ZYME

Business Context and Reporting Period

Zymeworks Inc. is a global biotechnology company focused on a royalty-driven asset aggregation strategy, managing a portfolio of licensed healthcare assets and developing novel biotherapeutics for cancer, inflammation, and autoimmune diseases. This Form 10-K covers the fiscal year ended December 31, 2025. The company operates as a non-accelerated filer and smaller reporting company.

Key Financial Metrics

Note: The filing does not provide explicit gross margin or operating margin percentages. Revenue is primarily derived from collaboration milestones, upfront fees, and royalties.

Material Changes vs. Prior Period

• Revenue Growth: Revenue increased by $29.7 million (39%) driven by significant milestone payments from partners J&J, BeOne, GSK, Daiichi Sankyo, and BMS. This was partially offset by a decline in development support revenue from Jazz as responsibilities for zanidatamab clinical activities were transferred to the partner.
• R&D Expenses: Total R&D expenses remained relatively flat at $137.0 million (up $2.4 million). Costs for zanidatamab decreased significantly due to the transfer of clinical trial responsibilities to Jazz, while spending increased for early-stage programs (ZW251, ZW191) and preclinical activities.
• Stock-Based Compensation: Increased significantly to $28.0 million (up from $17.8 million in 2024) due to higher grant-date fair values resulting from an increase in the company's stock price.
• Impairment: No impairment charges were recorded in 2025, compared to a $17.3 million charge in 2024 related to the discontinuation of the zanidatamab zovodotin program.

Guidance, Outlook, and Management Commentary

• Strategic Pivot: Management is executing a strategy to optimize future milestone and royalty cash flows while selectively investing in high-quality assets. The company aims to return capital to stockholders via share repurchases as the royalty portfolio matures.
• Zanidatamab (Ziihera) Progress: Positive Phase 3 data for first-line HER2+ gastroesophageal adenocarcinoma (GEA) was announced in late 2025. Partner Jazz expects to submit a supplemental Biologics License Application (sBLA) in Q1 2026, with a potential commercial launch in H2 2026. Zymeworks is eligible for up to $440 million in near-term milestones for GEA approvals.
• Pasritamig: Partner J&J initiated Phase 3 trials for this prostate cancer candidate in 2025. Zymeworks recognized a $25 million milestone payment in 2025 related to this progress.
• Capital Allocation: The company authorized a new $125 million share repurchase program in November 2025. As of December 31, 2025, $11.2 million had been utilized. In March 2026 (subsequent event), the company entered a $250 million loan arrangement with Royalty Pharma, monetizing 30% of future Ziihera royalties to fund repurchases and strategic acquisitions.
• Liquidity: Management anticipates existing cash resources will fund operations for at least the next 12 months, excluding potential milestone receipts and the proceeds from the Royalty Pharma loan.

Key Facts for Investor Verification

• Regulatory Milestones: Verify the timing and success of the sBLA submission for Ziihera in GEA by Jazz in Q1 2026, which triggers significant milestone payments.
• Royalty Pharma Loan Terms: Review the specific covenants and repayment structure of the March 2026 $250 million loan, including the 30% royalty interest sold and the maturity date of 2042.
• Partnership Dependencies: Assess the reliance on Jazz, BeOne, and J&J for clinical execution and commercialization, as Zymeworks does not currently commercialize products independently.
• Pipeline Progression: Monitor the Phase 1 clinical data readouts for wholly-owned ADC candidates ZW191 and ZW251, which are critical for future partnership opportunities.
• Share Repurchase Execution: Track the utilization of the $125 million repurchase program and the impact of the Royalty Pharma financing on future buyback capacity.