Zymeworks Inc. 10-Q Summary — Quarter Ended March 31, 2024
Business Context and Reporting Period
Zymeworks is a clinical-stage biopharmaceutical company developing multifunctional biotherapeutics, primarily for oncology. Its lead candidate is zanidatamab, partnered with Jazz and BeiGene; other programs include zanidatamab zovodotin and preclinical candidates ZW171, ZW191, ZW220 and ZW251. The filing presents unaudited results for the three months ended March 31, 2024, compared with the same period in 2023. The Company has no approved products and has generated no product-sales revenue.
Financial Performance and Liquidity
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Collaboration revenue | $10.0 million | $35.6 million | Down $25.6 million, or 72% |
| Research and development expense | $32.0 million | $45.9 million | Down $13.9 million, or 30% |
| General and administrative expense | $15.8 million | $16.9 million | Down $1.1 million, or 7% |
| Loss from operations | $37.8 million | $27.3 million | Higher operating loss |
| Net loss | $31.7 million | $24.4 million | Higher loss |
| Basic net loss per share | $0.42 | $0.36 | Higher loss per share |
| Net cash used in operating activities | $37.7 million | $83.2 million | Improved by $45.5 million |
Q1 2024 collaboration revenue consisted primarily of $9.9 million from Jazz for development support and drug supply, compared with $34.4 million from Jazz in Q1 2023. The decline primarily reflects the transfer of zanidatamab development responsibilities and related costs to Jazz in May 2023.
Interest income was $5.9 million, compared with $4.8 million in the prior-year quarter, reflecting higher returns on cash and investments. Total other income was $6.2 million, compared with $4.3 million. There is no meaningful product gross margin to report because the Company has no approved product sales.
At March 31, 2024, cash and cash equivalents were $114.8 million, short- and long-term marketable securities totaled $305.7 million, and total cash resources were approximately $420.5 million, compared with $456.3 million at December 31, 2023. Stockholders’ equity was $438.0 million and accumulated deficit was $709.1 million.
The filing does not disclose traditional funded debt. Lease liabilities totaled $25.2 million, including $25.1 million of operating lease liabilities. On April 4, 2024, the Company terminated a Seattle office lease and expects to pay a $6.1 million termination fee; the related lease liability was $4.4 million at March 31, 2024.
Material Changes Versus the Prior Comparable Period
- Revenue declined substantially because Jazz assumed responsibility for specified zanidatamab development activities and related costs.
- Research and development expense decreased as zanidatamab spending fell by $20.0 million, partly offset by higher spending on zanidatamab zovodotin and preclinical programs ZW171, ZW191 and ZW220.
- Cash used in operations improved significantly, principally because the Company no longer funded the transferred zanidatamab activities to the same extent and working-capital movements were more favorable.
- Preclinical investment increased, consistent with planned advancement of the Company’s wholly owned pipeline.
- Effective March 31, 2024, Christopher Astle was removed as Chief Financial Officer. Kenneth Galbraith became interim Chief Financial Officer while the Company searches for a permanent CFO.
- Research collaboration contract liabilities were $36.4 million at March 31, 2024, compared with $36.6 million at December 31, 2023.
Guidance, Outlook, Commentary, Risks and Unusual Items
Management expects existing cash, cash equivalents and marketable securities to fund operating and capital requirements for at least the next 12 months from the filing date. Management also states that substantial additional funding will be required over the longer term. Future financing could include equity, debt, strategic partnerships, asset monetization or other arrangements and could dilute existing stockholders or require the Company to relinquish rights.
- Jazz completed its rolling U.S. BLA submission for accelerated approval of zanidatamab in previously treated biliary tract cancer in April 2024. Jazz is targeting a U.S. launch in 2025 or earlier, subject to regulatory approval.
- Jazz plans to submit an EMA marketing authorization application for zanidatamab in biliary tract cancer and is targeting a late-2024 Phase 3 readout for the HERIZON-GEA-01 gastroesophageal adenocarcinoma trial.
- BeiGene intends to submit a China BLA for zanidatamab in biliary tract cancer in the second half of 2024.
- Jazz expects to initiate a Phase 3 breast cancer trial in the second half of 2024 and is evaluating additional zanidatamab indications.
- Zanidatamab zovodotin remains ready for a Phase 2 study, but the Company has deprioritized initiation of that study and paused recruitment in its Phase 1 Japan trial.
- The Company expects to submit IND or foreign-equivalent applications for ZW191 and ZW171 in 2024, and for ZW220 and ZW251 in 2025.
- The Company remains dependent on Jazz and other partners for development, regulatory submissions, commercialization and potential milestone and royalty receipts. The Company remains eligible for up to $1.56 billion in potential zanidatamab regulatory, development and commercial milestones, plus royalties, although receipt is uncertain.
- Key risks include clinical-trial failure or delay, regulatory nonapproval, safety findings, manufacturing and third-party dependence, intellectual-property challenges, partner termination or underperformance, cybersecurity and data-privacy events, competition, reimbursement pressure and the need for additional capital.
- Contingent consideration related to the Kairos acquisition had a fair value of $1.2 million at March 31, 2024, down from $1.9 million at year-end, reflecting a $0.7 million decrease in fair value.
- Management reported effective disclosure controls and procedures as of March 31, 2024, with no material changes in internal control over financial reporting during the quarter.
Important Facts for Investors to Verify
- Regulatory timing and outcomes for Jazz’s U.S. BLA, prospective EMA submission and BeiGene’s anticipated China submission for zanidatamab.
- Whether zanidatamab achieves approval and commercial launch targets, including the stated 2025-or-earlier U.S. launch objective.
- The durability and magnitude of future Jazz and BeiGene milestone, reimbursement and royalty receipts.
- The Company’s cash-burn trajectory and whether the stated 12-month liquidity outlook changes as preclinical and clinical spending increases.
- The terms and timing of the Seattle lease termination payment and any associated charges.
- Appointment of a permanent CFO and any related severance or restructuring costs.
- Progress, funding needs and IND submissions for ZW171, ZW191, ZW220 and ZW251, as well as the future of zanidatamab zovodotin.
- Potential dilution from the 5.1 million outstanding pre-funded warrants, stock options, restricted stock units and any future financings.