Thank you for standing. This is the conference operator. Welcome to Zymeworks Second Quarter 2022 Results Conference Call and Webcast. As a reminder, all participants are in a listen-only mode and 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 Jack Spinks, Associate Director of Investor Relations at Zymeworks. Jack, please go ahead.

Good afternoon, and welcome, everyone. My name is Jack Spinks, Associate Director of Investor Relations here at Zymeworks. Today, we will discuss our second quarter 2022 financial results as well as provide an update to 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 statements that relate to the implementation of our strategic priorities, development of our product candidates, related clinical trials, anticipated data presentations, potential therapeutic effects of zanidatamab and our other product candidates, our proposed redomicile transactions and the anticipated timing and benefits; expected financial performance and future financial position, the commercial potential of technology platforms and product candidates, anticipated continued receipt of revenue from existing and future partners, our preclinical pipeline, anticipated impact of the ongoing COVID-19 pandemic and our anticipated response to the same, anticipated sufficiency of cash resources and other potential sources of cash to fund our planned operations into the second half of 2023 and potentially beyond, impact of new hires, our ability to execute new collaborations and partnerships, and other information that is not historical information. 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 our stage in development.For discussion of these risks and uncertainties, we refer you to our latest SEC filings is found on our website and as filed with the SEC. In addition, please note that today's earnings call does not constitute an offer to sell or a solicitation of an offer to buy any securities or a solicitation of any vote or approval in connection with the proposed redomicile transactions. Zymeworks Delaware Inc. is filed with the SEC, registration statement on Form S-4 that…

Thanks, Jack, and thank you, everyone, for joining us today for our second quarter earnings call. As a reminder, I'd like to note that while I'll be presenting the prepared remarks today, members of our executive team will be available for questions and answers following this portion of the call. Before I speak to our financial results, I'd like to briefly announce and congratulate Neil Klompas on his recent appointment as President in addition to his current role as Chief Operating Officer. Neil has played an important role in the Company's reset over the past six months, and this expansion of his leadership responsibilities is a natural step in the future growth and development of the Company. I also want to welcome Dr. Paul Moore to Zymeworks as our new Chief Scientific Officer. Paul started with us on July 18 and has already begun to make valuable contributions to our early R&D efforts with his R&D colleagues. With that, I'd like to jump right into the overview of our financial results, followed by an update on both our clinical and R&D programs as well as a noteworthy corporate update, followed by a few brief closing remarks before we open up the line for question and answers. This afternoon, Zymeworks reported financial results for the quarter ended June 30, 2022. As reported, our revenue for the second quarter of 2022 was $5.4 million compared to $1.7 million of revenue for the same period of 2021. Revenues for the most recent three-month period, primarily related to a $5 million fee from the previously announced Atreca licensing agreement. Research and development expense for the quarter ended June 30, 2022, was $56 million compared to $50.7 million for the quarter ended June 30, 2021. This increase in the prior year related primarily to higher…

[Operator Instructions] Our first question comes from the line of Yigal Nochomovitz with Citi.

I just wanted to ask about your strategy in first-line biliary given the data from TOPAZ-1 earlier this year from Imfinzi plus GemCis. Given that data and obviously, depending on the results of the Phase II zani plus GemCis in first-line biliary that you're running. Just wondering whether you could consider adding tislelizumab to the first-line biliary regimen, which could build on the learnings from TOPAZ-1? Because if you were to do the quad regimen of zani plus tislelizumab plus GemCis in your pivotal trial in biliary, perhaps this could be an interesting way to differentiate from TOPAZ-1. I'm curious your thoughts on that strategy.

Yes. Thanks for the question. And again, I think, as you said, we're extremely optimistic in our current pivotal study using zani as monotherapy in second-line patient populations. And that has a potential to be the first HER2-targeted therapy for that patient population. So we're optimistic by the data we saw previously with zanidatamab, we're happy to be able to get to a top line data set earlier than we have expected. I think we're still recruiting in our ongoing Phase II study with first-line biliary tract cancer patients. And so that is an interesting data set for us. I think at the time that we have our ability to attract cancer data later this year, we'll be prepared then to talk about the nature of regulatory filings and next steps in looking at whether we can expand the patient population beyond the current pivotal study into additional label indications. And obviously, we're following all the competitive data sets that might be available for this patient population, although we're the only ones really with a HER2-targeted therapy for the patients that we're really looking to treat. So I think we'll have more to say about that once we get to our pivotal data release later this year, if that's okay.

Okay. Got it. And then specifically on ESMO and the mini oral presentation for ZW49 that's coming up. I think you mentioned that it's going to feature a basket cohort of HER2-positive cancers. I just wanted to check -- does that mean that that's going to include the HER2-positive breast and HER2-positive gastroesophageal at the 2.5 mg per kg Q3 weekly regimen? Or are we going to see a basket of HER2-positive cancers outside of breast and GEA at ESMO? Just clarify.

Yes, I'll ask Dr. Neil Josephson, to address the question of what patients were recruited in that study and what you're likely to see at ESMO with respect to that.

Sure. Thanks, Ken. This is Neil Josephson. Yes. The patients that will be presented at ESMO will include breast cancer -- HER2-positive breast cancer, HER2-positive gastric cancer. And then a mix of other HER2-positive tumors. So you'll see all of the patients that have been enrolled on the ZW49 study, and that does include breast and gastric cancer.

And should we expect it coming out of ESMO that we'll be able to learn the recommended Phase II dose going forward for this program?

So we will have information about dosing and about what doses we will potentially take forward. So I think that you're referring to a Phase II dose singular phenomenon. And certainly, there we will have a recommended dose that we will be taking forward, but there could be more than one that we would pursue depending on all of the results of the Phase I study.

And then just one last one, I guess, for Ken, just in terms of higher level strategy in the ADC world, obviously, given the DESTINY-Breast data earlier in the year from in HER2. Strategically, are you going to be kind of pivoting away from HER2 breast and focusing more on HER2 gastroesophageal and other HER2-positive cancers for your ADC? Or do you believe that you still want to pursue HER2 breast aggressively?

Yes. I think in HER2-targeted therapy, we feel very comfortable with zanidatamab in the pivotal studies we have ongoing right now in biliary tract cancer and the GEA study, which is under recruitment. As you know, we have other data in breast cancer and beyond that, that could be interesting for expansion beyond initial markets in BTC and GEA that we hope to serve pending positive data and successful approvals. So I think we're quite excited about that and its potential impact on the HER2 population, including in combination with other agents, which, of course, was the basis for the zanidatamab plus palbo plus fulvestrant breast cancer study, which is recruiting nicely, and we've submitted an abstract for presentation you have to be present that in the fourth quarter. So with respect to zanidatamab, I think we feel comfortable with the positioning of that in the patient population and the benefit we could have for patients beyond what's currently available and also what's in development. I think with respect to ZW49, we're working hard, as you know, to find a dosing regimen or more than one dosing regimen that we can take forward that would provide efficacy to justify future clinical development possibilities and also the tolerability around that efficacy, and we look forward to sharing that information at ESMO and in our investor webcast. I think we're giving a lot of thought to ZW49 in the clinical development strategy in light of, as you say, other competitive products that have come to market in the development. And we think we have a strategy around clinical development of ZW49 or zanidatamabzovodotin that we think could be compelling and could provide a benefit to patients beyond what might be available from other therapies either in the market or in development right now. So I think we're very committed to zanidatamab and ZW49 as being two potential products that could help that patient population. As we talked about with our earlier stage program, I think going beyond those two agents, I think there's a host of other targets in other cancer indications that we laid out that we think we -- in our advanced biologics would definitely benefit that patient population and potentially provide benefits that can't be seen with other product formats. And so with our future product pipeline, we'll be going beyond the HER2-targeted patient population and exploring other potential indications with those agents.

Our next question comes from the line of Gena Wang with Barclays.

This is Tong, on for Gena. We have two questions, one for ZW49. So for the updated upcoming data in ESMO, how many patients can we expect in total and especially from the cohort with one- and three-week dosing? And what kind of duration would you expect? And secondly, for ZW25, just wondering how is the enrollment going for the GEA pivotal trial, given the first-line triple combo in place?

Yes. Thank you for the questions. With respect to ZW49, I'm afraid you'll have to wait until the abstract is available on September 5. And then obviously, our presentation which will be provided by our investigator on September 12 to get the total details about patients, which are being disclosed at that time. We also will have an investor webcast on September 12 after our mini oral presentation to provide additional information. So I'm afraid for that one, you're going to have to wait until the actual ESMO conference. With ZW25, I think we're quite encouraged by our patient recruitment so far in the GEA study. As you're aware, we chose not to recruit patients in the United States because of the accelerated approval that occurred there with another competitive therapy. So we're recruiting entirely outside the United States, and I think we're quite happy with the recruitment that's ongoing with that study. I think as you've seen with others zanidatamab studies, they tend to accelerate later in the clinical study time period and that happened with our pivotal study in BTC, which we'll read out before the end of this year. And I think it's happened in our study with zani and palbo and fulvestrant, where I think as soon as investigators got some experience to the agent, we saw recruitment track up nicely in that regard. And I think we're excited to see the same thing. I think the data we set out at ESMO on the first-line -- treatment of first-line patient with zani and -- zanidatamab and chemo were very encouraging to investigators. We've obviously continued to follow those patient population, which is now fully enrolled in chemo. We're very encouraging to investigators. We've obviously continued to follow those patient population, which is now fully enrolled, and we hope to give an update of that in the first half of 2023. I think we're very encouraged by the longer-term follow-up of that fully enrolled patient population and the benefit that seems to be provided by zani plus the chemo regimen and also given the fact that chemotherapy regimen, as you know, is dropped after a number of cycles and patients remain on zanidatamab alone. So I think -- all those things together, I think, will encourage further clinical study enrollment, and we do expect it to accelerate as our other studies had as we get further through the clinical study itself.

Nick Abbott with Wells Fargo.

I was almost dropping off to sleep there. So Ken, maybe the first one for me is the press release states your progress towards previously announced goal of delivering upon new partnerships, collaborations, monetization opportunities. You didn't address that in your prepared comments. So can you provide us with some clarity on what this progress is and maybe what expectations should be?

Yes. Thanks for the question, Nick. And I'll do my best. I think as we talked about earlier in the year, we're -- first, we're making very nice progress this year without the benefits and resources of new partners. And I think we're working well -- nicely with BeiGene in our areas of cooperation. So I think we're really excited about the progress that we're making without the benefit of additional resources. I think we've got active and very wide-ranging discussions underway throughout the portfolio that I think will allow us to do what we talked about in January is the importance of this company using a more fulsome and integrated partnership model. So I think we'll be able to monetize the value that we've generated to date. I think, we can find ways to accelerate and broaden our business plans that will make us more competitive in light of an enhanced competition in the HER2 space. And I think, most importantly, leave open the possibility for a broader transaction, including an outright acquisition in the future from an existing partner or a brand-new third party, and we've heard that very important to our shareholders, and we've listened to that, and we will make sure that we don't eliminate that possible in the future from the partnerships and collaborations that we're going to form. So we've got active and midrange discussions underway, but having done this a long time, we won't provide any specific guidance about time frame or structure or a party of nature. We will get these deals done and announcement and explain the rationale and the impact on the Company. As I said earlier in January, I think working in a more fulsome integrated partnership models throughout the portfolio is very important to Zymeworks, and that's what we'll be doing from now into the future. So we fully expect to be able to complete a number of partnerships and collaborations in 2022 and 2023 which will allow us to operate our business a little bit differently than we did before January of this year. So we're working hard on it. We won't give any specific guidance until things are complete, and then we'll be happy to explain the rationale for transactions once they're completed.

Okay. And then just moving on to this quiet at ESMO. Once we've seen the data, will we have clarity around where this drug is active in patients who have failed in HER2? I know last -- on the last quarter, you mentioned you're seeing more and more of these patients coming in. But presumably, a lot of the data we're going to see in ESMO is going to be on patients that were enrolled prior to broader use of in HER2. So I'm just wondering whether there's a aftermarket option following HER2 failure and more broadly, what future development options are you considering? Please go ahead.

Yes. Really good question, Nick. And again, unfortunately, you're going to have to wait until ESMO to see our presentation and in the investor webcast, we'll be as fulsome as we can about all those questions which you just asked. Obviously, as I think we mentioned earlier, we're seeing more and more on HER2 failures in all of our studies. We didn't exclude HER2 failures in the ZW49 studies. So there could be patients in there what we can make of the data and how long those patients have been studied is something you'll have to wait to get to ESMO. I think, our goal at ESMO is the Company has never reported clinical data on ZW49 since the start of its IND a number of years ago. And I think we want to provide the wholesome data set that we can about what we see with this agent from an efficacy and tolerability standpoint. The rationale for a regimen or more than one regimen, which might be available to go forward and also a clinical development plan -- next steps for clinical development plan that we think makes sense because we think we have an agent that could be extremely competitive and we'd like to invest further in the clinical development of that molecule in light of what we see in competition, in light of what we see as unmet needs in specific indications in the HER2 space. Whether that includes strategies around looking at future patient populations who progress after in HER2 is obviously something that we and others are considering and understanding how you would address that patient population on the clinical development plan and what the economic value would be to that sort of clinical development plan. So we'll have as much to say as we can on September 12. But unfortunately, until we get to that point, you'll have to wait to have that question addressed.

Okay. And then just one more clarification. I think you said that zani, pablo and fulvestrant that you've submitted an abstract. Does this clarify that you did cleared out in presumably the phase II [indiscernible]?

Yes. We didn't specify the conference. We've obviously given guidance about it being a medical meeting to be held in the Q4 that will be focused in this indication, but we wouldn't be specific about that until we had our abstract submitted. I think we're -- as we said before, we're quite excited about this potential combination in this patient population. The study is recruited very nicely and again, accelerated over time, which is always a good sign for the clinical study. And we're excited to present our current findings in this study. And so we've moved as quickly as we can to get that. So we did submit an abstract for a medical meeting that occurs in the fourth quarter and we confirm that. And as soon as we're able to say that we had an abstract accepted, we'll provide those details and look forward to being able to present that before the end of this year.

Our next question comes from the line of Charles Zhu with Guggenheim Securities.

Congrats on all the progress. My first question is regarding ZW49. And I understand you're not commenting on whatever you may or may not present at ESMO? I had a related question, not specific to ESMO, but I'm just looking at your updated slides, it looks like you may have cleared 2.5 milligrams per kg at the Q3 weekly dose and also it looks like you've already cleared 1.5 mg weekly and are evaluating 1.75 mg weekly. It doesn't exactly take a rocket scientist to see that your exposures have effectively nearly doubled. I'm just kind of wondering like how we should be thinking about things like the impact of Cmax, total area under the curve and exposure as far as efficacy and toxicity specific to those may be concerned with antibody drug conjugates?

No, thanks for the question, Charles. And again, I think we won't try and get ahead of the ESMO meeting. I mean, obviously, the Company has spent some time studying every three-week dosing with ZW49, and we should be able to present a pretty fulsome picture there of what efficacy we think we see and what the side effect profile is of that agent in picking a recommended Phase II dose. And obviously, we've gone up in the dose escalation and dose expansion as you've mentioned. As you know, the Company started a weekly dosing regimen to try and understand what happened to efficacy and tolerability, and we've been working through that process in the dose escalation and dose expansion. And we look forward to present everything that we have at ESMO and what the future direction might be. And again, I think not to get ahead of ESMO, but I think there wouldn't be any reason to expect that there may be more than one dosing regimen, which might be suitable for patient populations to study in the future. And again, as you know, some agents, I think included in trial, have more than one dosing regimen which might be applicable. But we'll look forward to presenting everything we've done to date because we've never presented any clinical data on ZW49 since the IND. So we present all the Phase I data we have. We'll provide some feedback on the next steps when we see the clinical development plan, including what recommended dose we would study in that development plan as well as additional studies that we might have ongoing with ZW49 at the time of ESMO. So I think you'll get a full sense of those questions and trying to address the specific things you mentioned about Cmax and AUC and how that might relate to tolerability and the relationship between the efficacy you generate and the tolerability that you have to accept to generate that efficacy. I think we're really encouraged by the Phase I program. We've done, its very fulsome. I think we've done some really good work around the strategic -- strategically how we can continue to develop ZW49 in light of the different competitive environment than when we started, and we still think there's a really good place to ZW49 based on its unique mechanism of action associated with the ADC that we constructed to take forward in the clinic. And we look forward to giving a fulsome discussion at ESMO during the poster presentation and our investor webcast to be held after that and explaining the rationale and answering all those questions which you just poised now on September 12. Unfortunately, have to wait for those.

Got it. Yes fully understand. And maybe just one more regarding biliary tract cancer and the readout that you have now coming at year end of 2022. I understand we're probably splitting hairs with this question. But I guess what exactly drove the change in guidance from early '23 to year end '22? And do your patients only need to be independently assessed on the primary endpoint? Or is there also a minimum follow-up that needs to be met as well?

Yes. No, I think the update in guidance is just the fact that operationally, we're performing, I think, better than we did in prior years. And it was one of the things I think I laid out in mid-January is that the Company would try and focus on fewer priorities and by focusing on fewer priorities, we would try to improve operational performance and get things done more quickly in a higher quality way or allow us to do things more broadly. And I think this is one instance where I think our folks in clinical operations and clinical research and biometrics and regulatory have done an extremely good job of working with this data set. And now we feel comfortable that we'll be able to have top line data to be announced before the end of this year as opposed into early 2023. And that also obviously gives us an earlier opportunity to present the full data set at a pretty big conference in the first half of 2023. So I don't think it's down to anything related to the patient results or the patient population we're studying. And I think it's down to just great operational performance by our team. And I think -- I hope that the focus you've had on doing fewer things and doing them better and this is an example of it. And I think you'll hopefully continue to see that throughout the portfolio and throughout all of our operations that we're much more nimble and much more focused as an organization and this will allow us to get things done in a better way, which will ultimately enhance competitive ability with both zanidatamab, ZW49 and ZW171 and 191 and other things that come out of our preclinical portfolio.

Our next question comes from the line of Stephen Willey with Stifel.

I'll spare you the ZW49 question. Maybe one on the earlier stage pipeline. And I guess I'm not looking to steal any of your R&D Day event thunder, but I know that T cell redirected bispecifics have been pretty hard. I think they've proven to be even more difficult in the solid tumor space and lot of those challenges, obviously, on safety and tolerability. So just wondering if you can speak a little bit to how you think you can best overcome some of these challenges and whether or not that's going to occur through target selection? Is it going to be playing around with CD3 affinities and variance? Is it going to be valency? Just curious as to how you're thinking you can improve upon this specifically in the solid tumor space.

No, thanks for the question. And again, for ZW49, we're very excited to talk to folks about the progress we've made, and I just don't want to get ahead of the ESMO presentation. Sorry for not being able to address any of those things in advance, but it's five weeks away, hopefully. I think in the early-stage portfolio, we have a number of programs ongoing. I think the two we identified now we're excited about, and we think that can help us meet our goal of getting IND filings by 2024 for these two programs. I think on 191, the ADC program with the new TOPO payload, we're quite excited about using our new payload and our different platform in this way. So excited to talk about that. I think on the multi-specific antibody therapeutic program, I think we had some very specific thoughts around some of the things that you mentioned. And I think the specific targets that we're looking going after and some of the things that you mentioned are things that we think are competitively positive for us in our ability to do this. And I think we can differentiate ourselves by addressing some of the issues and setbacks that I think you've seen previously with this. So we've done a really extensive assessment of different bispecific formats. I mean, this is where the Company started. We designed a whole range of bispecifics for our partners and ourselves. I think we have a good reputation for being bright and smart protein engineers, and we've used that specifically with 171. So I think through the assessment and the work that we've done previously, we've used that to come up what we think is a really interesting product candidate that we look forward to taking forward in the clinic. And on October 20th, we're happy to lay out as much detail as we can about both of these candidates, other programs that we're working on as well as the strategy moving forward and explain the rationale for how we hope to turn these two agents into the successful clinical candidates from an efficacy and tolerability standpoint. And we'll be happy to address all that on October 20 at our early R&D Day.

Our next question comes from the line of Akash Tewari with Jefferies.

This is Amy, on for Akash. Just wanted to get the Company's current stance on the acceptable rates of eye tox with the new forward dose. You've mentioned eye tox is more off-target and related to Cmax, but it seems like efficacy is generally more related to Cmin. Is the relationship between safety and efficacy linear based on, I guess, it's current PK data that you're looking at? Or is there a sweet spot that you're trying to hit with the dosing regimen that you're evaluating?

Again, I don't think we'll talk about too much detail before ESMO, but I'll just pause and ask if Dr. Neil Josephson wants to say anything about your question or whether we'll just wait until September 12 and answer it then.

Yes. I would reiterate what you said, Ken, which is that we'll let data that we have at the conference. I think that we said that we were evaluating different regimens to try to look at Cmax and exposure. I'm not sure that we ever made specific comments about what was more related to which PK parameter, but we'll lay out all the data that we have at the ESMO conference.

Great. And then I guess, I know you guys aren't talking too much about ESMO, but will we see data from your potential go-forward dose? And then I guess just from a high-level standpoint, would it be sufficient enough to compare versus in HER2? Or is it still too early?

Do you want to take that one, Neil?

Yes. Sure. Again to what we said, which was I think you'll have to wait until ESMO to actually see the data. In terms of dosing, we will have information about dosing as we had multiple times, there may be more than one dose that we would take forward. And then in terms of your question about -- to, I think that it have a different molecule then, too. It has a different payload. It has a different mechanism of action. It has a completely different profile from an adverse event standpoint. So I don't think that we are looking at this as a direction [Technical Difficulty] to HER2 at all. I think that there are development paths for this molecule that are unique from what in HER2 can develop. And so we'll -- as we layout information, we'll also try to start to give information about how we're going to take the molecule forward.

Yes. And Amy, just a follow-up. For decisions we make, like a recommended Phase II dose, we will provide all the data to support the rationale for decisions that we're making with this clinical development program. You should exceed -- you should be expect to be able to see the supporting data and rationale and then make your own determination about our interpretation and analysis and conclusions about that data.

There appears to be no further questions. I'd like to turn the conference back over to Zymeworks for closing remarks.

That's great. Thank you, operator, and thank you for your attendance today and for all of your questions. We've had a really exciting quarter on all fronts, and we really look forward to the next opportunity to present some additional data. We're looking forward at ESMO on both our poster presentation and webcast. We also have four different investment conference attendance, which allows us to present and have meetings on the same week of, as ESMO. And so we look forward to be able to explain further the data that we're presenting, the future decisions where we have going forward and what data supports those decisions and rationale. So we look forward to that, and please look forward to save the date notices for October 20 in our early R&D Day. We're really looking forward to showing the next agents to come out of the engine and technology platforms that we have at Zymeworks. And I think you'll find them very interesting for the future of the Company beyond zanidatamab and ZW49. So please keep an eye on for that October 20 and save in your calendar, and we look forward to seeing you -- some of you at ESMO and talking about our presentation in our next investor webcast on September 12. So thank you very much for your time, and look forward to seeing you soon.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.