Stifel reiterates buy rating for Zymeworks stock after ASCO meeting

Stifel analysts reaffirmed their Buy rating and $28 price target for Zymeworks (ZYME) following positive Phase 2 trial results for zanidatamab combined with chemotherapy in HER2-positive gastric and esophageal adenocarcinoma, citing potential outperformance versus the current standard of care. The analysts are optimistic about the ongoing Phase 3 HERIZON-GEA-01 trial, with topline data expected in the second half of 2025, and noted the company's strong financial position. Zymeworks reported a significant increase in first quarter 2025 revenue, driven by milestone payments, and received conditional approval in China for zanidatamab for HER2-positive biliary tract cancer.

Analysis

Stifel analysts have reaffirmed a Buy rating and a $28.00 price target for Zymeworks (NASDAQ: ZYME), contrasting with its current trading price of $11.64, amidst analyst targets ranging from $12 to $30. This optimism is largely driven by updated Phase 2 trial results for zanidatamab combined with chemotherapy in first-line HER2-positive gastric and esophageal adenocarcinoma (GEA), which demonstrated an impressive approximately three-year median overall survival. Stifel anticipates this combination could outperform the current standard-of-care, with pivotal topline data from the Phase 3 HERIZONGEA-01 trial expected in H2 2025. Zymeworks exhibits strong financial health, evidenced by a current ratio of 4.71 and a balance sheet showing more cash than debt, supporting its ongoing clinical development. The company reported a significant Q1 2025 revenue increase to $27.1 million, up from $10 million year-over-year, primarily from milestone payments from partners like GSK and Daiichi Sankyo, although it posted a net loss of $22.6 million, an improvement from the prior year's $31.7 million loss. Over the last twelve months, revenue grew 85%, though Zymeworks remains unprofitable. A key regulatory milestone was achieved with China's National Medical Products Administration granting conditional approval for zanidatamab in HER2-positive biliary tract cancer. While Stifel and TD Cowen (initiating with a Buy) are positive, H.C. Wainwright maintains a Neutral rating. The competitive landscape for Zymeworks' ZW191 is highlighted by presentations on FRα-targeting ADCs from Eli Lilly and Genmab. Preliminary data for Johnson & Johnson's pasritamig, which could bring financial milestones to Zymeworks, was also noted as intriguing.

Key Decisions for Investors

• Investors should consider the significant upside potential indicated by Stifel's $28 price target against the current $11.64 price, while acknowledging the wide range of analyst targets ($12-$30) and the company's current unprofitability.
• Monitor the topline data from the Phase 3 HERIZONGEA-01 trial for zanidatamab, expected in H2 2025, as this will be a critical catalyst for the stock.
• Factor in Zymeworks' strong financial position (current ratio 4.71, more cash than debt) and recent revenue growth, which mitigates some development risk, but also weigh the competitive pressures in the ADC market, particularly for ZW191.
• Note the recent conditional approval of zanidatamab in China as a positive de-risking event, and consider diversifying exposure given the mixed analyst ratings and the long-term nature of biopharmaceutical investments.