Zymeworks Q4 2025 Earnings Call - Zanidatamab clinical win pushes Ziihera toward potential approval while $250M royalty note fuels buybacks and BD optionality

Operator: Welcome to the Zymeworks fourth quarter 2025 results conference call and webcast. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. I would now like to turn the conference over to Shrinal Inamdar, Vice President of Investor Relations. Shrinal, please go ahead.

Bijal Desai, Senior Vice President of Finance, Zymeworks3: Thank you, operator, and good morning, everyone. Thank you for joining our fourth quarter 2025 results conference call. As usual, I’d 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 on our slides and the accompanying oral commentary. Forward-looking statements are based upon our current expectations and various assumptions and are subject to the risks and uncertainties, including those associated with the company in our industry and at our stage of development. For discussion of these risks and uncertainties, I refer you to the latest SEC filings as found on our website and as filed with the SEC. In a moment, I’ll hand over the call to Ken Galbraith, our Chair, CEO, and Interim Chief Financial Officer, who’ll provide an overview of recent business updates.

Ken will hand the call over to Bijal Desai, our Senior Vice President of Finance, to discuss our cash position and financial results for the fourth quarter 2025. Following this, Dr. Sabeen Mekan, our Senior Vice President and Chief Medical Officer, will provide progress updates on the phase 1 clinical trial for Q51. At the end of the call, Ken, Sabeen, and Bijal will be joined for Q&A by Paul Moore, our Chief Scientific Officer, Scott Cashton, our Acting Chief Investment Officer, and Adam Szaronos, our Acting Chief Development Officer. As a reminder, the audio and slides from this call will also be available on the Zymeworks website later today. I’ll now hand the call over to Ken.

Ken Galbraith, Chair, CEO, and Interim Chief Financial Officer, Zymeworks: That’s great. Thank you, Shrinal. Good morning, everyone. First, for those on the call, I hope you and your families are all safe and well wherever you are joining the call from today. I’d like to begin by recognizing the results of the phase 3 HERIZON-GEA-01 trial as presented by ASCO GI by our partners Jazz and BeiGene. Zanidatamab in combination with chemotherapy, with or without a checkpoint inhibitor, demonstrated a median PFS exceeding 1 year with a median overall survival exceeding 2 years in the first-line metastatic or locally advanced HER2-positive GEA patients. This represents a clinically meaningful outcome in a setting where long-term survival has historically been limited and unmet need remains significant.

An additional planned interim analysis for median OS for the zanidatamab plus chemo regimen that just missed the statistical significance of the initial interim analysis is currently expected by mid-2026. The benefit was observed consistently across clinically relevant subgroups, irrespective of PDL1 expression, which was studied as an exploratory endpoint in the HERIZON-GEA-01 rather than a stratification factor. Based on these data, we’re optimistic that zanidatamab has the potential to redefine the treatment paradigm in first-line HER2-positive metastatic or locally advanced GEA. We received strong positive feedback from key opinion leaders who recognize both the magnitude and durability of benefits seen in the study against the known and manageable safety profile. Our partners are now preparing for upcoming global regulatory interactions, potential approvals, and inclusion in physician guidelines, as I’ll highlight now.

From a U.S. regulatory perspective, Jazz expects to complete the submission of the supplemental BLA with the FDA in the first quarter of 2026 under the Real-Time Oncology Review program in the U.S. For zanidatamab has been granted Breakthrough Therapy designation for patients with HER2 positive GEA. We expect these designations will allow for greater speed and regulatory interaction. In addition, the data from HERIZON-GEA-01 study has been submitted for inclusion in the National Comprehensive Cancer Network guidelines as previously disclosed. We therefore share in Jazz’s expectations to have zanidatamab approved and launched for the treatment of GEA in the second half of this year, subject to completion of FDA review and approval. Concurrently, BeiGene is working towards the supplemental BLA for tislelizumab in the U.S. in the first half of 2026 for review by the FDA.

We believe these steps reflect the clinical relevance of the results and support the path toward broader patient access. Outside of the United States, we believe Jazz and BeiGene will intend to continue working on plans and timelines for regulatory interactions with respect to zanidatamab and tislelizumab in GEA, and we look forward to reporting such progress as appropriate. Our confidence in zanidatamab’s potential has only increased since we commenced registration studies in 2021 and partnered with Jazz in 2022 as an addition to our existing APAC partnership with BeiGene. These partnerships allowed us to accelerate the development of zanidatamab and broaden its therapeutic potential in many other HER2-expressing tumors while sharing development risk and transferring costs to our partners.

We believe zanidatamab’s demonstration of a substantial survival benefit in metastatic or locally advanced GEA, a tumor type where prior HER2 target agents have struggled to materially extend outcomes, strengthens confidence in zanidatamab’s differentiated mechanism of action and meaningfully reduces risk in the broader development program beyond the initial accelerated approvals for second-line biliary tract cancer received previously in the U.S., China, Europe, and now Canada. Building on this foundation, zanidatamab is being evaluated by Jazz across multiple mid- and late-stage studies, including breast cancer and other HER2-expressing solid tumors, including in a pan-tumor study. Breast cancer, in particular, represents a setting where additional novel HER2-targeted therapies, such as zanidatamab, may provide opportunities to continue improving upon the current standard of care for patients in multiple treatment settings.

In January, Jazz updated enrollment guidance for the EmpowHER303 trial in which they expect to complete enrollment in the first half of 2027, with top-line data read expected later in 2027 or in early 2028. Given zanidatamab’s dual epitope binding and differentiated biology, we’re optimistic about its potential performance for the treatment of patients with metastatic HER2-positive breast cancer. Jazz is also pursuing collaborations with partners to combine zanidatamab with novel therapies. For example, the phase 1 trial in combination with BI’s zongertinib was recently initiated to explore the combination in metastatic HER2-positive breast cancer, along with other potential tumor types. Collectively, these ongoing studies are designed to expand the clinical footprint of zanidatamab into indications where meaningful differentiation may translate into durable clinical and patient benefit.

Consensus estimates for peak sales of zanidatamab have doubled over the last few years, indicating a clear potential for zanidatamab to achieve a multi-billion dollar peak sales level. With progress from our partners towards global regulatory approvals in first-line GEA and first-line BTC and accelerated development goals in metastatic breast cancer and other tumor indications, these advances represent significant opportunities to build on the financial value of Ziihera for Zymeworks and our shareholders. This quarter, we reported regulatory approvals for zanidatamab as monotherapy in both Canada and the United Kingdom for the treatment of second-line biliary tract cancer. From a financial perspective, this expansion is expected to translate into regulatory milestone payments for global approvals in GEA of up to $440 million, as well as further $89 million collectively from Jaz and B one upon approval in a third indication, as highlighted in our press release.

Zymeworks is also eligible to receive up to $977.5 million in commercial milestone payments tied to the achievement of sales thresholds. Approximately $1.5 billion in milestone payments remain possible under our collaboration agreements with Jazz and B one. As use broadens across indications and geographies, we expect cumulative revenue contributions through both royalties and milestones to scale meaningfully. As disclosed today under the collaboration with Jazz, Zymeworks is eligible to receive tiered royalties of 10% to the high teens on global annual sales of Zahera up to $2 billion and 20% on annual net sales above $2 billion. Jazz holds marketing rights globally to Zahera, excluding Asia, but including marketing rights in Japan.

Under the collaboration agreement with BeiGene, Zymeworks is eligible to receive tiered royalties of mid-single to mid-double digits on global annual net sales of Ziihera up to $1 billion and 19.5% on annual net sales above $1 billion. BeiGene holds marketing rights to Ziihera in Asia, excluding Japan. The strengthening clinical foundation for zanidatamab provides the basis for executing the royalty-backed note financing announced today. We view this as an opportunity to proactively leverage a validated scaling asset to secure efficient non-dilutive capital while preserving long-term upside. Our ability to utilize unique and creative financial structures is important to achieving optimal value for shareholders from our collective assets.

I’d like to spend a few minutes talking through this strategic financing with Royalty Pharma and how it fits in within our broader capital strategy using growing visibility into future royalties to fund the next phase of disciplined value accretive capital deployment. As announced with our press release today, the agreement with Royalty Pharma provides us with $250 million of low-cost non-dilutive capital in the form of a non-recourse royalty-backed note. To be clear, this is not a monetization. The full value of Ziihera royalties returns to Zymeworks after the note is fully repaid. Unlike a traditional royalty-backed loan, there’s no stated interest rate, and not all of Ziihera royalties are needed as security for repayment of the debt.

The obligation for repayment of the principal and cost of such capital is serviced from a portion of the Ziihera royalty stream itself, 30% rather than 100% with a traditional royalty loan, and provides the framework for a longer duration for the debt on attractive terms on a non-recourse basis. The structure of the repayment provides an appropriate sharing of duration risk with Royalty Pharma for an appropriate return. We worked very closely with Royalty Pharma to design this unique debt facility, which reflects our optimism in achieving approval of zanidatamab in first line GEA, as the loan is not conditional on FDA or other regulatory approvals, and our hope that zanidatamab becomes the clear HER2 targeted agent of choice for GEA over a long time period. The agreed structure allows us to securitize the note with only 30% of the Ziihera royalty stream until repaid.

Zymeworks retains 70% of the royalty stream throughout the duration of the term, preserving the majority of ongoing cash flows for reinvestment, unlike in a traditional royalty loan, where 100% of the royalties would be utilized to repay the interest and principal and be of a much shorter duration. Both the net present value and total royalty retained over the life of the asset were superior relative to alternative loan structures we evaluated, and the royalty note incorporates a longer duration profile. From our perspective, this approach allows us to preserve a greater portion of near-term royalty cash flow compared to a conventional structure, thus allowing for accelerated reinvestment.

In addition, all earned regulatory and commercial milestones under our agreements with Jazz and B one will be retained by Zymeworks, including, as mentioned earlier, $440 million in near-term milestone payments tied to future regulatory approvals of Ziihera and GEA, $89 million in regulatory milestones for a third indication beyond biliary tract cancer and GEA, and up to $977.5 million in potential commercial milestone payments. Altogether, again, these milestone payments represent $1.5 billion in potential future revenue for Zymeworks. Just as importantly, Royalty Pharma demonstrated strong conviction in the underlying royalty for zanidatamab and was highly enthusiastic about including this asset in their portfolio, reinforcing external validation of its long-term commercial potential. We’ve been very deliberate about protecting the potential long-term upside of Ziihera royalties. Only a defined portion of the royalty is subject to this agreement.

Once the cap is reached, the royalty reverts fully to us. We continue to own the long-term upside of additional indications being developed and potentially commercialized by our partners. In addition, no other future royalty streams that may become available to us, like with pasritamig under our license with J&J or others, are encumbered by the royalty note. This transaction ultimately allows us to protect our core Aduhero royalties and milestones while accelerating access to attractively priced capital and provides us with the ability to reinvest with a disciplined return framework. This framework uses both continued share repurchases and potential strategic acquisitions to compound predictable revenues into durable long-term shareholder value. From a use of proceeds standpoint, this capital enhances flexibility across those two primary levers. In addition to providing capital for our cash runway, which already extends beyond 2028.

First, we retain the flexibility to continue to repurchase shares opportunistically. If our stock continues to trade below what we believe is the future value of underlying assets, the ability to opportunistically reduce our share count at an attractive discount while the value of future cash flows expand is a very powerful way to drive growth of long-term total shareholder return on a per-share basis. As of today, we’ve utilized approximately $62.5 million of the $125 million share repurchase program authorized in November 2025. As we continue to see the ability to drive long-term TSR at a compelling discount, given the current market price of our shares. The proceeds of this financing will provide us the flexibility to continue to invest in our own business’ prospects.

Second, we have the ability to deploy capital into the acquisition of high-quality assets and platforms where we see synergy in one of many factors such as strategic fit, royalty potential, differentiated science, and favorable cash or tax attributes. Because we have internal research and development expertise, we can attribute value to development stage and partner programs differently than traditional royalty companies or traditional R&D-focused biotechs. We’re not just evaluating assets for an income yield. We’re evaluating probability of technical success, regulatory pathways, and commercial positioning. We believe this gives us an informational and analytical edge to pursue multi-asset acquisitions where we can attribute value to assets in a different way. Importantly, as we deploy this capital into additional royalty-bearing assets, we believe scaling and diversifying the portfolio has the effect of reducing the structural discount often applied to smaller or single-asset royalty streams.

We intend to deploy the capital dynamically across royalty asset and platform acquisitions, as well as our ongoing share repurchase program as a flexible allocation framework that can adjust based on opportunity and market conditions. In addition, we have the continued ability to generate additional royalty and milestone streams from our wholly owned R&D portfolio as an alternative to external acquisition. To summarize, this transaction with Royalty Pharma provides us with additional capital on attractive terms in a unique structure to achieve our strategic and financial objectives with no equity dilution and optimal strategic flexibility. We would expect to continue to utilize creative structures for capital, partnerships, and acquisitions where we believe they can be useful to building long-term value for our business. As part of our strategy, we see acquisitions as a potential way to add to our existing royalty portfolio.

Acquisitions also allow us to feed our R&D engine. Internal discovery will always be important in Zymeworks, but having the ability to source high-quality external innovation can enable us to continuously bring differentiated science into a development infrastructure that we know how to operate efficiently. Our R&D organization is built to advance assets to meaningful value inflection points. Whether those assets are internally discovered programs or externally acquired ones, the goal is to focus on assets that have the potential for meaningful patient benefit and future partnerships. Once we reach that stage for either internally or externally acquired assets, partnerships would allow us to translate scientific progress into long-duration economic participation through royalties and milestones without assuming the full capital burden of late-stage development and commercialization. Over time, that’s what we expect will build and diversify our emerging royalty portfolio.

In practice, we hope that acquisitions will expand what R&D we work on, should help de-risk and advance those programs, and partnerships have the ability to convert that progress into recurring capital-efficient future cash flows. That closed loop is central to how we aim to scale innovation into a durable economic engine. We look forward to providing updates against these capital allocation objectives. I’ll now hand over the call to Bijal to walk through our financial results for the fiscal year 2025, along with our current financial position.

Bijal Desai, Senior Vice President of Finance, Zymeworks: Thanks, Ken. Total revenue was $106 million for 2025, compared to $76.3 million for 2024. The increase for the year was driven mainly by achievement of significant clinical and regulatory milestones and exercise of an option under our collaborations with J&J, Boehringer Ingelheim, GSK, Daiichi Sankyo, and BMS. This growth was partially offset by a decline in development support and drug supply-related revenue from Jazz, reflecting the transition of responsibility for certain zanidatamab clinical activities to Jazz under our collaboration agreement. Overall, operating expenses were $198.5 million for the year 2025, compared to $213.4 million for 2024.

The decrease is primarily due to a non-recurring impairment charge recognized in 2024 related to our discontinued program, zanidatamab zovodotin, partially offset by a slight increase in research and development expenses. The increase for research and development expenses for the year was primarily due to an increase in unallocated costs, largely related to non-cash stock-based compensation expense, as well as consulting and rent expenses. The increase was largely offset by a decrease in R&D program costs as a decrease in expense of late-stage and discontinued programs, including zanidatamab zovodotin, and ZW220, more than offset the higher investment in early-stage clinical and preclinical programs, including ZW209, ZW1528, ZW251, ZW191, and ZW171 until ZW171 was discontinued.

General and administrative expenses were consistent with prior year as an increase in non-cash stock-based compensation was offset by a decrease in salary and benefits due to reduced headcount as well as decrease in consulting, rent, and information technology expenses. Net loss was $81.1 million for the year 2025 compared to a net loss of $122.7 million in 2024. The change for the year was primarily due to an increase in revenue and decrease in total operating expenses and in income tax expense, partially offset by a decrease in interest income. As of December 31, 2025, we had $270.6 million of cash resources consisting of cash equivalents, and marketable securities compared to $324.2 million as of December 31, 2024.

Based on current operating plans and assuming full execution of the $125 million share repurchase plan, we expect our existing cash resources as of December 31, 2025, when combined with anticipated regulatory milestone payments of $440 million related to the potential approvals of Ziihera in GEA in the United States, Europe, Japan, and China, as well as the net proceeds from our non-recourse royalty-backed note to fund our planned operations beyond 2028. This anticipated cash runway does not take into account any contribution from additional future milestone payments or royalties related to Ziihera, other current licensed product candidates, or contributions from future partnerships and collaborations. For additional details on our quarterly results, I encourage you to review our earnings release and other SEC filings as available on our website at www.zymeworks.com.

In January 2026, the company announced an adjusted gross operating expense framework, non-GAAP, reflecting disciplined capital allocation across research and development and general and administrative ex-activities of approximately $300 million over a 3-year period ending December 31st, 2028. Despite the royalty-backed note financing announced today, we expect continued discipline in our approach to general corporate operating expenses with no change in our prior guidance for the 3 years ending 2028. The company currently expects adjusted gross operating expenses in 2026 to be approximately 20% lower than in 2025, excluding the impact of any acquisition-related expenses or new partnerships and collaborations. A reconciliation of historical non-GAAP adjusted gross operating expenses to the nearest GAAP metrics can be found in our earnings release and on our investor relations website.

I will now pass the call over to Sabine, who will provide a brief update on our clinical development program for ZW251.

Bijal Desai, Senior Vice President of Finance, Zymeworks1: Thank you, Bijal. Following my update last quarter, I’m pleased to report that the phase 1 study of ZW251 in glypican-3 expressing tumors, including hepatocellular carcinoma, is progressing as planned. The trial is actively enrolling and is expected to include approximately 100 patients through dose escalation and optimization, with sites currently open across North America, Europe, and the Asia Pacific region. At ASCO GI in January, we presented a trial in progress poster outlining the study design, including a starting dose of 3.2 milligram per kilogram in the dose escalation portion. This starting dose reflects a data-driven decision informed by our prior experience with ZW191.

In that program, which utilizes the same linker halo technology and a drug-to-antibody ratio of 8, we began to observe early signs of activity at the 3.2 milligram per kilogram dose level after starting at 1.6 milligram per kilogram. ZW251 incorporates a lower drug-to-antibody ratio of 4, which supported our confidence in initiating dose escalation at 3.2 milligram per kilogram. We look forward to providing further updates on ZW251 as dose escalation advances. In parallel, we expect to share additional clinical data from ZW191 as the dataset from our dose escalation study matures and the program progresses through dose optimization. I will now hand the call back to Ken to provide for closing remarks.

Ken Galbraith, Chair, CEO, and Interim Chief Financial Officer, Zymeworks: Thank you, Sabine. As you can see on this slide, we have an eventful year ahead of us with multiple value-generating catalysts. This year, we hope to execute across each element of our novel strategy and illustrate the integration of the various development strategic initiatives. This means delivering clinical progress on our wholly owned R&D portfolio, continued progress on development and commercialization of Ziihera and pasritamig by our partners, expanding new partnerships and collaborations, and demonstrating tangible outcomes, including the potential for critically aligned acquisitions by year-end. In January 2026, we announced our R&D priorities for 2026 and beyond, including our intention to continue conducting phase 1 clinical studies for ZW191 and ZW251 in 2026.

We announced that beyond 2026, we expect to advance our advanced research efforts on multispecific antibody and engineered cytokine platforms, funded partially with early-stage partnerships and collaborations. INDs for our currently wholly owned multispecific programs, ZW209 and ZW1528, remain on track for submission in 2026. We expect to have representation of our platform and pipeline throughout scientific conferences in 2026, including at AACR in San Diego in April. A significant priority for Zymeworks in 2026 is to integrate new partnerships and collaborations into our existing wholly owned portfolio to share funding and risk with partners. Look forward to providing progress updates throughout the year on these expected catalysts and on the continued execution of our evolving strategy. I’d like to end the call with this thought.

One of the clearest illustrations of our model today is the journey of a single drug, zanidatamab, during my tenure as CEO since 2022. Zani was designed and developed in-house by our team. We advanced it through rigorous science and validated our Azymetric platform. Early in my tenure, we made the decision to partner it strategically rather than sell it outright, generating meaningful upfront payments structured with milestones and royalties to ensure we captured potential upside as a hero for our shareholders. The upfront proceeds funded the expansion of our wholly owned R&D portfolio over the past 3 years, strengthened our balance sheet, and contributed to the value creation reflected in our share price over time. Now we find that zanidatamab may be a more successful new medicine than we anticipated back in 2022, with the ability to generate a much higher level of peak sales.

The structure of our partnership provides a meaningful value of future cash flows over a long time period. Today, that same asset is again serving as a catalyst, this time through the royalty note financing announced today to unlock additional non-dilutive capital. We’re able to accelerate the reinvestment of that capital into new value-generating assets, including potentially externally sourced innovations that meet our strategic and return thresholds. In many ways, it’s a full circle moment. One internally generated medicine helped build the portfolio we have today and is now providing the capital to expand our business further with the ability to generate additional sources of royalties and milestones, both internally and externally.

What’s more is we may have the ability to do this again with pasritamig, which continues to demonstrate a highly encouraging safety and efficacy profile in phase 1 combination regimen, including with docetaxel, as presented last week at ASCO GU. Assets from our existing platform partnerships or other royalty-generating assets that we may choose to bring in or that result from new partnerships from our wholly owned pipeline. This transaction with Royalty Pharma underscores something fundamental about our model. We understand how to develop differentiated medicines. We also understand how to underwrite cash-producing assets. Very few biotech companies can do both well over the long term.

The ability to originate innovation internally and allocate capital externally allows us to compound value in a disciplined way, using science to create high-quality assets, partnerships that generate capital, and utilize that capital to acquire and scale the next wave of royalty-generating opportunities for long-term shareholder returns. With that closing comment, I’d like to thank everyone for listening. I’ll turn the call over to the operator to begin the question and answer session. Operator?

Operator: Certainly. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile our Q&A roster. Our first question will come from the line of Charles Zhu of LifeSci Capital. Your line is open, Charles.

Charles Zhu, Analyst, LifeSci Capital: Hello. Good morning, everybody. Thank you for taking our questions, and congratulations on all the progress and the updates that you presented today. My question here is regarding your GPC3 ADC ZW251. It sounds like you’ll have about 100 patients through dose escalation and optimization. Any qualitative comments around how the enrollment date data collection is going? Also, at what point might you make an internal decision whether or not to bring this forward in-house and how far versus partnering development for this particular asset? Thank you.

Ken Galbraith, Chair, CEO, and Interim Chief Financial Officer, Zymeworks: Thanks, Charles. I’ll start with that, and I’ll see if Sabine has anything to add later. You know, I would expect this would follow along very similar fashion to our phase 1 program for ZW191, which is still obviously playing out. I think obviously in 191 we had a very quick operational execution on the clinical study. We went from first patient in to first data presentation in about 10 and a half months, which I think is related to the structure of how we think about clinical execution in early-stage studies, and the geographic footprint we have. If you look on ClinicalTrials.gov, you’ll see we’ve got a very similar clinical trial footprint for ZW251. You know, it is a different tumor type, different treating physician group.

It’s a little early to make predictions about that. I think you’ll see the same cadence of, you know, we’re not gonna give guidance about when an initial data disclosure will be made. It’ll probably be exactly like it was last year for ZW191. When we think we have something interesting to provide, we’ll do that in a peer-reviewed setting, and we’ll likely not give guidance around that until right before it’s necessary to in terms of a public abstract or a public oral presentation. I think once we get through an initial presentation, it’s a little bit easier with the cadence. You know, we’ve indicated we’re gonna have some ZW191 data update coming soon from the full dose escalation data for that. I think for the initial data presentation for ZW251, we’ll let our clinical folks do their work.

I think it’s recruiting nicely, the way that we expected. I think once we have something that we want to say, we’ll submit an abstract to a peer-reviewed, medical meeting and happy to present the data there for all to see. I’ll just see if Sabine has anything else she wants to add on that in terms of guidance.

Bijal Desai, Senior Vice President of Finance, Zymeworks1: I think the only thing I would say is that the enrollment for the ZW251 is proceeding very nicely according to our plan. As Ken mentioned, it is a different patient population, we are very excited with this molecule. As you know, in dose escalation, the time frame often depends upon the number of dose escalation cycles and follow-up and how quickly you see responses. I mean, with ADC, that’s generally very quick. With a phase 1 program, we generally want to wait until we have a wholesome data set to present. As Ken mentioned, we will do so at a peer review conference when we get to that point.

Bijal Desai, Senior Vice President of Finance, Zymeworks5: Understood. Thank you very much for taking the questions, and congrats again on the progress.

Ken Galbraith, Chair, CEO, and Interim Chief Financial Officer, Zymeworks: No, thanks, Charles.

Operator: Our next question will be coming from Brian Cheng of JPMorgan. Your line is open, Brian.

Brian Cheng, Analyst, JPMorgan: Hi, Ken. Hi, team. Thanks for taking our questions this morning. First, I’m just curious on the timing of the royalty back financing. Is that driven by something that you already found on the BD side that accelerated that need to secure royalty-based deal? Can you help us define the accelerated timeframe on an acquisition here? With a quick follow-up. Thank you.

Ken Galbraith, Chair, CEO, and Interim Chief Financial Officer, Zymeworks: Yeah. Thanks, Brian. Thanks for the question. You know, I think the timing for the royalty note, completion with Royalty Pharma, you know, had as much to do with the, you know, current commercialization cycle of Zani and the cost of capital that’s available to us right now, as much as it does to where we see near-term use of proceeds. I wouldn’t read too much into that. You know, we’re obviously see, you know, a compelling opportunity to continue to buy our own shares and reduce share count over a period of time. We think it’s a really good investment for our current shareholders, and we’re halfway through the current authorized plan, and we’ll continue on that at the current share price. This provides a little bit more balance sheet to do that.

We did wanna add to the balance sheet also just to make sure that we were able to take advantage of opportunities for acquisitions we see in the marketplace and whether that’s, you know, licensed assets that bear royalties, whether it’s development assets or whether that’s other platforms that are available to us. You know, we did wanna have some capital available for that. We were active obviously in looking at those opportunities and assessing them, but we have a very disciplined approach, a very high standard for using that capital to bring other assets inside the company. We’ll just let that play out without getting too far in front of ourselves with respect to guiding around timeframe or anything else.

I think it’s just as much about looking at where Zani is in development cycle, the cost of capital is available to us right now. We decided that we would complete that exercise now, and we’ll just let the transactions that follow, whether it’s additional share repurchases or potential acquisitions, just let that follow and then explain those as they’re completed.

Brian Cheng, Analyst, JPMorgan: Got it. Looking ahead into April, can you give us a sneak peek of what to expect at AACR from your internal R&D side? What could really move the needle there for the, for the entire portfolio? Thank you.

Ken Galbraith, Chair, CEO, and Interim Chief Financial Officer, Zymeworks: Yeah. I think on the scientific side, I’ll just let Paul maybe give you a little bit of foreshadowing. Obviously, you know, none of the abstracts are public yet. We’ll have to wait till that standpoint. Maybe Paul can talk a little bit about what we’ve been working on that we’re excited about to talk about in April without getting too definitive.

Paul Moore, Chief Scientific Officer, Zymeworks: Yeah. Thanks, Ken. Yeah, Brian, as you know, we have both multispecifics and ADC capability in-house, and we’ve been applying that to oncologists. That’s the AACR. That’s where we’ve been, you know, traditionally over the last few years, having a pretty high presence, and we intend to have a high presence again this year. You know, on the ADC front, we did allude to a new payload technology that we’ve been developing. We can’t speak specifically too much about that, but that technology is built on a similar philosophy and design that we use to develop the topo payload that was had clinical validation with the 191, the folate receptor, and what the 251 program is built on.

You can expect to see, you know, progress and updates on that technology. Again, we’re also pushing forward on our multispecifics, so you can also anticipate potential, you know, news on those on that front as well. Other than that, I can’t really say too much on the specifics.

Brian Cheng, Analyst, JPMorgan: All right. Thank you. No worries. Thank you. Thanks, Paul.

Ken Galbraith, Chair, CEO, and Interim Chief Financial Officer, Zymeworks: Thanks, Brian.

Operator: Our next question will be coming from Yigal Nochomovitz of Citigroup. Your line is open, Yigal.

Bijal Desai, Senior Vice President of Finance, Zymeworks5: Yeah. Hi. Great. Thank you very much for taking the questions. Pasritamig is an asset you’ve been talking about more frequently recently. I’d just love to get your thoughts on the recent data and wondering whether the profile that’s emerging in the phase 1 is exceeding your expectations. On PTK7, the biparatopic ADC, just broadly, could you talk about the learnings from Zani and how much of that was translated into the design of PTK7, please? Thank you.

Ken Galbraith, Chair, CEO, and Interim Chief Financial Officer, Zymeworks: No, thanks very much, Yigal. I think I’ll let Paul answer the second question on PTK7 and then maybe let Adam answer the question on pasritamig ’cause he was at ASCO GU over this past week. Maybe, Paul, can you do the second question first and then Adam follow up?

Paul Moore, Chief Scientific Officer, Zymeworks: Thanks, Yigal. PTK7 is a target that we’ve been very interested in. We see it pairing nicely with both TOPO and also with the RAS payload technology. PTK7 has an attractive tumor expression profile. Lung cancer in particular is attractive, but there are other indications as well. Our, our effort on that, though, has been really to, you know, as part of our

Ken Galbraith, Chair, CEO, and Interim Chief Financial Officer, Zymeworks: Philosophy on ADCs. We think about the payload, but we also think about the front end of the antibody. Really how do you best deliver payload with an antibody-based modality. For PTK7 here, what we thought or what we felt from our data was that a biparatopic actually gives better delivery than just a monospecific antibody. There we did deploy the same technology that’s used in zanidatamab, our Azymetric technology, which allows us to pair different binding specificities, different epitopes that are targeting PTK7. What’s very important is that when you do build those, you scale, you screen multiple different specificities to get the right pair that actually gives you the biparatopic effect that you want, which is the enhancement of internalization.

You also have to think about other features as well, such as the CMC properties, the PK properties of that pair. That learning that we got from zanidatamab did put us in good position to understand then how to develop that for PTK7 biparatopic. That’s an overview of that, Yigal.

Bijal Desai, Senior Vice President of Finance, Zymeworks2: Maybe on the pasritamig data. Certainly lots of enthusiasm and excitement coming from ASCO GU this past weekend from J&J. You know, physicians largely agree that this is a very well-tolerated drug that has a lot of potential. J&J’s enthusiasm is obviously clear with multiple registration trials that they’ve publicly stated and disclosed at least some of the details around them. We’re certainly enthusiastic about it. We think that, you know, the safety is a key aspect of the differentiation, and of course, the efficacy is very impressive so far, but obviously still early days. A lot of enthusiasm on that front, both from us and from J&J and the physicians in the space.

Bijal Desai, Senior Vice President of Finance, Zymeworks: Thank you.

Ken Galbraith, Chair, CEO, and Interim Chief Financial Officer, Zymeworks: Thanks, Yigal.

Operator: Our next question will be coming from Eva Forte of Wells Fargo. Your line is open, Eva.

Eva Forte, Analyst, Wells Fargo: Good morning. Thanks for taking our questions, and congrats on the progress. A few from us. Stepping back to your brother’s strategy, what types of assets are you looking to bring in through acquisitions? Any specific therapeutic areas or development stage you’re looking for? How should we be thinking about the cadence of these deals? Just as a follow-up, you mentioned cash runway extends beyond 2028. Are any potential acquisitions accounted for in the cash runway? Thanks.

Ken Galbraith, Chair, CEO, and Interim Chief Financial Officer, Zymeworks: Yeah. I’ll just answer your second part of your question first, then I’ll pass over to Scott to talk a little bit about the first part to the extent he wants to do that. No, there’s no acquisitions included in our cash runway forecast. There’s also no, you know, new partnerships or collaborations which could be inflows as a part of that. Like, as we complete transactions, whether they’re acquisition-related or partnership or collaboration-related, or if there’s progress of existing collaborations, we’ll update that cash runway. Obviously, we’re, you know, well beyond 2028 when you look at the milestones coming in from just GEA and the reduction we’ve taken in R&D spend this year over last year, which will continue.

I think we feel very comfortable with the runway that we have and the proceeds that we have available to allocate, whether it’s continuing share repurchases or exploring some of the acquisitions that we’ll talk about. I’ll let Scott provide some more guidance around that if he’d like.

Bijal Desai, Senior Vice President of Finance, Zymeworks2: Yeah, thanks. Look, I think there’s 2 questions embedded in that, which is sort of therapeutic areas for deal making and sort of the timing and cadence of deals. We think a lot about the world-class protein engineering team we have in Vancouver. It’s the team that made Zani, that developed Azymetric, that led to pasritamig and has an amazing ADC platform and innovative immunology assets. We really have a incredibly high conviction that that team will be developing the next Zani. What I mean by that is an innovative medicine that drives really dramatic patient benefit. Given that expertise in-house, we think a lot about that as a resource and how it impacts our right to win when we’re looking at deal making.

We feel like we have an advantage in there, but we’re certainly not going to restrict ourselves to the areas of that oncology and immunology. It does factor into sort of the hurdle rate on return that we might expect when looking at deal making. Your second question was sort of when will we do deals? We’re just not in a position to give explicit guidance on deal timing. I think I can tell you sort of our core values around deal making, which is one, as I mentioned earlier, opportunities that we understand well. I would say number two is that we have a real clear reason to be the right buyer and a right to win that deal. We overlay that with a very strict return threshold.

The deal making externally is always done and weighed against the opportunity to own more of our existing portfolio, which we have a very, very good sense of what it of its value at all times. Any capital deployment externally is gonna be weighed against the IRR achieved from those share repurchases.

Ken Galbraith, Chair, CEO, and Interim Chief Financial Officer, Zymeworks: Thanks, Scott. Eva, obviously the, you know, the arrangement that we completed with Royalty Pharma today, you know, is a part of that strategy. You know, it’s a longer-term duration, which I think lets us have a little bit more strategic flexibility about the types of assets we might look at and the payback we need to have from those assets. Obviously accessing this capital from Royalty Pharma in this structure gives us something that’s, you know, low double-digit cost of capital, which I think just allows us to think about target returns in a different way than maybe traditional biotechs might think about.

Brian Cheng, Analyst, JPMorgan: Got it. Thanks.

Ken Galbraith, Chair, CEO, and Interim Chief Financial Officer, Zymeworks: Yep.

Operator: Our next question will come from Yaron Werber of TD Securities. Your line is open.

Bijal Desai, Senior Vice President of Finance, Zymeworks4: Hi, this is Stephen Willey on for Yaron Werber. One question about the 20% plan for lower OpEx. Maybe a little bit more color on how that’s going to look. In terms of fulfilling that $125 million share repurchases, any sense of a cadence on that? Thank you very much.

Ken Galbraith, Chair, CEO, and Interim Chief Financial Officer, Zymeworks: Yeah, thank you. I’ll take those 2 questions. Second, on the cadence of share repurchases. Obviously, we did a, you know, $60 million share repurchase starting in 2024, which took about 12 months. That was really, you know, funded entirely by milestones that were received from Jazz and Boehringer Ingelheim for the BTC indication approval. Right now we authorized another $125 million in November. We’re obviously, you know, halfway through that pretty quickly. In addition to the, you know, the balance sheet we have now and the Royalty Pharma financing of $250 million, we obviously have expectations of another $250 million in capital being available to us upon GEA approval in the U.S. based on our next Jazz milestone.

We feel fully resourced to move as quickly as opportunities allow ourselves to move on the remainder of that $62 and a half million, as well as consider authorizing further before then. Right now, given the underlying value we see in our assets in the future, it’s a very compelling discount for us to think about reducing share count for our shareholders through investing in our business and returning capital through share acquisition. We’ll continue to pursue that as long as that compelling discount continues to be available to us.

I think if you look on the spendings side, if you look over the last 3 years, we took the upfront payment from Jazz, which is about $375 million back in the end of 2022, and we put that to work over a 3-year time period to build the current wholly owned portfolio that we have right now. I think given that we’ve now established a pretty reasonable portfolio, the cadence of continuing to do that is gonna slow down a little bit, and that will result in some reduction from last year to this year’s spending.

In addition, we’ve said we think now is the time to start to integrate partnerships and collaborations into that wholly owned, unencumbered portfolio that we’ve built of both clinical and pre-clinical assets, which is quite broad, obviously, between the multispecifics, the dual endurance cytokines and in our next generation ADCs. Feel quite comfortable that we still have a robust R&D operation inside the company, even at a slightly reduced spend level. As we manage that ourselves and bring in partnerships and collaborations which will bring in funding towards that the direction of R&D spending will be downward, we’ll still have a very viable R&D operation that will continue to build, you know, unencumbered assets in combination with potentially earlier stage partnerships, unlike what we’ve done the past three years in building a wholly owned portfolio.

Different strategy, different purpose, but we still think we have a very robust and innovative R&D operation that integrates well with the thoughts around the royalty assets that we have in Ziihera and eventually pasritamig and things that we can add from outside the company inside, whether they’re unpartnered assets, additional novel platforms like Azymetric or assets that are already licensed, which will carry some royalty or milestones in the future.

Bijal Desai, Senior Vice President of Finance, Zymeworks4: Thank you.

Ken Galbraith, Chair, CEO, and Interim Chief Financial Officer, Zymeworks: Yep.

Operator: Our next question will be coming from the line of Stephen Willey of Stifel. Your line is open, Stephen.

Stephen Willey, Analyst, Stifel: Yeah, good morning. Thanks for taking the questions. Just a couple on the IND submissions for this year. I know the development of DLL3 targeting therapies has grown increasingly crowded. There’s a number of different modalities out there, and the target’s only really relevant in a couple of indications. Can you just speak to the target product profile you’re hoping to see with ZW209 in phase 1 and just how you’re currently thinking about strategic interest here? And then also just curious why you’re targeting an ex-US regulatory submission for ZW1528. Just wondering if that’s predicated on enrollment kinetics or is that due to the ability to move faster through dose escalation? Thanks.

Ken Galbraith, Chair, CEO, and Interim Chief Financial Officer, Zymeworks: I can answer the second question, maybe I’ll pass over to Paul to talk a little bit more about DLL3 and what we’re trying to accomplish, not just with ZW209, but on the broader sense in the tri-TC platform. I think, you know, both these assets are quite interesting from our standpoint. We’re obviously interested in considering strategic interest in potential partners who want to move along with us into the clinic at this stage. That’s something that we’re continuing to have discussions about. ZW1528, we just see the ability to move much more quickly in early clinical studies in an ex-US environment. I think if you...

It’s not unusual, if you look at, you know, respiratory expertise in clinical studies, there’s quite a bit of it in both the EU and the UK separately because that’s not in the EU, but there is a lot of respiratory expertise in Europe and in some cases, abilities to go faster than the US in early clinical studies. The same way we’ve gone faster with ZW191 by having integrated sites in Asia Pacific and Europe to go along with the US, and we’re doing the same thing with 251 with a pretty big ex-US footprint. I think with 1528 may have the ability to access the expertise that’s necessary and go quickly in early clinical studies outside the US rather than US. That’s what we’re looking at doing for that.

I’ll pass the DLL3 question on to Paul.

Paul Moore, Chief Scientific Officer, Zymeworks: Yeah. Thanks, Ken. Thanks, Stephen, for the question. Yeah, I mean, just as a reminder, the way we’ve designed 209 is that it incorporates co-stimulation directly in the trispecific. It’s a trispecific binding DLL3, CD3, and CD28. Although the DLL3 space is, you know, gained a lot of attraction because it is a very viable target, we feel like, I mean, a truly differentiated molecule, and we’d be the first with that type of design all in one molecule. The thinking and the design of that molecule took a lot of work to get that balance of CD3, CD28, so that we only engage CD28 after we’ve targeted CD3. We think that will then drive...

The benefit of that is that it then drives a deeper T-cell response. T-cells are more sustained in their ability to maintain activity over a period of dosing. You can even see that reflected, that desire to have that component reflected in other people’s T-cell engager designs where they add in CD20 as a separate molecule. We think by putting it into a single molecule, it can really give you a lot of benefit out of the gate. There, we pushed that forward with DLL3. There was also a lot of learnings that we made from our ZW171 program in the delivery, the subcu, the step up. We think we can accelerate quite quickly based on those learnings.

We have Sabeen’s team well-positioned to execute on that based on the efficient execution of the ZW171. We’re well-positioned. We think we can, you know, execute and get to inflection data quite quickly overall. Behind that, of course, that same mechanism design, we also are very excited about applying it to other targets. We did have a nice presentation at SITC where we talked about how we can expand the target base both in solid tumors, hemonc, as well as sort of more gated strategies as well. There’s a lot behind that platform on other molecules that we’re also developing.

We’re very excited about ZW209 as a proof of concept molecule as well is really providing benefit that we think you can get beyond existing T-cell engagers by having that beneficial co-stimulation in design.

Stephen Willey, Analyst, Stifel: Maybe just a follow-up. If the advantage of coast then is to improve durability of response, at least that’s what I’m intimating from your comments, does that then inherently require you to take that through a later stage of development to be able to prove out that durability beyond a phase one all comers trial?

Paul Moore, Chief Scientific Officer, Zymeworks: Yeah. Yeah. I think I should state the durability of response, also the breadth of response. We also feel like there are certain patients with T-cells and solid tumors that maybe don’t have enough punch from just a CD3 engagement. We think both the breadth and the durability of a response, you know, we hope to enhance. We think we should see signals, you know, during the dose escalation if our projections are on, you know, in line with what we actually execute and see. You’re right, there may also then take time for no longer benefit to see the duration of response, like as you say, as we get into expansion phases or that part of the study.

Bijal Desai, Senior Vice President of Finance, Zymeworks1: I would like to add, in the setting that, as Paul mentioned, given the additional mechanism of action, we are expecting an improvement in response rate as well as the duration of response, which would translate into progression-free survival in this setting. There may be additional patients who respond but typically don’t respond to tarlatamab or other DLL3 agents that are in development. I mean, given the fact that we already have agents approved in this setting, we could easily compare our efficacy based on existing molecules, which may help us in evaluating our efficacy and our safety at an earlier stage without even taking it into a later stage of development. I mean, we could choose to take it later if we would like, if we wanted to.

Stephen Willey, Analyst, Stifel: Yeah. Thanks for taking the questions.

Ken Galbraith, Chair, CEO, and Interim Chief Financial Officer, Zymeworks: Yeah. Thanks, Steve.

Operator: Our next question will be coming from the line of Mayank Mamtani of B. Riley Securities. Your line is open, Mayank.

Speaker 7: Yes. Good morning, team. Thanks for taking our questions. Congrats on progress on several fronts, including the Royalty Pharma note and the Cardene tree purchase. If I may ask a HERIZON-GEA-01 question quickly, clarification of this next OS analysis that’s coming up. Are you aware if that data could constitute as a major BLA amendment or once, you know, you have that available? Also was curious if you could touch on the rationale of the zonometinib combination with Zani study. Looks like a multi-indication study, you know, that could also have head-to-head data versus T-DXd or T-DM1. Then I have a quick follow-up.

Ken Galbraith, Chair, CEO, and Interim Chief Financial Officer, Zymeworks: Yeah. I think on the question related to the median OS readout, I don’t think we wanna comment about any regulatory strategy related to that. Obviously, Jazz has stated very clearly in their call last week that they believe that they have sufficient data from the current HERIZON-GEA-01 study to file in the U.S., and obviously they’ve initiated that process. The timing of the outcome from the second analysis of median OS and the ability to add that to an existing filing versus file that later to add to an approved label is something I think Jazz will talk about at the time when that data is available and not ahead of that from a regulatory strategy perspective if that’s okay. Sorry. Can you repeat your second question again?

Sorry, I didn’t hear it quite clearly. Sorry.

Speaker 7: Yeah. The Zonometinib, the study of the HER2 TKI with Zani, looks like a multi-indication study, not just breast cancer and some head-to-head data versus T-DXd one might be generated there. Just curious on the vision there of that study.

Ken Galbraith, Chair, CEO, and Interim Chief Financial Officer, Zymeworks: Yeah, it’s interesting. I don’t think we want to go much beyond what’s available on Clin Trials, but obviously that’s an approved TKI now, and Zani is as well. The ability to look at combinations of two approved agents and indications that they’ve not yet been labeled for is a pretty standard practice. I think we’ve always known that the combination of Zani and TKI could be very interesting in multiple indications. I think, you know, Jazz just waiting for the next generation of TKIs to be approved. This one is pretty interesting from our perspective, having followed all of them for some time periods. It wouldn’t be surprising to look at a range of indications in that combination.

After understanding the data that could come out of the combination studies and deciding what the next steps are from there, we’ll just have to let Jazz and BI and data drive those future decisions.

Speaker 7: Okay, thank you. On the GPC3, liver cancer program, could you just confirm if, you know, patients here are enriched for high GPC3 expression or not? If you are able to comment on how much validation and even differentiation you could show versus, you know, the GPC3 CAR-T data that we’ve seen. Thank you.

Ken Galbraith, Chair, CEO, and Interim Chief Financial Officer, Zymeworks: Yeah. I’ll let Sabeen answer that first part of that question, and second part, maybe Paul could comment if he feels the need.

Bijal Desai, Senior Vice President of Finance, Zymeworks1: ZW251 GPC3 programs, we are enrolling all levels of GPC3 expression. The target tumor types that we’re enrolling in this patient population, which is hepatocellular carcinoma mainly, has very high levels of GPC3 expression. According to the literature available, more than 90% of patients have some level of expression. We’re fairly confident that most of the patients we enroll are gonna have expression levels. The other thing is we will be evaluating GPC3 levels during the course of our study for all of our patients and in the end, do a comparison for the efficacy with regards to expression levels once we have enough data.

Paul Moore, Chief Scientific Officer, Zymeworks: Yeah. I think your second part of your question was how does it compare to other modalities? I think, you know, certainly GPC3 has been a target of high interest in liver cancer. There has been some success with CAR-Ts, but you know, they have their own challenges, CAR-Ts. Certainly that does bode well for the value of the target. We think we are really quite competitive and really one of the first to really think about using ADCs. The data that we have from the 191 program using the same topo payload really gives us a lot of, you know, conviction that, you know, we’re on the right track with the tolerability and the efficacy profile that showed there. Of course, we’ll wait for the data.

Speaker 7: Thank you.

Ken Galbraith, Chair, CEO, and Interim Chief Financial Officer, Zymeworks: Thanks for the question.

Operator: Our next question will be coming from the line of Jon Miller of Evercore ISI. Your line is open, Jon.

Bijal Desai, Senior Vice President of Finance, Zymeworks0: Hi, guys. Thanks much for taking my question, sneaking me in here. Congrats on the financing. One more on the strategy side and the financing side. Obviously, between this financing and the expected royalty, expect milestone that’s coming from Jazz this year, you’ve got a lot more flexibility. Ken, I know you spoke about balancing, capital allocation across a number of different things, but is it fair to assume that today’s financing opens up larger potential BD opportunities to you guys? Can you give a little bit of commentary on maybe what size of targets you’re looking at given the cash position, the expected cash position once all of this is cleared out?

Then sort of relatedly, you talked a lot about keeping OpEx discipline even though you’ve gotten the new capital. Is it fair to assume that if you do bring in development stage assets as part of your BD activity, that’s gonna come with additional OpEx liability and you’re gonna have to spend against those assets to generate value off of them? Can you give me a little bit of a, you know, bookends about how I should be thinking about what that liability could be?

Ken Galbraith, Chair, CEO, and Interim Chief Financial Officer, Zymeworks: Yeah. No, great questions as always, Jon. You know, I think the way we feel about the current financing is again, we’ve, you know, we’ve got, you know, the right amount of R&D spend that we wanna have right now. I think we’ve, you know, made a really great investment the last three years in the wholly owned portfolio, and, that cadence is slowing down a little bit. I think integrating the partnerships, collaborations is the right thing to do with how all of those programs that deserve to go forward will get funded. I think that’s great. We’ve obviously been able to continue to invest in ourselves by continuing our share repurchase at even a much more accelerated rate than we did when we started this in 2024.

It’s allowing us to, you know, return capital to shareholders from, you know, milestones and commercial revenue from Ziihera, you know, usually as we start in 2024, a little bit in advance of maybe receiving all of those milestones. Those are all great. I think obviously a part of this financing strategy now is to find, you know, an appropriate cost of capital with a long-term duration that allows us to think about the types of things that we’ll invest in. I don’t think it makes us think about larger transactions necessarily.

It does expand the amount of capital that might be available that, you know, as we find those that achieve our target hurdles for IRR, we can hopefully be able to finance those and do those quickly, which is a part of having that capital available. I don’t think it really makes us think about expanding necessarily to larger transactions. It could be more transactions. It could be able to get them done more quickly because the capital is available right now. I think from our standpoint, we’re also trying to match the, you know, the types of assets we’re looking at and when those might appreciate in value versus the duration of liability that we now have to be paid back out of royalties.

We, you know, we chose intentionally to pick a long-term duration liability, and that was created by, you know, only securitizing 30% of the royalty against the loan, makes it a longer term duration liability. Just gives a little bit more thought that we can look at assets that don’t have to have an immediate payback or income associated with them immediately to cover the financing cost. I think we feel comfortable the way we’ve done that. I think we’ve used the liability side of our balance sheet to give us a little bit more strategic optionality and flexibility in the type of assets that we’re looking at.

We’re obviously anxious to execute against this part of the element of our strategy so we can show our shareholders what we meant by our strategy and what types of things we should expect. It might take you know, multiple transactions to understand how we’re trying to accumulate assets externally inside the company. One aspect of that with respect to capital discipline is, you know, if we are to bring in an asset which has some R&D investment required as a part of that’s gonna have to come from the same capital allocation pool as the acquisition. That will be one of the defining factors is looking at what additional R&D investment is required to move something forward to get appreciation versus acquiring something that is already licensed and someone else is covering the development costs.

That’s a part of it. I would expect the capital allocation to acquisitions would also have to cover any incremental spend in R&D over and above the current base that we’re establishing this year versus last year, if that makes sense.

Bijal Desai, Senior Vice President of Finance, Zymeworks0: It does make sense. I guess if I can sneak in 1 more. To dovetail with that, I know you’ve discussed the potential to do more with the internal pipeline, the wholly owned pipeline, as it reaches the appropriate stage of development. And acknowledging that you’re not gonna give guidance on any particular asset, can you talk about broadly across the wholly owned portfolio, at what stage of development, at what are the key data readouts that you think unlock the ability to do partnerships with them or monetize those assets in this sort of way that you’ve been pioneering?

Ken Galbraith, Chair, CEO, and Interim Chief Financial Officer, Zymeworks: Yeah. Well, I mean, it’s always, you know, when you talk about this, it’s always, you know, most obvious to look at, you know, the asset that’s in the lead or has the most clinical data around it. That’s not necessarily where you might see the first collaboration, or, you know, as much, you know, the interest from our side on the collaboration. We have as much interest in understanding how we can move some of the early-stage programs forward. You know, we have a really interesting construct in ZW209 looking at DLL3 in a trispecific format. We have an incredible portfolio of targets behind that that are really interesting in other solid tumors in hemonc, even thinking about autoimmune.

Trying to move those earlier programs forward, with partnerships is as relevant for us in discussions as getting clinical data and trying to strike a partnership post clinical data or trying to bring on a partner to start funding at IND because it reduces our risk or shares cost. We’re interested in all aspects of that. It’d be fair to say that we’re open now maybe that we weren’t in the past 3 years, but open now to looking up and down the portfolio in different therapeutic categories, in different product formats, whether it’s ADCs, trispecifics, our dual engineering side, you know, chemokine or cytokine program, which we have, you know, more than ZW1528 available to us. It might be the early collaborations are things that get done before looking at later stage partnerships based on clinical data.

We’re just being open to understand how we integrate it in with our wholly owned portfolio right now and still have some unencumbered independent assets of our own, as a result of looking at different types of partnerships and collaborations we can integrate into that portfolio.

Bijal Desai, Senior Vice President of Finance, Zymeworks0: Great. Thanks so much.

Ken Galbraith, Chair, CEO, and Interim Chief Financial Officer, Zymeworks: Yeah. No, thanks, Jon.

Paul Moore, Chief Scientific Officer, Zymeworks: Our next question will be coming from Asthika Goonewardene of Truist. Your line is open.

Asthika Goonewardene, Analyst, Truist: Hey, guys. Good morning, and thanks for taking the questions. I got 2 quick ones for you and then a big picture one. I’ll start with the 2 quick ones. Just quickly on ZW191, by the time you present the data, can you tell us how much of that 6 and 9 milligram the dose levels will be backfilled to about 10-12 patients? About what amount of follow-up you’d anticipate having on hand when you present that data. The other quick question was just building on Stephen’s previous question. Given the toxicities... This is for specifically ZW209.

Given the toxicities that we’ve seen with CD28 engagement, wouldn’t improved safety of ZW209 be a near-term signal that the costim mechanism is working and perhaps be a inflection point for you to consider a strategic optionality? I’ll give you my longer question afterwards.

Ken Galbraith, Chair, CEO, and Interim Chief Financial Officer, Zymeworks: You have a longer question than that? Okay, thanks. maybe I’ll let Paul answer the second part of your question about DLL3, and then I’ll give Sabine a little bit of chance to think about how much of that first part of your question we want to talk about because, you know, hopefully it’s a subject of an abstract coming up, so may not wanna get too far ahead of that. I’ll let Paul answer your DLL3 or CD28 costim question first.

Paul Moore, Chief Scientific Officer, Zymeworks: Yeah, that’s a great question, I’m glad you brought that point up because I think that is very that could well be a very important inflection point is, you know, understanding the profile of the molecule. We’ve again, I’ve emphasized that the CD28 should only engage upon CDC engagement and trigger signaling, and that all is still contingent on engagement on DLL3. It has the same classic pattern or design as a T-cell engager. We think that careful design should be reflected in the tolerability of the molecule.

Ken Galbraith, Chair, CEO, and Interim Chief Financial Officer, Zymeworks: maintaining that localized activity in the tumor microenvironment where DLL3 is very selectively expressed in tumors is such an attractive target for that, this approach. I completely agree with your sentiment, and I think that was an important point to bring up. Thanks.

Asthika Goonewardene, Analyst, Truist: Sabine?

Bijal Desai, Senior Vice President of Finance, Zymeworks1: Yes. I will start with, for ZW191, we when we presented the data at the triple meeting, we had mentioned that we completed dose 1 escalation at that point in time, and we’re planning to start dose optimization. Dose optimization is proceeding very well. We are very clear with the number of patients that we have in part 1 of our study since that’s already completed. Since we completed that in Q4 of last year, we think that by the time we present the updated data, we’re gonna have reasonable follow-up to present both the safety and efficacy of those patients. I would also say that the part 2 dose optimization enrollment is proceeding very well as well, and it’s according to our plan.

We are hoping that we will provide an update to you about the completion of enrollment sometime in the near future.

Asthika Goonewardene, Analyst, Truist: All right, Ken. Brace yourself for the long one.

Ken Galbraith, Chair, CEO, and Interim Chief Financial Officer, Zymeworks: Is it multi-part?

Asthika Goonewardene, Analyst, Truist: No, no. It’s Okay, it’s just a long one. Let’s get to it.

Ken Galbraith, Chair, CEO, and Interim Chief Financial Officer, Zymeworks: Go for it.

Asthika Goonewardene, Analyst, Truist: Payload resistance continues to emerge as an issue for ADCs. Big picture, how are you guys thinking about this very real problem that the field is gonna have as ADCs become even more commonplace? How are you planning on deploying capital to bring in new assets and build your own capabilities to address it? Thanks.

Ken Galbraith, Chair, CEO, and Interim Chief Financial Officer, Zymeworks: Yeah. I’ll start physically and then let Paul comment, cause we’ve been thinking about this a lot. I mean, we, you know, really like the 519 payload that we developed back in 2022, 2023 that we now have on ZW191 and ZW251 and also ZW220, which is IND ready. I think we really selected, you know, a great payload in the camptothecin analog class, and we’re very proud of the data we’re seeing right now cause I think it’s showing that there’s some benefit from the work that we did to select a proprietary payload with very specific characteristics. It is providing some differentiation from clinical data you’re seeing from exatecan or other generic payloads. That’s great.

There’s obviously been a tremendous amount of overcrowding in that class in, you know, multiple, you know, multiple targets, especially some of the therapeutic areas when we started out. We were looking at gynecological cancers, thoracic, both non-small cell, small cell and head and neck, as well as GI indications for our ADCs and T-cell engagers. It’s safe to say that on the gynecological cancer side, some of the initial indications, especially P-ROC, are quite crowded with different targets and different payloads approaching. There’s still opportunities, I think, in some earlier settings, but we’ve been thinking really about, you know, the next payload. We have been working for some time period to try and find another class of toxins that might be interesting. I know it’s been reported that Daiichi Sankyo’s been doing the same thing.

You know, it is hard to find, you know, a payload that’s as effective that comes from that camptothecin analog class. That drove some of our efforts to think more about, you know, small molecule approaches that might be better targeted with ADC constructs or a dual payload strategy to maybe do something a little bit differently. I think Paul can talk a little bit about our work, and that’ll be the focus of some of our presentations at AACR coming up in April. Paul, do you wanna add to that? No, totally, Ken. I think the challenge about the space and the busyness in the topo space, I think there we really thought carefully about how we designed ours.

As Ken alluded to, and Sabine reported in the ZW191 data, we feel like our care and design and tolerability as well as efficacy does put us in a good position so that we can get out front with those molecules. We can combine, hopefully in the future and sort of differentiate on the clinical strategy. Behind that, though, I think we for sure are looking at next generation payloads. Where else do you go to broaden out the opportunity for ADCs? We’re really empowered with the success we’ve seen in our ability to deliver payloads in small molecules, and we wanna then just translate that into other payloads. For One, as we talked about, will be the pan-RAS.

We think we can do it also for other, small molecules as well, or toxins, pan toxins. That work is also proceeding. I think really thinking about the tolerability profile, the linker stability, the potency of the payload, the balance there, how also when you start thinking about dual payloads, how those toxicities interplay, and again, thinking about the combination and the bystander and the overlap of toxicities is very important. We, you know, we are thinking about that. I think there’s a lot of opportunity still in the ADC space to, you know... It really depends on careful design and really balancing, you know, pragmatically what should work, you know, thinking about PK, thinking about bystander activity, as well as, very importantly, is also how you deliver the modality that you use to deliver. Is it a monoclonal antibody?

Is it a bispecific? Is it a biparatopic? At Zymeworks, we’re really well positioned to also think about that end of the ADC as well with our protein engineering capability. Thanks for the question.

Operator: Our next question will be coming from Reni Benjamin of Citizens. Your line is open.

Brian Cheng, Analyst, JPMorgan: Perfect. Thanks.

Bijal Desai, Senior Vice President of Finance, Zymeworks6: Thank you. Good morning and congratulations on all the progress. Ken, maybe, you know, I’d love to kinda get an idea.

Ken Galbraith, Chair, CEO, and Interim Chief Financial Officer, Zymeworks: Are you there, Randy?

Bijal Desai, Senior Vice President of Finance, Zymeworks6: about future.

Ken Galbraith, Chair, CEO, and Interim Chief Financial Officer, Zymeworks: Yeah.

Bijal Desai, Senior Vice President of Finance, Zymeworks6: Yes. Can you hear me?

Ken Galbraith, Chair, CEO, and Interim Chief Financial Officer, Zymeworks: Cool. Yeah, I hear you now. Go ahead. Yep. Yeah. Okay.

Bijal Desai, Senior Vice President of Finance, Zymeworks6: Thanks for taking the questions. As you think about future buybacks, can you maybe take us through the criteria of these future buybacks and your thoughts on kind of when enough is enough, as we’re thinking about modeling this out, you know, to the future? Maybe one for Sabine. As you think about, you know, the HCC indication, what other additional indications may show promise, given GPC3 expression, and what kind of efficacy criteria would you wanna see that would guide you into either expansion cohorts or expanding into these other indications? Thanks.

Ken Galbraith, Chair, CEO, and Interim Chief Financial Officer, Zymeworks: No, that’s great. Sabine, do you wanna take the GPC3 question first?

Bijal Desai, Senior Vice President of Finance, Zymeworks1: Yes, I can take that. HCC is a tumor that we’ve highlighted for GPC3 expression, although there are other tumors that express pretty high levels of GPC3 expression. We have evaluated those pretty well and are going to be including some of those patients into our study. As we move forward from species signal, we may potentially include others into our development plan. Some of these tumors, include some germ cell... rare germ cell tumors. There are certain lung cancer patients who express those patients. We’re evaluating them very carefully with regards to including them into our development plan. There are certain pediatric tumors and sarcomas. We have our eye on that. We just wanted to start our development plan with the tumors that have highest expression, which is HCC.

Also, HCC is an area of very high unmet medical need, particularly after first-line, patients relapse after first line. We think that given the wide therapeutic window that we’ve observed with our ZW191, we wanted to apply that in the HCC population as well. As you know, there is evidence to indicate that cytotoxics work in HCC. The main concern there is having the therapeutic window, and what we’ve seen with one nine one gives us a lot of confidence that we should be able to have that both in terms of safety, which is critical in this patient population. Because as you know, a lot of the HCC population have abnormalities in their liver function and cytopenias.

Given the safety that we observe with ZW191, we are fairly confident that this ADC should be well-tolerated in this patient population. Also from an efficacy perspective, the current standard of care treatment in already treated HCC population, the response rates are pretty low. They are lower than 15%. We’re expecting that we should be doing much better than current standard of care in this patient population.

Ken Galbraith, Chair, CEO, and Interim Chief Financial Officer, Zymeworks: No, that’s great, Sabine. Thank you. Randy, just come back to your question about shareholder repurchases, which, you know, we really see as a return of capital. I think, you know, we started this back in 2024 with the idea that we were going to start to see commercial revenues from our investment in Ziihera, and that started with approval milestones in 2024 in the U.S. and another one in 2025 in China. You know, we were very clear that we felt it was important to return that capital to shareholders, and we’ve chosen to done that through repurchasing shares, just because it does provide a...

You know, there’s a compelling discount for us right now between the underlying share price and what we see as the, you know, the future cash flows that can be derived just from Ziihera on its own, not counting pasritamig or other parts of the business. That compelling discount shows us that, you know, reacquiring those shares at those prices and retiring them can really be an effective way to boost total shareholder return over the long term. You know, that always has to go along with continued investments in the numerator part of that equation, which is continue to build value in the business, which we have been doing through our significant R&D investment in our portfolio behind Ziihera.

We’re doing both of those at the same time, reflect. I think that’ll always be the case. I think in November last year when we saw the top-line data from HERIZON-GEA-01, we felt very comfortable this was going to be something that should be approved based on the current dataset and approved in a timeframe that would bring in the additional milestone that we expect later this year from Jazz for GEA. The royalty transaction we did with Royalty Pharma today is a way of just bringing forward some of the commercial royalties from further in the future to today, just to give us optionality to continue to buy back shares. We’re halfway through the current $125 million authorized share program.

We think that’s a compelling discount, which we think provides a good investment for our shareholders to buy back the number of shares. Over time, as the business continues to build and become more valuable, that will be valuable on a per share basis. We’ve done that more aggressively, starting this November. I think a part of that was just what we felt was a disconnect between, you know, a great outcome for HERIZON-GEA-01 and getting more optimism and confidence of our next randomized study, the IMpower030 in metastatic breast cancer. I know it’s a different study, it’s a different tumor type.

We’ve got a lot of confidence out of the large randomized HERIZON-GEA-01 study outcome to understand that zanidatamab could be a more powerful HER2-targeted agent than zanidatamab in combination GEA, that could read over into metastatic breast cancer and other indications eventually. We probably had a higher confidence level on the cash flows related to the outcome of that study than maybe we felt was embedded in the market price. It just gave us an even more compelling discount to acquire shares, which is why I’ve been doing it very aggressively. You know, we’ll continue to do that. When we reach the end of the $125 million authorized plan, then we’ll speak with our board and decide again the size and cadence of the next share buyback.

As of right now, I think it’s a very compelling investment in the years to come. I think our investors will benefit by this aggressive share purchasing by looking at the compelling discount against what we view as the future cash flows from not just the hero. As we add additional assets, whether royalties or partnerships around the portfolio, that’s gonna drive that even further. Reducing that share count is just a way that’s been proven to generate outsized returns. We obviously have, you know, capital limitations. We need to make sure we fund our R&D efforts. We need to make sure we have a strong balance sheet, which we do right now. As more royalties and milestones come in, that’s just generating additional free cash flow for us that we need to figure out how to allocate.

Right now, allocating it to share repurchases has been, you know, a pretty, hopefully thoughtful capital allocation, but a pretty compelling thing to do. If we can add some strategic acquisition to the internal R&D refunding, then I think the mix of all three of those will evolve over time. Right now we’ll just continue to return that capital from commercialization of Ziihera back to shareholders through those share repurchases.

Bijal Desai, Senior Vice President of Finance, Zymeworks6: Thanks for taking the questions. Congrats again.

Ken Galbraith, Chair, CEO, and Interim Chief Financial Officer, Zymeworks: No, thanks very much, Randy. Appreciate that.

Operator: I would now like to hand the call back to Ken for closing remarks.

Ken Galbraith, Chair, CEO, and Interim Chief Financial Officer, Zymeworks: That’s great. Yeah, thank you everyone. Appreciate your time in listening to us today. We obviously had a very eventful 2025 at Zymeworks here at the end of last year of finally reading out the HERIZON-GEA-01 study after four years from starting that study back in 2021. We were so pleased with the results for patients, we felt energized our business. We’ve got a great start to 2026 right now, I’m expecting a very eventful and full year for us. I think the Royalty Pharma transaction we’ve announced today with the $250 million in note financing is a very unique and creative financing structure, which I think can be a catalyst for us for additional strategic change.

We look forward to reporting on our progress against that and the other events we laid out today in the weeks and months ahead. Look forward to giving those updates to you along the way. Thank you very much for your time, and please be safe wherever you are in the world. Thank you.

Operator: This concludes today’s conference. Thank you for participating. You may now disconnect.