across these various therapeutic areas, we believe this approach ensures both a broad and comprehensive coverage of these challenging diseases.

Speaker Change: 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.

Paul Moore: This includes leveraging our deep technical expertise to combine and adapt various modalities with the aim to improve patient outcome.

Paul Moore: We have big plans for growth and expansion later in the year, including the nomination of our fifth product candidate, a tri-specific T cell engager or tri-TC. ZW171 and ZW191 are both designed to optimize efficacy, starting with the selection of targets with the highest level of expression. As you can see here, across ovarian cancer, mesothelin, fold receptor, and NAPI 2b are expressed at relatively higher levels compared to other targets, such as Keturin 6, providing a broad and comprehensive coverage of the view, something which also holds in non-small cell ones.

Paul Moore: You'll hear more about that on our plans for growth and expansion later in the year, including the nomination of our fifth product candidate, a tri-specific T cell engager, or tri-TCE.

Paul Moore: Our strategic balance of wholly owned AACs and T-cell

Paul Moore: Antigens like Folic 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.

Paul Moore: ZW-171 and ZW-191 are both designed to optimize efficacy, starting with the selection of targets with the highest level of expression.

Paul Moore: As you can see here, across ovarian cancer, mesothelium bolt receptor and NAPI2B are expressed at relatively higher levels compared to other targets, such as catherine 6.

Paul Moore: Providing a broad and comprehensive coverage of ovarian cancer.

Paul Moore: Something which also holds in non-small cell lung cancer.

Paul Moore: We believe that the relatively high tumor expression levels are crucial for maximizing the efficacy of our therapeutic agents, helping the ADCs and T-cell engagers to effectively bind to and eliminate cancer cells, regardless of modality. This quarter, we achieved significant milestones in progressing our pipeline by advancing both CW171 and CW191 into clinical stage 2. With the FDA clearance of these IEDs, we are one step closer to our goal of providing patients with potentially best-in-class therapeutics that could improve the standard of care for these treatment plans.

Paul Moore: We believe that the relatively high tumor expression levels are crucial for maximizing the efficacy of our therapeutic agents, helping the ADCs and T cell engagers to effectively bind to and eliminate cancer cells, regardless of modality.

Paul Moore: By leveraging T-cell killing through an enhanced 2-plus-1 format and unique geometry, our ZW171 candidate offers a potentially robust and precise immune response against mesothelium-expressing tumors and helps to enhance our position in the competitive landscape.

Paul Moore: Similarly, leveraging a unique antibody and p-load linker for ZW191 offers a pretentious robust and effective therapy against fully receptor alpha-expressing tumors.

Paul Moore: This quarter, we have achieved significant milestones in progressing our pipeline by advancing both CW171 and CW191 into clinical stage development.

Paul Moore: With the FDA clearance of these IEDs, we are one step closer to our goal of providing patients with potentially best-in-class therapeutics that could improve the standard of care for these treatment landscapes.

Paul Moore: T-cell engagers offer great opportunity for more effective therapies, and in particular, ZW171 has the potential to treat patients with the right range of tumors with moderate to strong mesothelium expression observed in ovarian cancer, pancreatic cancer, non-small cell lung cancer, and endometrial. However, the opportunity for developing a T cell engager, with high means of feeling expression relative to normal, cancer cell lengths with relatively high or moderate mesothelial expression, including representative lung and ovarian cancer, CRC, and mesothelial cancer cell lines.

Speaker Change: T-cell engagers offer great opportunity for more effective therapies, and in particular ZW171 has the potential to treat patients with the right range of tumors with moderate to strong mesothelium expression observed in ovarian cancer, pancreatic cancer, non-small cell lung cancer, and endometrial cancer.

Speaker Change: However, the opportunity for developing T cell engager

Speaker Change: Targeting means that feeling expressing cancers doesn't come out doesn't come without its challenges

Speaker Change: For 1.7.1, we have taken a thoughtful approach to what a target profile would look like for this patient population. And we believe in our design approach, which uses an ability-dependent mesothelin binding of two mesothelin paratopes to enable selective sex-successive tumor cells.

Speaker Change: with high mesothelian expression relative to normal.

Speaker Change: normal tissues, and reduces the impact of soluble metathelium on potency, potentially minimizing, potentially minimizes off-tumor on-target toxicity.

Speaker Change: On slide 13, the preclinical data shown here demonstrates 171's ability to exhibit mesothelioma-dependent cytotoxicity across various cancer cell lines, including lung, ovarian, colorectal, and mesothelioma.

Speaker Change: [inaudible]

Speaker Change: Including representatives of lung and ovarian cancer, CRC, and mesothelioma cancer cell lines. 171 demonstrates a potent cytotoxic effect, significantly reducing tumor cell survival at low concentrations.

Paul Moore: 171 demonstrates a potent cytotoxic effect, significantly reducing tumor cell survival at low concentrations. We believe that this selective activity helps to ensure that 171 specifically targets mesothelium-expressing tumor cells, minimizing potential off-target effects and improving safety. The demonstrated efficacy across high and moderate mesothelium-expressant tumors suggests a broad therapeutic potential for 171 in treating various cancers, as shown in the previous slide. The Phase I study design is now available on the clinicaltrials.gov website under the MCT number 065-23803.

Speaker Change: Importantly, in cell lines with relatively low mesothelium expression, reflective of mesothelium expression on normal healthy tissue, 171 showed minimal cytotoxic effects, similar to the negative control.

Speaker Change: We believe that this selective activity helps to ensure that 171 specifically targets mesothelium-expressing tumor cells, minimizing potential off-target effects and improving safety profiles.

Speaker Change: The demonstrated efficacy across high and moderate mesothelial expression tumors suggests a broad therapeutic potential for 171 in treating various cancers as shown in the previous slide.

Speaker Change: Based on these promising preclinical results, we are preparing to further validate these findings in a clinical setting.

Speaker Change: We expect to dose the first patient this year in our Phase I

Speaker Change: 171 and participants with advanced or metastatic ovarian cancer, non-small cell lung cancer, and other mesothelial and expressing cancers.

Speaker Change: The Phase I study design is now available on the clinicaltrials.gov website under the MCT number 065-23803.

Speaker Change: The global study is expected to enroll 160 participants across North America, Europe , and Asia-Pacific regions.

Paul Moore: Part one of the study will evaluate the safety and tolerability of 171, and part two of the study will evaluate the tumor activity of 171, according to the RESIST evaluation criteria. We'll continue to evaluate safety and tolerability. We look forward to reporting the first patient dose in the near future and discussing progress in the coming earnings. Platinum-resistant ovarian cancer tumors express some level of Foley receptor alpha, with 35% scoring as Foley receptor alpha.

Speaker Change: Part 1 of the study will evaluate the safety and tolerability of 171, and Part 2 of the study will evaluate the anti-tumor activity of 171.

Speaker Change: According to the Resist Evaluation Criteria, we'll continue to evaluate the safety and tolerability.

Speaker Change: Conclusion criteria includes pathologically confirmed diagnosis of cancers with evidence of locally advanced, unresectable, and or metastatic disease.

Speaker Change: Cancers that are refractory to all available standard of care treatment, cancers for which no standard of care treatment is available, or the participant cannot tolerate or refuses standard of care therapy.

Speaker Change: We look forward to reporting first patient dose in the near future and discussing progress in the coming hearing calls.

Speaker Change: And I'm moving to...

Speaker Change: ZW191, which highlights our continued focus on targeting individuals with high levels of expression, as I described earlier.

Speaker Change: As illustrated in the attached slide, folic receptor alpha is frequently overexpressed in a substantial portion of non-small cell lung cancer, ovarian cancer, and endometrial cancers.

Speaker Change: In non-small cell lung cancer, in non-small cell lung cancer adenocarcinoma, for example, over 70% of patients have been reported to exhibit full receptor alpha positivity, with significant portions demonstrating high expression levels.

Speaker Change: As defined by a TPS over 50% and an IHC score greater than or equal to 2+.

Speaker Change: Similarly, in ovarian cancer, around 80%...

Speaker Change: Platinum-resistant ovarian cancer tumors express some level of Foley receptor alpha, with 35 percent scoring as Foley receptor alpha high.

Speaker Change: Endometrial cancer also presents a notable opportunity with 33% of tumor scoring that's fully receptor alpha positive and 15% that's fully receptor alpha high.

Speaker Change: By focusing on antigens such as coloreceptor alpha, which are commonly expressed in these cancers, we aim to develop treatments that not only demonstrate strong therapeutic efficacy, but also minimize off-target effects, potentially improving patient outcomes.

Paul Moore: We are pleased to report that the FDA has cleared the IND submission for 191. We are looking forward to seeing how our unique design and novel payload for the CDC translates in a clinical setting. As we have discussed previously on these calls, our efforts in developing a novel topoisomerase 1 inhibitor, or TOPO1A1 inhibitor, have been successful. I, Pierre Lourdes, Nunes.

Speaker Change: We are pleased to report that the FDA has cleared Andy's submission for 191. We're looking forward to seeing how our unique design and novel payload for the CDC translates in a clinical setting.

Speaker Change: As we have discussed previously on these calls, our efforts on developing a novel topoisomerase 1 inhibitor, or TOPO1, have been successful.

Speaker Change: I, Phil Wood, Nunes.

Speaker Change: ZD06519 has focused on selecting properties that we expect would drive strong efficacy while maximizing tolerability.

Unknown Executive: 6519 was designed and selected to potentially allow high antibody doses in humans compared to AECs with more potent TOPO1 inhibitor payloads. In non-human primate studies, we observe superior tolerability of the 519 ADCs, as exemplified by the 120 mg per kg dose of ADCs with a drug antibody ratio of 4. We then implemented well-established and clinically validated lipor and antibody attachment chemistry with a balanced approach of designed instability. As you can see in the bottom section of the table, DDCs of higher stability show unexpected or higher toxicity compared to the DXD platform. As you can see, 191's monoclonal antibody, in dark blue, demonstrated higher levels of internalization compared to the monoclonal antibodies from Elahir, Moorup202, Stro002, and Pro1184.

Speaker Change: Specifically, moderate potency with high bystander activity.

Speaker Change: 6519 was designed and selected to potentially allow high antibody dose in humans compared to the ACs with more potent TOPO1 inhibitor payloads.

Speaker Change: That's evidenced by the DXD ADCs.

Speaker Change: In non-human primate studies, we observed superior tolerability of the 519 ADCs as exemplified

Speaker Change: at the 120 mg per kg dose of ADCs with a drug antibody ratio of 4.

Speaker Change: We then implemented well-established and clinically validated linker and antibody attachment chemistry with a balanced approach of designed instability.

Speaker Change: As you can see here in the bottom section of the table, DDCs with higher stability show an unexpected or higher toxicity compared to the DXD platform.

Speaker Change: Slide 17, as we highlighted in our AACR poster presentations earlier this year, we demonstrate the relative internalization by 191's folate receptor alpha monoclonal antibody compared to folate receptor alpha-encarotene antibodies incorporated in four other ADC programs.

Speaker Change: As you can see, 191's monoclonal antibody, in dark blue, demonstrated higher levels of internalization compared to the monoclonal antibodies from Elahir, Morav-202, Stro-002, and Pro-1184.

Speaker Change: This observation is consistent with our decision to select the 191 monoclonal antibody from a larger pool of antibodies for its ability to deliver payload through enhanced internalization and our care in factoring in all components of the ADC in designing our candidates.

Speaker Change: This type of spheroid model is more protective of anti-tumor activity in in vivo models than traditional 2D cell-like models and also aids in the detection of ADC mechanism of action, which gives us confidence in being able to replicate these results in humans.

Speaker Change: Further, for 191, we are pleased to have achieved the highest non-severely toxic dose in non-human primates of 60 mg per kg, presenting a compelling profile for potential efficacious dosing in our Phase I clinical trial, expected to initiate later this year.

Speaker Change: I will now hand over to Ken, our CEO and Chair, for closing remarks before we begin the Q&A portion of the call.

Ken: That's great. Thank you, Paul. We're excited to see how our data-driven approach for designing and developing both CW171 and CW191 translates into our respective Phase I studies.

Speaker Change: 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.

Unknown Executive: On another business update, we're pleased to announce the appointment of Leonie Patterson as Executive Vice President, Chief Business Officer, and Chief Financial Officer, effective September 1st, through multiple phases of We're pleased to announce that our partner, Jazz, has initiated the Phase 3 EMPOWER trial, which is designed to evaluate Xanadatumab in combination with chemotherapy after progression on an HER2. We're also looking forward to the Pivotal Phase III top-line data readout in our first-line GEA study by our partner, JAGS, to estimate top-line CFS data will be available in the second quarter of 2024.

Speaker Change: 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.

Speaker Change: The owner'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.

Speaker Change: We're pleased to announce that our partner, Jazz, has initiated the Phase 3 EMPOWER trial, which is designed to evaluate Xanadatamab in combination with chemotherapy after progression on an HER2. Well, it's an opportunity for Xanadatamab to be the first HER2-targeted therapy to demonstrate efficacy and safety in breast cancer patients.

Speaker Change: After Inherited Treatment.

Speaker Change: Together with our partners Gaz and Beijing, we look forward to sharing more data on Zenodatamab's efficacy this year during peer-reviewed medical meetings where we can further validate Zenodatamab's potential to improve the standard of care for these patients.

Speaker Change: We're also looking forward to the pivotal Phase 3 readout, top-line data readout in our first-line GEA study by our partner JAZ, who estimate top-line CFS data will be available in the second quarter of 2025.

Unknown Executive: In the near term, we also look forward to an important catalyst, our upcoming FDUFA date of November 29, 2024, for our Xenodata MEV filing and second-line BPC in the United States. This decision reflects our confidence in the future outlook for our business. The potential of our product candidate portfolio and the long-term value of our preclinical and clinical development pipeline. We believe our stock is currently undervalued and see this buyback as a strategic way to invest in ourselves through thoughtful capital allocation ahead of upcoming expected catalysts in 2024 and 2025.

Speaker Change: In the near term, we also look forward to an important catalyst, our upcoming FDUFA date of November 29, 2024, for our Xanadata MAP filing and second-line BPC in the United States.

Speaker Change: Before we turn the call over to Q&A, I'd like to talk about the share repurchase program, which was announced via a press release concurrent with our second quarter 2024 financial report.

Speaker Change: As disclosed in the press release, our Board has authorized a $60 million share repurchase program with $30 million of the program repurchases expected to begin promptly and continue during the second half of 2024.

Speaker Change: This decision reflects our confidence in the future outlook for our business, the potential of our product candidate portfolio, and the long-term value of our preclinical and clinical development pipeline.

Speaker Change: We believe our strong capital position bolster BARA strategic partnerships.

Speaker Change: enables us to execute on the share of purchase program while maintaining ample cash resources to continue advancing our product candidate portfolio and providing optionality around strategic capital allocation.

Speaker Change: The Shared Purchase Program is further supported by our decision to de-prioritize the development of ZanyZetto, which allows us to reallocate that associated R&D spending.

Speaker Change: We also expect to maintain our projected cash runway into second half 2027, assuming completion of the full $60 million share purchase program based on existing cash resources and assuming the receipt of certain anticipated regulatory milestone payments.

Speaker Change: We believe our stock is currently undervalued and see this buyback as a strategic way to invest in ourselves through thoughtful capital allocation ahead of upcoming expected catalysts in 2024 and 2025.

Speaker Change: Our plan to execute the share repurchase in two phases gives us the flexibility to manage repurchases over time, allowing us to adapt to market conditions and pursue additional growth opportunities as they may arise.

Speaker Change: By reserving the remaining $30 million for future repurchases, we maintain flexibility that can enable us to capitalize on strategic opportunities without compromising our cash resources.

Speaker Change: This balanced approach and thoughtful capital allocation enables us to make prudent decisions that we believe will benefit our shareholders both now and in the future.

Speaker Change: With that, I'd like to thank everyone for listening, and I'll turn the call over to the operator to begin the question-and-answer session. Operator?

Speaker Change: We will now begin the question and answer session. To join the question queue, you may press star 11 on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star 11 again. We will pause for a moment as callers join the queue.

Operator: Our first question comes from the line of Stephen Walley at Stifle. Stephen, your line is now open.

Speaker Change: Our first question comes from the line of Stephen Walley at Stifle. Stephen, your line is now open.

Stephen Wally: Yeah, good afternoon. Thanks for taking the questions and thanks for getting 171191 on the clinic.

Stephen Wally: I'm just wondering if you can speak to the levels of b-zephylline and fully receptive alpha expression that you're requiring at baseline for the phase one. What are the IHC cutoff values that you're requiring for both?

Speaker Change: 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.

Speaker Change: Sure, thank you, Stephen. Maybe I'll ask Pranchal, who's the Global Clinical Lead for ZW171. He wants to answer some, but maybe not all of those questions, Stephen.

Unknown Executive: Hi Stephen, thank you for your question. I can share with you what's publicly available on clinicaltrials.gov. To start off, I think you asked about the expression levels of mesothelin and folate receptor in Alzheimer's studies. Initially, in our dose escalation phases, we'll be analyzing expression levels retrospectively. So there's no cut off as such. Some of these are yet to be validated for me to see, 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 CW171 in clinic. And what was your next but not least of the questions, Stephen? Sorry.

Pranchal: Hi Stephen, thank you for your question. I can share with you what's publicly available on clinicaltrials.gov.

Pranchal: To start off, I think you asked about the expression levels of leaders, Heaton, and

Speaker Change: and Foliate Perceptor Alzheimer's studies.

Pranchal: Initially, in our dose escalation phases, we'll be analyzing expression levels retrospectively, so there's no cut-off as such, as some of these are yet to be validated for mesothelium, for example.

Speaker Change: 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 CW171 in clinic.

Speaker Change: And your, what was your next but last question, Stephen, sorry. Oh, it's the question of any starting dose, step up dosing, and then any.

Unknown Attendee: It is just a question of any starting dose, step-up dosing, and then any inpatient administration requirements.

Unknown Executive: The starting dose is something we haven't shared publicly yet. There will be a requirement for inpatient treatment in a small subset of patients during the dose escalation phase. 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.

Shrinal Inamdar: and Shrinal Inamdar.

Speaker Change: The starting dose is something we haven't shared publicly yet. There will be a requirement for inpatient in a small subset of patients during the dose escalation phase. This is mandated by regulatory requirements in our discussion with the regulatory bodies.

Speaker Change: However, we do intend to work at different strategies for dosing, where we will explore dosing without hospitalization requirements later on in the study.

Unknown Attendee: Okay, can I just ask a clarification question? On the mesothelian side, and I guess maybe even on the Foley 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.

Speaker Change: Okay. Can I just ask a clarification?

Speaker Change: questions. So just so that I'm clear on the mesothelium side, and I guess maybe even on the Foley receptor alpha side.

Speaker Change: 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

Speaker Change: IHC. Exactly. Okay.

Speaker Change: Thank you. Our next question comes from Yigal Nochomovitz from Citi. Yigal, your line is now open.

Yigal Natchomovitz: And then the second one, on the general ADC strategy, do you see any risk in using the same payload for your three ADC programs? What gives you confidence about this payload?

Operator: Two great questions. Paul, would you like to answer both of those questions?

Yigal Natchomovitz: Sure, sure, so...

Speaker Change: First of all, on our confidence level in 2020 being successful,

Speaker Change: That really comes down to, you know, the design of our...

Speaker Change: Unknown Executive, Shrinal Inamdar, Unknown Executive, Shrinal Inamdar, Unknown Executive,

Speaker Change: That, we feel, is very important, that level of potency, overall, across all our ADCs, and particularly for...

Speaker Change: NAPI, there we think, again, the safety profile and the efficacy profile and the use of a TOEFL payload, which is not what others have tried before, differentiates our program from previous efforts to target through an ABC approach.

Yigal Natchomovitz: So, we're, you know, 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, our preclinical data supports that when we benchmarked it against..

Speaker Change: competitive programs or prior programs, both the efficacy profile and the breadth of patients that we can tackle with this payload balance.

Speaker Change: Thanks, that's helpful.

Speaker Change: Thank you. Our next question comes from the line of Akash Tiwari from Jeffreys.

Akash Tiwari: Akash, your line is now open.

Speaker Change: Thank you. Our next question comes from the line of Brian Chang at JP Morgan.

Brian Chang: The phase one was posted on clinicaltrials.gov. How should we think of the side effect profile based on the target you selected? I'm 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. Thank you.

Unknown Attendee: And I have a quick follow-up.

Operator: Paul, do you want to take the first question about preclinical characterization, the tolerability of mesothelium, and what we might see?

Paul Moore: target the tumor without avoiding the normal. And so that's why we spent so much time preclinically trying different formats to get a format that gave us that better window where we wouldn't have activity in low-expressing models. So the goal is to identify the types of tumors that represent normal tissue levels of mesothelium but are very potent and don't compromise the anti-tumor activity on the mesothelium-positive tumors, the high-expressing.

Speaker Change: And that's why we spent 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

Speaker Change: that represent normal tissue levels of mesothelium but has very potent and doesn't compromise the anti-tumor activity on the mesothelium-positive tumors, the high-expressing.

Paul Moore: And that we've seen in our preclinical profile. You know, we've taken the molecules into non-human primates. We've done a lot of other things, evaluation of the molecules regarding safety, and there we haven't, you know, we haven't seen evidence of toxicity. Of course, we have to, you know, going into the clinic, we'll have to monitor that and pay attention there; that's part of the dosing strategies. As Pranshal alluded to, it will be evaluated, but so far, we really tried to come up with a design in the mouth to address exactly what you're asking.

Speaker Change: And that we've seen in our preclinical profile, you know, we've taken the molecules into non-human primates. We've done a lot of other...

Brian Chang: evaluation of the molecules on regarding safety. And there we haven't, you know, we haven't seen

Speaker Change: And I'll let Pranchal answer the second question about the number of dose levels planned for the Phase I study.

Pranchal: I think you had another question.

Speaker Change: Yeah. Thank you for the clarification. We just have a quick modeling question. So we saw that the cash run rate hasn't changed, but with ZeniZo now discontinued, is there any near-term impact that we should model for the R&D expenses? Thank you.

Speaker Change: Yeah, there will obviously be a subsequent decline in some of the expenses that would have been related to continued spending on ZanyZo to complete the...

Speaker Change: So, that's the plan phase two study and prepare for our registration study. So, that will decline over the next period of time. And again, that's

Speaker Change: program from our share of purchase 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 of purchase program over time.

Unknown Attendee: Thanks for taking our question.

Operator: Thank you. Our next question comes from the line of John Miller at Evercore. John, your line is open.

Speaker Change: Thank you. Our next question comes from the line of John Miller at Evercore. John , your line is now open.

Jonathan Miller: Yeah, thank you very much for taking the questions. I'll start on the mesothelial program. I know you mentioned you'll be looking at mesothelial expression retrospectively in some of these patients. I guess, what are your expectations for those mesothelial-negative patients? Presumably, there would be an absence of expected activity there, but there's the absence of sufficient antigen. You know, I know you don't see tox from a cytotoxicity perspective in normal expressing patients, but can you drive CRS or T-cell exhaustion by circulating T-cells if you don't have a good antigen sink to sop up the bispecific to the tumor itself?

Speaker Change: I'll start on the Mesothelian program. I know you mentioned you'll be...

Speaker Change: looking at mesothelial expression retrospectively in some of these patients.

John Miller: I guess, what are your expectations?

Speaker Change: For those mesothelial and negative patients, presumably there would be an absence of expected activity there, but...

Unknown Attendee: And sort of separately, maybe relatedly, you note in the slides that you have potency even in the presence of soluble mesothelium, and I'd love to get a little bit more color on that. Is that driven by the binding mode? Do you not bind soluble mesothelium, or is there something else going on that's helping you maintain activity?

Speaker Change: that you have 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 binding mode? Do you not bind soluble mesothelin or is there something else going on that's that's helping you maintain activity?

Unknown Executive: I'm not sure. I'm not sure. I'm not sure.

Speaker Change: No, thanks, John. Paul, do you want to address both of those questions for me as a student?

Unknown Executive: That, you know, you wouldn't have a mesothelium target, or it would be limited.

Speaker Change: That, you know, you wouldn't have a mesothelium target, or it would be limited.

Paul Moore: I mean, most of the tumor types that we're going into have some level of mesothelium, so we would probably not think it's possible, you know, unlikely, but you're right, it theoretically could happen. And I think then, but your question about then, that then leading to potential, you know, deleterious effects through T cell exhaustion or having a negative effect.

Speaker Change: The other part about the soluble mesothelium there, we tested that.

Speaker Change: Impact on activity, you really need to be lodged or binding to a cellular surface as opposed to a soluble protein.

Speaker Change: So that, you know, happy to share more data on that with you and discuss it further, John. But the data, you know, speaks to that and supports that mechanism of action.

John Miller: I would love to talk more about the detail there, but maybe not on the Q&A session here. I guess, can I ask a follow-up on the Bullet Receptor Alpha program? One of the things you said in the prepared remarks,

Speaker Change: was that you were specifically looking

Speaker Change: for a payload that would support a higher antibody dose.

Speaker Change: and I guess I'm curious why that's intrinsically valuable given that blocking FR-alpha isn't in itself effective. So what's the benefit to giving a higher dose versus a lower dose if aggregate payload toxicity is similar?

Speaker Change: Yeah, yeah, that's a good question. I think, you know, there's, there's, you know, they are partly thinking is that

Speaker Change: 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, you know, just a penetrance through into the tumor, only one to two percent of the antibody actually gets to site.

Speaker Change: 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 internalization, because you also want what does get to the tumor to also internalize very efficiently.

Speaker Change: So that's where our thinking on the design there is, and by having a more moderate payload 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 could then get to tumor.

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

Speaker Change: Make sense. And then I guess one final one on the share repo. I guess I'm just curious about this is a use of capital.

Speaker Change: Given expectations for five-plus programs in the clinic and a very obviously very active drug discovery effort, is there really excess capital at this point to return cash to shareholders versus driving value through clinical development?

Speaker Change: ZW220 and ZW251 are on schedule.

Speaker Change: to go into the clinic next year. They're well-funded. Beyond that, the fifth indication, and what's in Paul's.

Paul Moore: 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.

Speaker Change: 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

Speaker Change: Total shareholder return, and we're certainly convinced that

Speaker Change: that a thoughtful capital allocation process as with periodic buybacks and a smart R&D strategy.

Speaker Change: can co-exist in a biotech company.

Speaker Change: and hopefully that's the way to optimize total shareholder return over the long term and that's what that's what we're committed to.

Speaker Change: and we've seen the opportunity now uniquely to do it in front of some catalysts 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 so that's what we've chosen to do.

Operator: Thank you. As a reminder to join the question queue, you may press star 11 on your telephone keypad. You will hear a tone acknowledging your request.

Speaker Change: All right, thanks very much.

Speaker Change: Thank you. As a reminder to join the question queue, you may press star 11 on your telephone keypad. You hear a tone acknowledging your request. You're using a speakerphone, please pick up your handset before pressing any keys.

Operator: Our next question comes from the line of Robert Burns at HC Wainwright.

Operator: Robert, your line is open.

Robert Burns: from me if I may. With regard to 171, you know, from a go slash no-go signal perspective in the dose escalation, what are you looking to achieve in particular with regard to ovarian cancer and NSCLC and would what Gavisal demonstrated in ovarian cancer be a good reference point for us?

Speaker Change: Good question. I'll let Pranchal decide how he wants to answer that question, what we're looking for. Yeah, very good question. I think...

Pranchal: Initially we want to assess the safety and tolerability of our assets. Paul's group has spent 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...

Speaker Change: would be on a mesothelium targeting agent

Speaker Change: that shows safety and tolerability. So that's the core of the phase one study. We will gather data on efficacy in these tumor types.

Speaker Change: and these will be measured using RISA's criteria to measure our objective response rate. We'll be gathering other data such as PFS data and OS data, but the fundamental of the Phase 1 study is to focus on safety and tolerability.

Speaker Change: All right, thank you.

Unknown Executive: Paul Moore, Shrinal Inamdar, Zymeworks Inc.

Unknown Executive: Yeah, that's great. Well, thank you very much for your time and attention today and for listening to questions, and we very much look forward to reporting on progress against our milestones for the remainder of 2024. Please stay tuned, and we'll provide some updates on progress throughout the course of the year. Thank you very much.

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