Earnings Call Transcript - ZYME Q4 2025

Operator, Conference Operator

Thank you for standing by. This is the conference operator. Welcome to the Zymeworks Inc. 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 a Q&A session. I would now like to turn the conference over to Sharnell Elander, Vice President of Investor Relations. Sharnell, please go ahead.

Sharnell Elander, Vice President, Investor Relations

Thank you, operator, and good morning, everyone. Thank you for joining our fourth quarter 2025 results conference call. As usual, I would like to remind you that we will be making a number of forward-looking statements during this call, including, without limitation, those forward-looking statements identified in 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, our industry, and at our stage of development. For a 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 will hand over the call to Kenneth H. Galbraith, our Chair, CEO, and interim Chief Financial Officer, who will provide an overview of recent business updates. Kenneth will then 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 SVP and Chief Medical Officer, will provide progress updates on the Phase I clinical trial for ZW251. At the end of the call, Kenneth, Sabeen, and Bijal will be joined for Q&A by Paul A. Moore, our Chief Scientific Officer, Scott Pashton, our Acting Chief Investment Officer, and Adam Sherwitz, our Acting Chief Development Officer. As a reminder, the audio and slides from this call will also be available on the Zymeworks Inc. website later. I will now hand the call over to Kenneth.

Kenneth H. Galbraith, Chair, CEO, Interim Chief Financial Officer

Great. Thank you, Sharnell. 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 would like to begin by recognizing the results of the Phase III HORIZON-GEA-01 trial as presented at ASCO GI by our partners, Jazz and BeiGene. Zanidatumab in combination with chemotherapy, with or without a checkpoint inhibitor, demonstrated a median PFS exceeding one year with a median overall survival exceeding two years in 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 zanidatumab plus chemo regimen that just missed the statistical significance at the initial interim analysis is currently expected by mid-2026. Benefit was observed consistently across clinically relevant subgroups, irrespective of PD-L1 expression, which was studied as an exploratory endpoint in the HORIZON-GEA-01 rather than a stratification factor. On these data, we are optimistic that zanidatumab 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. I will highlight now. From a U.S. regulatory perspective, Jazz expects to complete the submission of the supplemental BLA with the FDA in 2026 under the Real-Time Oncology Review program in the U.S. For zanidatumab, zanidatumab has been granted Breakthrough Therapy designation for patients with HER2-positive GEA. We expect these designations will allow for greater speed in regulatory interaction. In addition, the data from HORIZON-GEA-01 has been submitted for inclusion in the National Comprehensive Cancer Network guidelines, as previously disclosed. We therefore share in Jazz's expectations to have zanidatumab 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 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 zanidatumab and tislelizumab in GEA, and we look forward to reporting such progress as appropriate. Our confidence in zanidatumab’s potential has only increased since we commenced registration studies in 2021 and partnered with Jazz in 2022, in addition to our existing APAC partnership with BeiGene. These partnerships allowed us to accelerate the development of zanidatumab and broaden its therapeutic potential in many other HER2-expressing tumors while sharing development risk and transferring costs to our partners. We believe zanidatumab's demonstration of a substantial survival benefit in metastatic or locally advanced GEA, a tumor type where prior HER2-targeted agents have struggled to materially extend outcomes, strengthens confidence in zanidatumab'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, zanidatumab 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 zanidatumab, 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 EMPOWUR-303 trial, in which they expect to complete enrollment in 2027 with top-line data readout expected later in 2027 or in early 2028. Given zanidatumab's dual epitope binding and differentiated biology, we are optimistic about its potential performance in the treatment of patients with metastatic HER2-positive breast cancer. Jazz is also pursuing collaboration with partners to combine zanidatumab with novel therapies. For example, the Phase I trial in combination with BI’s zanidotinib 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 zanidatumab into indications where meaningful differentiation may translate into durable clinical and patient benefit. Consensus estimates for peak sales of zanidatumab have doubled over the last few years, indicating clear potential for zanidatumab to achieve a multibillion-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 zanidatumab for Zymeworks Inc. and our shareholders. This quarter, we reported regulatory approvals for zanidatumab 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 a further $89 million collectively from Jazz and BeiGene upon approval in a third indication, as highlighted in our press release. Zymeworks Inc. 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 BeiGene. 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 Inc. is eligible to receive tiered royalties of 10% to the high teens on global annual sales of zanidatumab up to $2 billion and 20% on annual net sales above $2 billion. Jazz holds marketing rights globally to zanidatumab, excluding Asia, but including marketing rights in Japan. Under the collaboration agreement with BeiGene, Zymeworks Inc. is eligible to receive tiered royalties of mid-single to mid-double digits on annual net sales of zanidatumab up to $1 billion and 19.5% on annual net sales above $1 billion. BeiGene holds marketing rights to zanidatumab in Asia, excluding Japan. The strengthening clinical foundation for zanidatumab 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, nondilutive 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 would like to spend a few minutes talking through this strategic financing with Royalty Pharma and how it fits 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, nondilutive capital in the form of nonrecourse royalty-backed notes. To be clear, this is not a monetization. The full value of the zanidatumab royalties returns to Zymeworks Inc. after the note is fully repaid. But unlike a traditional royalty-backed loan, there is no stated interest rate, and not all of the zanidatumab royalties are needed as security for repayment of the debt. Obligation for repayment of the principal and cost of such capital is serviced from a portion of the zanidatumab 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 nonrecourse 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 zanidatumab in first-line GEA, as the loan is not conditional on FDA or other regulatory approvals. Our hope is that zanidatumab 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 zanidatumab royalty stream until repaid. Therefore, Zymeworks Inc. retains 70% of the royalty stream throughout the duration of the term, preserving the majority of ongoing cash flows. Royalty proceeds will be utilized to repay the principal, unlike in a traditional royalty loan where 100% of the royalty proceeds could be encumbered. As a result, both the net present value and total royalty retained over the life of the asset, with a much shorter duration, 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 reinvestments. In addition, all earned regulatory and commercial milestones under agreements with Jazz and BeiGene will be retained by Zymeworks Inc., including, as mentioned earlier, $440 million in near-term milestone payments tied to future regulatory approvals of zanidatumab in GEA in the United States, Europe, Japan, and China, $89 million in regulatory milestones for a third indication beyond biliary tract cancer and GEA, and up to $977.5 million of potential commercial milestone payments. Altogether, again, these milestone payments represent $1.5 billion of potential future revenue for Zymeworks Inc. Just as importantly, Royalty Pharma demonstrated strong conviction in the underlying royalty; Royalty Pharma was highly enthusiastic about including this asset in their portfolio, reinforcing external validation of its long-term commercial potential. We have been very deliberate about protecting the potential long-term upside of zanidatumab royalties. Only a defined portion of royalties are 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 zanidatumab 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. 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 have utilized approximately $62.5 million of the $125 million share repurchase program authorized in November 2025. We will 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’s 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 are not just evaluating assets for an income yield. We are 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, 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, where acquisitions also allow us to feed our R&D engine. Internal discovery will always be important at Zymeworks Inc.; having the ability to source high-quality external innovation enables 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 partnership. 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 is what we expect will build and diversify our emerging royalty portfolio. So 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 will 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

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, BeiGene, GSK, Daiichi Sankyo, and BMS. This growth was partially offset by a decrease in development support and drug-related supply-related revenue from Jazz, reflecting the transition of responsibility for certain zanidatumab 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 nonrecurring impairment charge recognized in 2024 related to our discontinued program zanidatumab 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 noncash 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 programs, including zanidatumab, zanidatumab 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 the prior year as an increase in noncash stock-based compensation was offset by a decrease in salary and benefits due to reduced headcount, as well as decreases 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 12/31/2025, we had $270.6 million of cash resources consisting of cash, cash equivalents, and marketable securities, compared to $324.2 million as of 12/31/2024. Based on current operating plans, and assuming full execution of the $125 million share repurchase plan, we expect our existing cash resources as of 12/31/2025, when combined with anticipated regulatory milestone payments of $440 million related to the potential approvals of zanidatumab in GEA in the United States, Europe, Japan, and China, as well as the net proceeds from our nonrecourse 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 zanidatumab, 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 activities of approximately $300 million over a three-year period ending 12/31/2028. 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 three 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 Sabeen, who will provide a brief update on our clinical development program ZW251.

Sabeen Mekan, MD, Senior Vice President and Chief Medical Officer

Thank you, Bijal. Following my update last quarter, I am pleased to report that the Phase I study of ZW251 in GPC3-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 mg/kg in the dose-escalation portion. This starting dose reflects a data-driven decision informed by our prior experience with ZW191. In that program, where we utilized the same linker–payload technology and a drug-to-antibody ratio of eight, we began to observe early signs of activity at the 3.2 mg/kg dose level after starting at 1.6 mg/kg. ZW251 incorporates a lower drug-to-antibody ratio of four, which supported our confidence in initiating dose escalation at 3.2 mg/kg. 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 data set from our dose-escalation study matures and the program progresses through dose optimization. I will now hand the call back to Ken to provide closing remarks.

Kenneth H. Galbraith, Chair, CEO, Interim Chief Financial Officer

Thank you, Sabeen. 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 zanidatumab 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 I clinical studies for ZW191 and ZW251 in 2026. In addition, 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. As usual, 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 Inc. in 2026 is to integrate new partnerships and collaborations into our existing wholly owned portfolio to share funding and risk with partners. We look forward to providing progress updates throughout the year on these expected catalysts and on the continued execution of our evolving strategy. I would like to end the call with this thought: one of the clearest illustrations of our model today is the journey of a single drug, zanidatumab, during my tenure as CEO since 2022. Zanidatumab was designed and developed in-house by our team. We advanced it through rigorous science and validated our asymmetric platform. Early in my tenure, we made the decision to partner strategically rather than sell it outright, generating meaningful upfront payments, structured with milestones and royalties, to ensure we captured potential upside as a shareholder value driver for our shareholders. The upfront proceeds funded the expansion of our wholly owned R&D portfolio over the past three years, strengthened our balance sheet, and contributed to the value creation reflected in our share price over time. Now we find that zanidatumab 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, and 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 nondilutive capital. We are 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 is 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 is more, we may have the ability to do this again with pasritamig, which continues to demonstrate a highly encouraging safety and efficacy profile in Phase I combination regimens, including with docetaxel, as presented last week at ASCO GU, as well as 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, and 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 utilizing that capital to acquire and scale the next wave of royalty-generating opportunities for long-term shareholder returns. With that closing comment, I would like to thank everyone for listening, and I will turn the call over to the operator to begin the question-and-answer session. Operator?

Operator, Conference Operator

Certainly. As a reminder, to ask a question, please press 1-1. To withdraw your question, please press 1-1 again. Our first question will come from the line of Charles Zhu of LifeSci Capital. Your line is open, Charles.

Charles Yue-Wen 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 will have about 100 patients through dose escalation and optimization. Any qualitative comments around how the enrollment data collection is going and, 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.

Kenneth H. Galbraith, Chair, CEO, Interim Chief Financial Officer

Yeah. Thanks, Charles. I will start with that, and I will see if Sabeen has anything to add later. I would expect this would follow along a very similar fashion to our Phase I program for ZW191, which is still obviously playing out. With ZW191, we had a very quick operational execution on the clinical study. We went from first patient in to first data presentation in about ten 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 see we have a very similar clinical trial footprint for ZW251. It is a different tumor type and a different treating physician group. It is a little early to make predictions about that, but I think you will see the same cadence: we are not going to give guidance about when an initial data disclosure will be made. It will probably be exactly like it was last year for ZW191: when we think we have something interesting to provide, we will do that in a peer-reviewed setting, and we will likely not give guidance around that until right before it is necessary to in terms of a public abstract or a public oral presentation. I think once we get through an initial presentation, it is a little bit easier with the cadence. We have indicated we are going to have some ZW191 data update coming soon from the full dose-escalation data for that. For the initial data presentation for ZW251, we will let our clinical folks do their work. It is recruiting nicely, the way that we expected. Once we have something that we want to say, we will submit an abstract to a peer-reviewed medical meeting and present the data there.

Sabeen Mekan, MD, Senior Vice President and Chief Medical Officer

I think the only thing I would add is that the enrollment for ZW251 is proceeding in line with our plan and is exceeding expectations according to our schedule. As Ken mentioned, it is a different patient population, but we are very excited with this molecule. In dose escalation, the timeframe often depends upon the number of dose-escalation cycles and follow-up and how quickly you see responses. With ADCs, it is generally very quick. With a Phase I program, we generally want to wait until we have a wholesome data set to present, and as Ken mentioned, we will do so at a peer-reviewed conference when we get to that point.

Charles Yue-Wen Zhu, Analyst (LifeSci Capital)

Understood. Thank you very much for taking the questions, and congrats again on the progress.

Kenneth H. Galbraith, Chair, CEO, Interim Chief Financial Officer

No. Thanks, Charles.

Operator, Conference Operator

Our next question will be coming from Brian Cheng of J.P. Morgan. Your line is open, Brian.

Brian Cheng, Analyst (J.P. Morgan)

Hi, Ken. Hi, team. Thanks for taking our questions this morning. First, just curious on the timing of the royalty-backed financing. Is that driven by something that you already found on the BD side that accelerated that need to secure the royalty-based deal? Can you help us define the accelerated timeframe on an acquisition here? And then we have a quick follow-up. Thank you.

Kenneth H. Galbraith, Chair, CEO, Interim Chief Financial Officer

Yes. Thanks, Brian. The timing for the royalty note has as much to do with completion with Royalty Pharma and the current commercialization cycle of zanidatumab and the cost of capital that is available to us right now, as much as it does to where we see near-term use of proceeds. I would not read too much into that. We see a compelling opportunity to continue to buy our own shares and reduce share count over a period of time. We think it is a good investment for our current shareholders, and we are halfway through the current authorized plan; we will continue on that at the current share price. This provides more balance sheet to do that. We wanted to add to the balance sheet to take advantage of acquisition opportunities we see in the marketplace, whether that is licensed assets that bear royalties, development assets, or platforms that are available to us. We are active in looking at those opportunities and assessing them, but we have a very disciplined approach and a high standard for using that capital to bring other assets inside the company, and we will let that play out without guiding around timeframe. It is about where zanidatumab is in the development cycle and the cost of capital available now, so we completed that exercise now and will let subsequent transactions—whether additional share repurchases or potential acquisitions—follow, and we will explain those as they are completed.

Brian Cheng, Analyst (J.P. Morgan)

Got it. And 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 entire portfolio?

Kenneth H. Galbraith, Chair, CEO, Interim Chief Financial Officer

I will let Paul give a little foreshadowing. None of the abstracts are public yet, so we will have to wait. Paul can talk a bit about what the team has been working on and what we are excited to discuss in April without getting too definitive.

Paul A. Moore, Chief Scientific Officer

Thanks, Ken. Brian, as you know, we have both multispecifics and ADC capability in-house, and we have been applying that to oncology. AACR is where we have traditionally had a strong presence and intend to again this year. On the ADC front, we alluded to a new payload technology that we have been developing. We cannot speak to specifics yet, but that technology is built on a similar philosophy and design as the TOPO payload that was clinically validated with ZW191, the folate receptor program, and what ZW251 is built on. You can expect to see progress and updates on that technology. We are also advancing our multispecifics, so you can anticipate potential news on that front as well. Other than that, I cannot say much more on specifics at this time.

Brian Cheng, Analyst (J.P. Morgan)

Alright. Thank you. No worries. Thank you.

Kenneth H. Galbraith, Chair, CEO, Interim Chief Financial Officer

Thanks, Brian.

Operator, Conference Operator

And our next question will be coming from Yigal Nochomovitz of Citigroup. Your line is open, Yigal.

Yigal Dov Nochomovitz, Analyst (Citigroup)

Yes. Hi. Great. Thank you very much for taking the questions. Pasritamig is an asset you have been talking about more frequently recently. Would love to get your thoughts on the recent data and wondering whether the profile that is emerging in the Phase I is exceeding your expectations. And then on PTK7, the biparatopic ADC, just broadly, can you talk about the learnings from zanidatumab and how much of that was translated into the design of PTK7, please? Thank you.

Kenneth H. Galbraith, Chair, CEO, Interim Chief Financial Officer

Thanks. I will let Paul answer the second question on PTK7, and Adam will address pasritamig since he attended ASCO GU. Paul, can you take the PTK7 question first and then Adam follow-up?

Paul A. Moore, Chief Scientific Officer

Thanks, Yigal. PTK7 is a target we have been very interested in. It pairs nicely with both TOPO and 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 effort focused on the entire ADC design philosophy: the payload but also the antibody front end and how best to deliver payload with an antibody-based modality. For PTK7, our data indicated that a biparatopic format gives better delivery than a monospecific antibody. We deployed the same Azymetric technology used in zanidatumab, pairing different binding specificities to target PTK7. It is important when building biparatopics to screen multiple specificities to get the right pair that enhances internalization. You also must consider CMC and PK properties of that pair. The learning from zanidatumab put us in a strong position to develop PTK7 biparatopic.

Adam Sherwitz, Acting Chief Development Officer

On pasritamig, there is lots of enthusiasm coming out of ASCO GU. Physicians agree that this is a well-tolerated drug with significant potential. J&J's enthusiasm is clear with multiple registration trials they have disclosed. The safety profile is a key aspect of differentiation. Efficacy is impressive so far, but it is still early days. There is a lot of enthusiasm from us, J&J, and physicians in the space.

Yigal Dov Nochomovitz, Analyst (Citigroup)

Thank you.

Kenneth H. Galbraith, Chair, CEO, Interim Chief Financial Officer

Thanks, Yigal.

Operator, Conference Operator

And our next question will be coming from Eva Fortea-Verdejo of Wells Fargo. Your line is open, Eva.

Eva Fortea-Verdejo, Analyst (Wells Fargo)

Good morning. Thanks for taking our questions, and congrats on the progress. Stepping back to your broader strategy, what types of assets are you looking to bring in through acquisitions? Any specific therapeutic areas or development stage you are looking for? And how should we be thinking about the cadence of these deals? And just as a follow-up, you mentioned cash runway extends beyond 2028. Are any potential acquisitions accounted for in the cash runway? Thanks.

Kenneth H. Galbraith, Chair, CEO, Interim Chief Financial Officer

I will answer the second part first and then pass to Scott for more on the first part. No acquisitions are included in our cash runway forecast. There are also no new partnerships or collaborations included. As we complete transactions, whether acquisition-related or partnership-related, or if existing collaborations progress, we will update the cash runway. We are well beyond 2028 when you look at the milestones coming from GEA and the reduction in R&D spend this year versus last year. We feel comfortable with the runway and the proceeds available to allocate to share repurchases or acquisitions. Scott, do you want to provide more guidance?

Scott Pashton, Acting Chief Investment Officer

Thanks. There are two questions embedded: therapeutic areas and cadence of deals. We think a lot about our world-class production engineering team in Vancouver—the team that made zanidatumab and developed Azymetric and an ADC platform and innovative immunology assets. Given that expertise in-house, we think we have an advantage and consider that when looking at deals. We will not restrict ourselves to oncology and immunology, but our in-house capabilities factor into the return hurdle for deals. On timing, I cannot give explicit guidance. Our core values around deal making are: one, opportunities we understand well; two, a clear reason we are the right buyer; and three, a strict return threshold. External deals are always weighed against the opportunity to own more of our existing portfolio, where we have a very good sense of value, and any acquisition capital will be compared against the IRR achieved from share repurchases.

Kenneth H. Galbraith, Chair, CEO, Interim Chief Financial Officer

Thanks, Scott. The Royalty Pharma arrangement we announced is part of that strategy. It is a longer-duration instrument that provides more strategic flexibility for the types of assets we might consider. The low cost of capital allows us to think about target returns differently than some traditional biotechs.

Eva Fortea-Verdejo, Analyst (Wells Fargo)

Got it. Thanks.

Operator, Conference Operator

And our next question will come from Yaron Benjamin Werber of TD Securities. Your line is open.

Steven (for Yaron Benjamin Werber), Analyst (TD Securities)

Hi. This is Steven on for Yaron. One question about the 20% plan for lower OpEx, maybe a little bit more color on how that is going to look. And then in terms of fulfilling that, I mean, $125 million share repurchases—any sense of the cadence on that? Thank you very much.

Kenneth H. Galbraith, Chair, CEO, Interim Chief Financial Officer

I will take both. On the cadence of share repurchases: we did a $60 million repurchase starting in 2024, which took about twelve months, funded by milestones from Jazz and BeiGene for the BTC indication approval. We authorized another $125 million in November, and we have utilized approximately $62.5 million so far. With the Royalty Pharma financing and expectations of another $150 million upon GEA approval from Jazz, we feel fully resourced to move as opportunities allow on the remainder of that $62.5 million and consider authorizing additional repurchases before then. Regarding spending, over the last three years we used the upfront payment from Jazz, about $375 million in 2022, to build the current wholly owned portfolio. Given we have established a reasonable portfolio, the cadence of building further will slow a bit, which will result in reduced spending from last year to this year. We intend to integrate partnerships and collaborations into our wholly owned portfolio to share funding and reduce spend. We still have a robust R&D operation even at a slightly reduced spend level. As we bring in partnerships, funding will offset our internal spend, so R&D spending directionally will be downward while maintaining a viable R&D operation. We will continue to manage this while balancing share repurchases and acquisitions.

Operator, Conference Operator

And our next question will be coming from the line of Stephen Douglas Willey of Stifel. Your line is open, Stephen.

Stephen Douglas Willey, Analyst (Stifel)

Yeah. Good morning. Thanks for taking the questions. Just a couple on the IND submissions for this year. So I know that development of DLL3-targeting therapies has grown increasingly crowded. There is a number of different modalities out there, and the target is only really relevant to a couple of indications. So can you just speak to the target product profile you are hoping to see with ZW209 in Phase I and just how you are currently thinking about strategic interest here? Then also just curious why you are targeting an ex-U.S. regulatory submission for ZW1528. Just wondering if that is predicated on enrollment kinetics, is that due to the ability to move faster through dose escalation? Thanks.

Kenneth H. Galbraith, Chair, CEO, Interim Chief Financial Officer

I can address the ZW1528 point, and I will pass the DLL3 question to Paul. We see the ability to move faster in early clinical studies ex-U.S. for certain programs due to the availability of clinical expertise in Europe and the UK and elsewhere. We used a multi-regional approach with ZW191 to move quickly. For ZW1528, the ex-U.S. environment gives us access to the necessary expertise to go quickly in early clinical studies. Paul can take the DLL3 question.

Paul A. Moore, Chief Scientific Officer

Thanks, Stephen. ZW209 is a trispecific binding DLL3, CD3, and CD28. We designed it to incorporate costimulation directly in the molecule, and we believe this gives a differentiated mechanism compared to DLL3 T cell engagers that only target CD3. We worked to balance CD3 and CD28 so that CD28 engages only after CD3 targeting, which should drive a deeper and more sustained T cell response. That design takes significant effort to calibrate, and it could provide benefits in breadth and durability of responses. There are learnings from our ZW171 program on delivery, subcutaneous administration, and step-up dosing that we can apply to accelerate execution. We think ZW209 is well positioned to deliver proof-of-concept data and potentially broader benefit than CD3-only agents, and the same mechanism design can be applied to other targets.

Stephen Douglas Willey, Analyst (Stifel)

Maybe just a follow-up. So if the advantage of costimulation is to improve durability of response, does that inherently require you to take that through a later stage of development to prove out durability beyond the Phase I all-comers trial?

Paul A. Moore, Chief Scientific Officer

You raise a good point. We expect both breadth and durability of response could improve with our design. We think we should see signals during dose escalation if projections hold true, but duration of response may take longer to fully assess and could be observed in expansion cohorts or later stages. The additional mechanism may improve response rates and the sustainability of T cell activity.

Sabeen Mekan, MD, Senior Vice President and Chief Medical Officer

I would add that, given the additional mechanism of action, we are expecting an improvement in response rate as well as duration of response, which would translate into progression-free survival in this setting. There may be additional patients who respond who typically do not respond to other DLL3 agents. Given existing agents in the setting, we could compare efficacy and that may help us evaluate efficacy at an earlier stage without taking it immediately into a later stage of development, although we could choose a later-stage path if desired.

Stephen Douglas Willey, Analyst (Stifel)

Thanks for taking the questions.

Kenneth H. Galbraith, Chair, CEO, Interim Chief Financial Officer

Thanks, Steve.

Operator, Conference Operator

And our next question will be coming from Mayank Mamtani of B. Riley Securities. Your line is open, Mayank.

Mayank Mamtani, Analyst (B. Riley Securities)

Yes. Good morning, team. Thanks for taking our questions, and congrats on progress on several fronts, including the Royalty Pharma note and the continued repurchase. If I may ask a HORIZON-GEA question quickly, clarification of this next OS analysis that is coming up. Are you aware that that data could constitute a major BLA amendment once you have that available? And also, curious if you could touch on the rationale of the zanidotinib combination with zanidatumab study. Looks like a multi-indication study that could also have head-to-head data versus T-DXd or T-DM1? Then I have a quick follow-up.

Kenneth H. Galbraith, Chair, CEO, Interim Chief Financial Officer

On the median OS readout, we do not want to comment on regulatory strategy. Jazz has stated they believe they have sufficient data from HORIZON-GEA-01 to file in the U.S., and they have initiated that process. The timing of the second analysis of median OS and whether to add it to an existing filing versus adding later to an approved label is something Jazz will discuss when the data are available. Regarding the zanidotinib combination, I do not want to go beyond what is available on ClinicalTrials.gov, but the combination of zanidatumab and a TKI could be interesting in multiple indications. As next-generation TKIs are approved, combinations with zanidatumab are logical to explore. We will let Jazz and BI and the data drive future decisions.

Mayank Mamtani, Analyst (B. Riley Securities)

Okay. Thank you. And on the GPC3 liver cancer program, could you confirm if patients there are enriched for high GPC3 expression or not? And if you are able to comment on how much validation and even differentiation you could show versus the GPC3 CAR-T data that we have seen?

Kenneth H. Galbraith, Chair, CEO, Interim Chief Financial Officer

I will let Sabeen answer the first part, and Paul can comment on the comparison to other modalities.

Sabeen Mekan, MD, Senior Vice President and Chief Medical Officer

For the ZW251 GPC3 program, we are enrolling all levels of GPC3 expression. Hepatocellular carcinoma has very high levels of GPC3 expression; literature suggests more than 90% of patients have some level of expression, so we are confident most enrolled patients will have expression. We will evaluate GPC3 levels during the study and compare efficacy by expression level once we have sufficient data.

Paul A. Moore, Chief Scientific Officer

On how it compares to other modalities: GPC3 is a high-interest target in liver cancer, and there has been some success with CAR-Ts, which bodes well for the target. We believe ADCs are a competitive approach, and data from the ZW191 program using the same TOPO payload give us conviction in tolerability and the profile. We will wait for the ZW251 data for comparison.

Kenneth H. Galbraith, Chair, CEO, Interim Chief Financial Officer

Thanks for the question.

Operator, Conference Operator

And our next question will be coming from the line of Jonathan Miller of Evercore ISI. Your line is open, Jonathan.

Jonathan Miller, Analyst (Evercore ISI)

Hi, thanks so much for taking my questions and 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 milestone that is coming from Jazz this year, you have a lot more flexibility. Ken, you spoke about balancing capital allocation across a number of things. Is it fair to assume that today’s financing opens up larger potential BD opportunities? Can you give a little commentary on what size of targets you are looking at given the cash position and expected cash position once all of this is cleared out? And relatedly, you talked about keeping OpEx disciplined — is it fair to assume that if you bring in development-stage assets, that will come with additional OpEx liability, and you will have to spend against those assets to generate value? Can you give bookends about how we should think about that liability?

Kenneth H. Galbraith, Chair, CEO, Interim Chief Financial Officer

Great questions. The Royalty Pharma financing provides the right amount of R&D spend we want, and it gives strategic optionality. We made a strong investment the last three years in the wholly owned portfolio and that cadence is slowing. Integrating partnerships and collaborations is the right way to fund many programs. The financing allows us to continue share repurchases more aggressively, and to consider acquisitions that meet our return thresholds. I do not think it makes us look for larger transactions necessarily, but it expands capital available so we can act quickly when we find deals meeting our hurdle rates. We intentionally chose a longer-duration liability by securitizing only 30% of the royalty, which gives strategic flexibility to look at assets that do not require immediate payback. If we bring in an asset which requires R&D investment, that incremental R&D will come from the same capital allocation pool as the acquisition. That will be a defining factor when assessing deals—evaluating acquisition price and required incremental R&D to move an asset forward versus acquiring something already licensed where someone else covers the development cost. Capital deployed to acquisitions must also cover any incremental R&D over and above our baseline.

Jonathan Miller, Analyst (Evercore ISI)

Does make sense. And a follow-up: across the wholly owned portfolio, at what stage of development and what key data readouts unlock the ability to do partnerships or monetize assets in the way you have been doing?

Kenneth H. Galbraith, Chair, CEO, Interim Chief Financial Officer

We are open to partnering at many stages. While late-stage clinical data can drive partnerships, we are just as interested in earlier-stage collaborations that share funding and risk. We are looking up and down the portfolio, in different therapeutic categories and product formats—ADCs, multispecifics, engineered cytokines. Early collaborations to move programs to IND or early clinical proof-of-concept are as relevant as partnerships driven by later-stage data. We are flexible in timing and stage when we see the strategic fit and return profile.

Jonathan Miller, Analyst (Evercore ISI)

Great. Thanks so much.

Operator, Conference Operator

Our next question will be coming from Ethika Goonewardene of Truist. Your line is open.

Ethika Goonewardene, Analyst (Truist)

Hey guys, good morning and thanks for taking the questions. I have two quick ones and then a big-picture one. First, on ZW191: by the time you present the data, can you tell us how much of the 6 mg and 9 mg dose levels will be backfilled to about ten to twelve patients? About what amount of follow-up you anticipate having on hand when you present that data? Second quick question building on Stephen's earlier one: given toxicities seen with CD28 engagement, would improved safety of ZW209 be a near-term signal that the mechanism is working and perhaps be an inflection point for you to consider strategic optionality? My longer question is on payload resistance as an issue for ADCs: how are you thinking about the problem as ADCs become more common, and how are you planning to deploy capital to bring in new assets and build capabilities to address it?

Kenneth H. Galbraith, Chair, CEO, Interim Chief Financial Officer

I will let Paul address the payload resistance portion after Sabeen comments on the ZW191 specifics, as she is closer to the data. Sabeen, can you start?

Sabeen Mekan, MD, Senior Vice President and Chief Medical Officer

When we presented ZW191 data at the meeting, we had completed dose escalation and were planning to start dose optimization. Dose optimization is proceeding well. We completed Part 1 in Q4 of last year. By the time we present updated data, we will have reasonable follow-up to present both safety and efficacy of those patients. Part 2 dose optimization enrollment is proceeding according to plan, and we hope to provide an update about completion of enrollment in the near future.

Paul A. Moore, Chief Scientific Officer

On payload resistance and the ADC space: the TOPO payload we developed and used in ZW191 and ZW251 has been a strong choice; the data so far suggests it provides differentiation from exatecan and other generic payloads. There is crowding in the TOPO space in some indications, but careful payload design and selection matter. We are exploring next-generation payloads, including pan-RAS small molecules and other toxin classes. We are also considering dual-payload strategies and other small-molecule approaches to broaden ADC opportunities. Key factors include payload potency, linker stability, tolerability, and delivery modality. At Zymeworks, we can optimize both the payload chemistry and the antibody engineering—monoclonal, biparatopic, multispecific—to improve delivery, tolerability, and efficacy. We will present more on this at AACR in April.

Ethika Goonewardene, Analyst (Truist)

Thanks. That is helpful.

Operator, Conference Operator

And our next question will be coming from Rene Benjamin of Citizens. Your line is open.

Rene Benjamin, Analyst (Citizens)

Thank you. Good morning, and congratulations on all the progress. Ken, could you discuss the criteria for future buybacks and when you would consider them sufficient? Also for Sabeen: regarding HCC, what other indications may show promise given GPC3 expression, and what efficacy criteria would guide expansion cohorts or expanding into other indications?

Sabeen Mekan, MD, Senior Vice President and Chief Medical Officer

HCC is our priority for GPC3 given its high expression levels, but other tumors also express GPC3 and could be included as data emerge. We will consider rare germ cell tumors, certain lung cancer patients who express GPC3, some pediatric tumors, and sarcomas. We started with tumors with the highest expression and high unmet need, like HCC after first line. Safety is critical in HCC because many patients have impaired liver function and cytopenias. Given the safety observed with ZW191, we are confident about tolerability in HCC and expect to see efficacy meaningfully better than current second-line treatments, where response rates are typically below 15%. We expect a higher response rate and will use efficacy and safety data to guide expansion.

Kenneth H. Galbraith, Chair, CEO, Interim Chief Financial Officer

On future buybacks: we view repurchases as a return of capital. We started this in 2024 when commercial milestones began to materialize for zanidatumab. We think the current stock price represents a compelling discount to what we see as the future value from our assets, particularly zanidatumab. Reacquiring shares at these prices and retiring them can increase long-term per-share value. We are halfway through the current $125 million authorization and have been aggressive because we saw a disconnect between the market price and the underlying value after the HORIZON-GEA-01 results. We will continue to repurchase opportunistically as long as that discount exists. When we complete the current program, the Board will evaluate whether to authorize additional repurchases. We also must fund R&D and maintain a strong balance sheet. As more royalties and milestones come in, we will allocate additional capital between share repurchases, strategic acquisitions, and investments in the business. Any acquisition will be weighed against our internal investment returns and the capital required to advance acquired assets.

Rene Benjamin, Analyst (Citizens)

Thanks for taking the questions, and congrats again.

Kenneth H. Galbraith, Chair, CEO, Interim Chief Financial Officer

That is great. Yes. Thank you, everyone. I appreciate your time in listening to us today. We obviously had a very eventful 2025 at Zymeworks Inc. At the end of last year, we read out the HORIZON-GEA-01 study after four years from starting that study in 2021. We were pleased with the results for patients, and it energized our business. We have had a great start to 2026, and I expect a very eventful year. The Royalty Pharma transaction announced today, with $250 million in note financing, is a unique and creative financing structure and can be a catalyst for additional strategic change. We look forward to reporting progress on that and other events in the weeks and months ahead. Thank you very much for your time, and please be safe, wherever you are in the world. Thank you.

Operator, Conference Operator

And this concludes today’s conference. Thank you for participating. You may now disconnect.