Earnings Call Transcript - ZYME Q3 2025

Operator, Operator

Thank you, operator. Good afternoon, everyone. Thank you for joining our third quarter 2025 results conference call. As usual, before we begin, I would 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 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 usual risks and uncertainties associated with companies in our industry and at our stage of development. For a discussion of these risks and uncertainties, we refer you to our latest SEC filings as found on our website and as filed with the SEC. In a moment, I will hand over to Leon Patterson, our Executive Vice President and Chief Business and Financial Officer, who will provide an overview of our recent business and partnership updates, along with financial results for our third quarter 2025. Following this, Dr. Sabine Mikan, our Senior Vice President of Clinical Development, will provide progress updates on our Phase I programs ZW191 and ZW251. We will then pass the call over to Dr. Paul Moore, our Chief Scientific Officer, who will provide a brief overview of recent R&D developments. At the end of the call, Leon, Sabeen, Paul and Ken Galbraith, our Chair and CEO, will be available for Q&A. As a reminder, the audio and slides from this call will also be available on the Zymeworks website later today. I will now turn the call over to Leon.

Leone Patterson, Executive Vice President and Chief Business and Financial Officer

Thank you, Shrinal, and good afternoon, everyone. I'd like to start the call by walking you through recent progress on both clinical and preclinical programs within our wholly owned product pipeline. As you know, our team was pleased to present initial clinical data from the Phase I trial of ZW191, an antibody drug conjugate targeting folate receptor alpha at the ENA conference in October. Sabeen will provide a recap of the data we presented during our poster presentation later on today's call. We are encouraged by the preliminary Phase I data for ZW191, which provides early clinical validation of our ADC approach. And we are pleased to announce that we have dosed the first patient in the Phase I clinical trial of ZW251, a DAR4 ADC targeting GPC3 in hepatocellular carcinoma. Again, Sabeen will talk more about the trial design later on today's call. We also continue to present preclinical data of ZW1528, a bispecific inhibitor of IL-4 and IL-31 to address respiratory inflammation at the European Respiratory Society Annual Congress. Additional information can be found on the ERS Congress website, and a copy of the poster is available on the Publications page of Zymeworks website. Meanwhile, our partnered programs also continue to provide encouraging data at ESMO. Our partner, Jazz, presented a trial in progress poster on the DiscovHER PAN-206 Phase II study of zanidatamab in HER2 overexpressing solid tumors as well as a 2-year follow-up in first-line metastatic colorectal cancer showing durable responses and a favorable safety profile. In addition, yesterday, Jazz announced that the ITT population for the primary PFS and interim OS analysis of the HERIZON-GEA-01 trial will include the full patient population enrolled in the study of 920 patients. Also at ESMO, J&J presented translational findings from the first-in-human study of pasritamig in metastatic prostate cancer, linking T-cell phenotypes with clinical activity. These updates highlight the strong momentum in our partnered portfolio and the long-term value these collaborations continue to build. With this in mind, I'm pleased to announce that this quarter, we recognized a $25 million development milestone as revenue from our collaboration partner, J&J, in association with clinical progress of pasritamig, a first-in-class bispecific T-cell engager targeting KLK2 in Phase III studies in metastatic castration-resistant prostate cancer, which was engineered using Zymeworks Azymetric platform. As a reminder, we remain eligible to receive up to a further $434 million in development and commercial milestones from the J&J collaboration in addition to potential mid-single-digit royalties on global product sales. In addition, this quarter, we earned royalties of $1 million based on Ziihera net product sales by Jazz and BeOne Medicines. And we look forward to pivotal data from the HERIZON-GEA-01 study expected in the fourth quarter. I'd also like to highlight that as of November 4, 2025, we have completed share repurchases of $22.7 million of the remaining $30 million under our previously authorized share repurchase program, which reflects the leadership team's confidence in the company's outlook, the strength of our pipeline and our long-term commitment to shareholder value. This program was primarily funded from Ziihera development milestones and cumulative royalties received from Jazz and BeOne related to initial regulatory approvals in biliary tract cancer in both the U.S. and China, allowing us to efficiently deploy excess capital while maintaining full flexibility to fund operations and growth initiatives. This action reinforces our view that the stock remains undervalued, and it aligns with our disciplined, balanced approach to capital allocation designed to drive sustainable long-term returns. Turning now to our financial results. Total revenue was $27.6 million in the third quarter of 2025 compared to $16 million for the third quarter of 2024. The increase was primarily due to a $25 million nonrefundable milestone recognized from J&J in relation to clinical progress on pasritamig in Phase III studies in metastatic castration-resistant prostate cancer and $1 million of royalty revenues from Jazz and BeOne medicines. These increases were partially offset by a reduction in development support and drug supply revenue from Jazz and due to a nonrecurring milestone from GSK that was achieved in the third quarter of 2024. Overall, operating expenses were $49.7 million for the 3 months ended September 30, 2025, compared to $50.2 million for the same period in 2024, representing a decrease of 1%. The decrease was primarily due to a reduction in expenses from ZW220 and ZW251, zanidatamab and zanidatamab zovodotin and a decrease in personnel expenses. This was partially offset by an increase in preclinical and research expenses for our ZW209 and ZW1528 programs, progression of clinical studies for ZW171 and 191 and an increase in noncash stock-based compensation expense. Net loss was $19.6 million for the 3 months ended September 30, 2025, compared to a net loss of $29.9 million for the same period in 2024. This was primarily due to an increase in revenue, partially offset by a decrease in interest income and an increase in income tax expense. As of September 30, 2025, we had $299.4 million of cash, cash equivalents and marketable securities, which is a decrease in cash resources compared to $324.2 million as of December 31, 2024. Our cash resources as of September 30, 2025, did not include the $25 million milestone from J&J recognized in the third quarter and expected to be received in the fourth quarter. We remain well capitalized. And based on our current operating plans, we expect our existing cash resources as of September 30, 2025, when combined with the assumed receipt of certain anticipated regulatory milestones will enable us to fund planned operations in the second half of 2027, which is anticipated to take us through multiple catalyst events on our pipeline. These achievements underscore the strength of our foundational partnerships and the relevance of our platform across multiple products moving into clinical development by our partners. 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. With that, I'd like to hand over to our Senior Vice President of Clinical Development, Dr. Sabeen Mekan, to run through progress on our clinical development programs.

Sabeen Mekan, Senior Vice President of Clinical Development

Thank you, Leone, and good afternoon, everyone. I'd like to start off by providing a recap of the initial Phase I data for ZW191 as presented at the AACR-NCI-EORTC conference last month. As it pertains to the safety, we are encouraged by the tolerability profile that we've seen. The safety profile for ZW191 allowed us to escalate dose up to 11.2 milligrams per kilogram, which is quite high for a topoisomerase payload of this potency similar to deruxtecan. Across all treated patients, there was a low incidence of grade 3 or higher treatment-related adverse events and adverse events leading to dose interruptions or reductions were infrequent. The most commonly reported events were nausea, fatigue, and anemia, which are generally consistent with our expectations for an ADC. Importantly, there were no serious treatment-related adverse events, no discontinuations due to adverse events, and no deaths observed in this study. These findings support a favorable safety profile, particularly in a population that has been heavily pretreated. Overall, these data give us confidence that this drug is well tolerated at clinically active doses, providing a solid foundation for ongoing and future studies. Moving now to the efficacy results. This slide shows the waterfall plot summarizing the best change in tumor size across dose levels. What we see here is also very encouraging. There are meaningful reductions in tumor size across multiple dose levels with objective responses observed at doses as low as 3.2 milligrams per kilogram and the majority of patients continuing on treatment at data cutoff. Importantly, these responses were seen across the spectrum of folate receptor alpha expression, an important observation as we think about future development and patient selection. In participants with gynecological cancers dosed between clinically relevant doses of 6.4 and 9.6 milligrams per kilogram, we observed an objective response rate of 64%. Taken together, these early data show promising antitumor activity across multiple dose levels and tumor types, reinforcing the potential of this program to be a best-in-class folate receptor alpha-directed ADC. Based on the integrated assessment of safety, efficacy, and pharmacokinetic data, we have selected 2 doses of 6.4 milligrams per kilogram and 9.6 milligrams per kilogram for optimization with approximately 30 patients planned in each cohort. Enrollment is expected to begin in this quarter, and this will allow us to further refine the balance between efficacy and safety and inform optimal dose registrational studies. We expect to share additional data at a future medical conference with a larger and more mature data set. Overall, early results support ZW191 as a potential best-in-class asset with promising early activity and a manageable safety profile. We continue to be data-driven in planning further development for registration and expanding into earlier lines of therapy and in combination. As we move forward, our focus remains on disciplined clinical execution while exploring strategic partnerships that could accelerate development and expand global reach. Based on the encouraging clinical findings for ZW191, we are moving forward with the clinical development of our second ADC candidate, ZW251, and are pleased to confirm the dosing of the first patient in our Phase I open-label multicenter study of ZW251. The study is actively recruiting and aims to enroll approximately 100 participants across North America, Europe, and the Asia Pacific region. The patient population includes advanced or metastatic hepatocellular carcinoma that has progressed after standard of care treatments regardless of GPI-3 expression levels and with measurable disease as per RECIST. Part 1 of the study will evaluate escalating doses of ZW251 to determine safety and maximum tolerated dose. Part 2 of the study includes randomized dose optimization at 2 selected doses of ZW251 in order to further evaluate safety and explore efficacy according to the RECIST evaluation criteria.

Paul Moore, Chief Scientific Officer

Thank you, Sabeen. I'd like to just add a few final thoughts on the developments disclosed this quarter for both ZW191 and ZW171. Firstly, the initial data presented on ZW191 provides important translational insights that could help accelerate and reduce risk in the future development of ZW251 and other pipeline ADCs using our ZB06519 payload. As you can see on this slide, behind 191 and 251, we also have preclinical stage candidates targeting more novel antigens such as Ly6E and PTK7. Also, our NaPi2b program remains IND ready, and we continue to explore next-generation ADCs. Importantly, each of our ADCs has been tailored to factor in target biology by toggling drug-to-antibody ratio and the Fc modifications. Furthermore, we also ensure to utilize the most optimal antibody to deliver an internalized payload, whether this be a superior monoclonal antibody to benchmark as ZW191 or LE or a biparatopic antibody such as in the case of PTK7. Our approach of tailoring these parameters to target biology, patient population needs, and preclinical safety efficacy data aims to ensure optimal therapeutic windows while minimizing off-target toxicities. Secondly, I wanted to touch briefly on our decision to discontinue the development of ZW171 and importantly, the valuable insights, both scientifically and operationally that we took from this experience. Internally, we hold ourselves to very high standards when it comes to our target product profiles. That discipline is important because we have a broad and productive pipeline, and we want to ensure our capital and our focus go to programs with the clearest path to meaningful patient benefit. Based on the totality of the dose escalation data, we concluded that as a monotherapy, this program did not fully meet our internal threshold to advance further within our portfolio as it was unlikely to support a benefit-risk profile consistent with the desired monotherapy target product profile. It was not an easy decision as we continue to believe there is potential for mesothelin-directed therapies, including ZW171, perhaps in specific subpopulations in combination settings or through the right external partnership. So we felt it was the right choice to prioritize programs that more closely align with our long-term strategic and clinical goals. Our experience of taking 171 through dose escalation significantly strengthened our understanding of the T-cell engager design and provided clinical experience, which will aid us in executing future clinical trials for our next-generation T-cell engagers. For example, we were able to advance 171 safely and efficiently through dose escalation in under a year, which is a real testament to our team and technology. We also deepened our understanding of dosing strategies, routes of administration, and investigator engagement, all of which we can apply to our next generation of trispecific T-cell engagers. The study also reinforced our hypothesis around the importance of co-stimulation for T-cell engagers, the use of our novel CD3 epitope and tailoring our candidates for patient characteristics and target biology. Our ongoing portfolio management is a reflection of our discipline, our high scientific standards, and the strength of our portfolio. We will continue to hold ourselves and our target product profiles to high standards of success and remain focused on advancing the programs we believe can have the most impact for patients, partners, and shareholders. With that in mind, we look forward to presenting 3 poster presentations at the SITC Annual Meeting this weekend with one showcasing the versatility and application of our innovative TriTCE Co-Stim T-cell engager platform to enable diverse targeting strategies across different target tumor types, one featuring a next-generation tumor-targeted Mast IL-12 enabled by Iometric and the third covering new research co-authored with NeoGenomics on ADC-resistant mechanisms using preclinical models. Together, we believe these presentations showcase our continued leadership in advancing innovative and target oncology research. With that, I'll hand over to our Chair and CEO, Ken Galbraith, to conclude today's call and open up the call for Q&A.

Kenneth Galbraith, Chair and CEO

Thanks, Paul. Over the last 2 years, we've redefined what this company can achieve by combining R&D innovation, smart partnerships, and disciplined capital allocation to help deliver potential best-in-class therapies while helping to grow shareholder value. Our partnership-based model continues to generate value today while also providing opportunities for growing potential cash flows. We plan to continue leveraging partnerships across our wholly owned pipeline to bring in external capital and accelerate development. We believe this approach allows us to maintain control of our R&D innovation while helping to derisk clinical development and to help ensure that every investment we make has the potential to contribute meaningfully to durable value creation. As we look beyond important near-term events for our pipeline and partner programs, our long-term focus is on compounding returns from Ziihera and protecting and enhancing future cash flows that can be reinvested to drive the next wave of innovation. With this in mind, this quarter, we announced some changes to our Board of Directors to align governance and leadership with the next phase of our strategy. We welcomed 2 new directors in August and 3 members transition off the Board effective today. We'd like to thank those 3 directors for their service to Zymeworks. In October, we appointed Dr. Adam Schayowitz as acting Chief Development Officer to help advance our portfolio and strengthen our partnership-driven strategy. With this refreshed leadership, we believe we're well positioned to transition our scientific innovation into a scalable model that builds durable royalty streams and delivers sustainable long-term value for our shareholders. To close, I want to emphasize that our capital allocation decisions, whether investing in R&D, advancing partnerships or returning capital through share repurchases, all serve one purpose: to help build sustainable long-term value. Our R&D priorities remain focused on programs with clear differentiation and strong scientific rationale, and we'll continue to fund those using partnerships to extend our reach and offset development risk. Those collaborations also aim to provide a meaningful revenue floor through milestones and royalties, giving us the flexibility to invest with conviction and discipline. This is how we plan to sustain momentum through focus, partnership, and the power of compounding. I want to thank you for your continued support. I'd like to turn the call back over to the operator for the question-and-answer session.

Unknown Analyst, Analyst

Can you hear me?

Yue-Wen Zhu, Analyst

Perfect. Congrats on the progress. Two from me, if you don't mind. First one, we heard it from Jazz yesterday and I think earlier today as well. But wanted to get your thoughts perhaps on the update in the PFS analysis for HERIZON-GEA to include the ITT rather than the PITT population, your thoughts here, and perhaps what drove that change?

Kenneth Galbraith, Chair and CEO

Yes. Thanks, Charles. I think Jazz provided some guidance on that yesterday in their earnings call in the prepared remarks, I think in question-and-answer session. We don't have anything to add beyond what Jazz has shared other than that we're aligned with the regulatory strategy that they laid out for the readout of HERZON-01 and how to analyze that data. So I really can't add anything beyond that.

Yue-Wen Zhu, Analyst

Got it. Fully understood. And perhaps for my second question, I want to say congrats on the folate receptor alpha data at Triple meeting. That was quite impressive. Kind of also wanted to get your thoughts on what this means for GPC3, especially when we're thinking about a DAR4 construct in the liver cancer population. And similarly, if we see anything that comes close or is similar or even exceeds what we saw with 191, what would your thoughts be on potential development in-house versus partnership versus out-licensing of this asset in liver cancer?

Kenneth Galbraith, Chair and CEO

Yes. No, good question, Charles. Yes, we're intrigued as your question suggests as well and looking forward to continued recruitment of ZW191 in dose escalation, moving to dose optimization, which provides a larger, more mature data set. At the same time, as we announced, we're recruiting patients now in the ZW251 study. So far, our clinical execution is as good as it has been to date with our prior programs. We're looking forward to that. I think in terms of what we think about that, I think maybe I'll give Sabeen and then Paul both a chance to add their flavor to that because it's a really interesting question for us as well. So I don't know, Sabeen, if you want to go first and I'll ask Paul to follow up.

Sabeen Mekan, Senior Vice President of Clinical Development

Yes. I can go first. So as you know, hepatocellular carcinoma is a population with very high unmet medical need, particularly post first-line setting. There are not many treatment options for those patients. And that's why we think we should be able to create a difference given the construct of our ADC and what we've observed in ZW191 based upon the clinical data that we've observed. One of the key concerns with the hepatocellular population is concern for safety because this patient population often is very fragile and they have underlying liver disease. So the concern for safety is very important. And it is for this reason that we have selected DAR4 for this ADC molecule. And given the safety profile that we've observed with ZW191, we're fairly confident that we should be able to have a good safety profile in terms of treatment for hepatocellular carcinoma patients. I'll pass over to Paul.

Paul Moore, Chief Scientific Officer

Yes, Sabeen effectively highlighted the main points. Regarding tolerability, the results from the 191 study indicated that we achieved the expected tolerability along with efficacy. With DAR4, preclinical studies suggest we can maintain the same level of activity. Therefore, we focused on ensuring we developed the most tolerable molecule for this challenging cancer indication. The Phase I data reinforces that our payload selection is heading in the right direction. We were meticulous in choosing the payload from the topoisomerase inhibitors to support a tolerable profile while enabling us to deliver effective doses to patients, which our data reflects. Ultimately, we aim for these molecules to be combinable with other treatment modalities, but our initial goal is to establish their profile as monotherapy. The 191 data has energized our pursuit of the 251 project.

Yaron Werber, Analyst

Congratulations on the progress with the folate receptor alpha. I have a couple of questions regarding the pipeline. First, regarding GPC3, B1 mentioned in their call that they have demonstrated proof of concept with their bispecific GPC3 4-1BB and are moving ahead, which is very encouraging. For your payload, you're using irinotecan, which is typically TOPO1 based. Is TOPO1 commonly used in liver cancer? Can you provide insight from the preclinical data on what kind of efficacy you expect? Additionally, concerning the next IND for the DLL3 CD3, CD28 trispecific in the first half of next year, we know DLL3 is a strong target, and there has been significant activity with both the bispecific and the ADC on the market. However, CD28 hasn't been effective in most cases so far. What gives you optimism about this approach?

Kenneth Galbraith, Chair and CEO

Yes. I'll let Paul talk about the DLL3 and then maybe let Sabine and Paul both comment about GPC3, if that's okay.

Paul Moore, Chief Scientific Officer

Yes, I'll address the second question first. It's a great question about why we believe we can make CD28 successful where others have struggled. We draw on experience from the CAR-T field, where adding co-stimulation has proven beneficial. For instance, signals like CD28 or 4-1BB that relate to the B1 molecule have attracted attention. Many have pursued this avenue due to the potential of CD28's costimulatory signal to enhance T-cell activity, which cannot be achieved solely with signal 1 through CD3. The main difficulty has been timing and the simultaneous interaction of CD3 and CD28, which is critical for realizing those benefits. We approached this challenge by creating a trispecific antibody, ensuring that once we engage CD3, the T-cell is also activated by CD28. No one had successfully developed this solution until we came along. Our preclinical data gives us confidence that we can replicate this success in a clinical environment. We've noticed that others have attempted a CD3 bispecific paired with a CD28 bispecific, which may have had some success, but we believe a more effective method is to target the same T-cell with both primary and secondary signals simultaneously through a single molecule. This pertains to DLL3, and we will be presenting additional data at SITC this week that illustrates the advantages we can achieve over bispecific molecules while ensuring safety in preclinical trials. Regarding TPC341BB, although chemotherapy isn't the standard treatment for liver cancer, there are instances where it has been effective. However, it hasn’t typically been administered as a systemic treatment. We believe there’s a pathway for chemotherapy in this setting, particularly by utilizing our ADC to precisely deliver the chemotherapy agent, such as a topoisomerase inhibitor, in a way that achieves the right dosage for sustained exposure while maintaining a tolerable safety profile. Our preclinical hypothesis is supported by data showing that among various HCC PDX models, roughly 8 out of 10 have responded positively, and we can administer dosages up to 100 mg per kg in cynomolgus monkeys, demonstrating a favorable safety profile along with some evidence of efficacy in the patient population, suggesting there are circumstances where patients can respond to chemotherapy. We think we can expand that potential with our ADC.

Kenneth Galbraith, Chair and CEO

Sabeen, anything you want to add from a medical perspective with this patient population and the idea of chemo versus a payload delivery with an ADC construct?

Sabeen Mekan, Senior Vice President of Clinical Development

Yes. So I would like to say that chemotherapy has been tried in hepatocellular carcinoma with limited success, but there has been some incidence of success there, especially trying to localize chemotherapy that's been effective. And that actually makes us believe that giving cytotoxic in an ADC format, particularly with our higher internalizing antibodies and the fact that hepatocellular carcinoma has very high expression of GPC3 gives us confidence that we should have the therapeutic window that is needed in this patient population to be successful.

Andrew Berens, Analyst

Congratulations on the progress. I have a question. I understand that Jazz is managing the trial, but I was curious whether the increase in the intent-to-treat analysis today would also lead to a higher number of PFS events required to initiate the analysis. Could you help put this announcement into context?

Kenneth Galbraith, Chair and CEO

Yes. No, thanks for the question, Andy. I think I am going to answer the same way before. I think Jazz provided all the guidance appropriate around that decision of the patient population that will be utilized for the ITT patient population, both from a PFS perspective and OS. And I don't want to go further than the guidance they've provided. Obviously, we've been working on the study for 4 years from a Zymeworks perspective and proximity data is very close. And so I'll just let Jazz provide that guidance, and we'll just have to wait for a future announcement and presentation to understand anything further beyond that.

Stephen Willey, Analyst

Just curious how we should be thinking about the starting dose levels of 251 relative to 191. I know obviously, different DARs, different target organs. But is there anything you can say qualitatively or maybe even quantitatively about how you're thinking about pushing dose here? And I guess, did that dose escalation schema for 251 change at all as some of the 191 data started to come in? And I just have a follow-up.

Kenneth Galbraith, Chair and CEO

Yes, that's a good question, Steve. Sabeen, do you want to share that we haven't disclosed the starting dose yet? We will likely approach it in a similar way as we did with 191. Sabeen, is there anything you would like to add regarding the dose schema for dose escalation for 251 in relation to the 191 schema that people have reviewed?

Sabeen Mekan, Senior Vice President of Clinical Development

So I would say that the schema for 251 is very similar to 191, although as you rightfully pointed out, this is a DAR4 as opposed to 191, which was a DAR8. So there are differences. And also with 191 being our first ADC into the clinic, we were very conservative with our initial starting dose. And now that we've gained some clinical experience, particularly with regards to safety, I can say that we have more confidence in our starting dose, but we are not disclosing that yet. We will be disclosing that later similar to what we did with 191.

Paul Moore, Chief Scientific Officer

Yes. No, thanks, Steve. That's definitely very much in our mind. And actually, I sort of alluded to we have actually a presentation this weekend at SITC and what we're going to show there is application of the technology to different targets and the way that we designed the molecule for the target. So the base molecule on the context of the CD3/CD28, we know the positions of those molecules. We're not telling people really the secret sauce there and how they're in the geometry of the molecule. But what we can think about is how do you then target the antigen and design the targeting of the tumor antigen in such a way to get that maximum window. So we are looking at that. We're looking at targets both in solid tumor and in hematological cancers. We can deploy against the 2 plus 1 strategies. We can think about logic-gated strategies as well. So there are ways with the Azymetric so versatile and flexible that we can put in multi-binding sites to help us get more selectivity and targeting. We can share more of that. But we're very much thinking about how do we tailor that so that we can have that therapeutic window. We don't rule out the use of masking. We do have masking technology. We're actually applying that to the IL-12 molecule, and that can also be adapted to our T-cell engagers. So we have that toggle if we feel we need it as well. But we just run it through, we test all the different permutations of the molecules, let the data drive and then we have the preclinical models that allow us to understand the toxicity profile and the therapeutic window. So we're very excited about the application of that. And again, looking forward to pushing forward with the DLL3 program, but we do have other molecules coming behind as well.

Brian Cheng, Analyst

I have two quick questions. Firstly, regarding the GPC3 trial design, I've noticed that you're actively recruiting patients who have undergone standard care. Paul, I'm interested to know what you observed in the preclinical setting that supports your confidence in the efficacy of GPC3 in the post-IL context, especially since NIVO IPI was recently approved for first-line HCC. Secondly, on the topic of biomarkers, do you see an immediate need to develop a biomarker assay? I'm interested in your thoughts on that as well.

Kenneth Galbraith, Chair and CEO

I'll let Paul start on that. I think Sabine may have something to add also on those, but I'll go ahead, Paul.

Paul Moore, Chief Scientific Officer

Yes, thank you. Regarding your question about our confidence in going beyond standard treatment in a preclinical setting, we have examined the expression level of GPC3 and do not anticipate that it will be influenced by IL treatment. The complementary mechanisms involved do not hinder our ability to pursue a targeted therapy aimed at GPC3. We have preclinical data from various PDX models, and some of this data may be gathered post-treatment. Mechanically, we do not see this as a limitation. As Yaron mentioned, there is encouraging data from other GPC3 approaches that are also being tested alongside standard care in clinical trials. We draw optimism from the progress seen by others using GPC3-targeted therapies with different methods. We believe that the ADC approach could provide a unique mechanism and enhance our chances of achieving significant benefits. Regarding biomarkers, similar to what we did with the folate receptor, we will assess GPC3 levels to determine if a biomarker is necessary as we advance in clinical development, and we will continue to gather that data. Sabeen can expand on this further.

Sabeen Mekan, Senior Vice President of Clinical Development

So I'm answering a question regarding NIVO IPI being approved not too long ago. I don't think that changes our development plan. If you look at the treatment landscape for first-line hepatocellular carcinoma, the treatment currently includes checkpoint inhibitors and VEGF and also checkpoint inhibitors plus CTLA. So prior to the approval of NIVO IPI, durvalumab has been approved as well. So it's the same mechanism of action, and it really doesn't have an impact on how we think an ADC, particularly a topoisomerase ADC would perform in this setting. So I think we remain confident with regards to that. And I think Paul answered all your questions regarding the biomarker. We are enrolling a similar strategy to our 191 enrolling patients regardless of expression and be able to ultimately do a correlation of how the expression level relates to clinical activity.

Mayank Mamtani, Analyst

Congrats on a productive quarter. Can you talk a little bit more about your expectations on durability for 191, just given what you've seen at the dose levels you're at? And at what point you'd also be able to explore combination, obviously, important in PROC, but also in other solid tumor types that you may want to explore there? And just kind of put it together, when you think you have a sort of partnership enabling package here, just your latest thoughts on that. And then I have a follow-up.

Kenneth Galbraith, Chair and CEO

No. I'll just answer the partnership question quickly, and then I'll turn it over to Sabine, I think can answer part 1 A, B, and C of your first question. But obviously, we found the data from 191, although early in initial clinical data, very interesting. I think there are others who are interested in other ADCs that are differentiated. We think ours clearly are. And so we'll continue to talk to parties who might have an interest in joining us and moving that forward that might allow us to accelerate development, might allow us to find a better ability to compete even on a time basis and explore the full potential of ZW191. So we'll continue to have those discussions. And as I think you've seen that data was very intriguing to KOLs and obviously, people on this call and especially to us. And I think there are potential partners where that data was also very intriguing. And so we'll continue to let the data mature, continue to collect more data and have ongoing discussions at the same time. And I'll let Sabeen answer the subparts of your first part of your question, if that's okay.

Sabeen Mekan, Senior Vice President of Clinical Development

In terms of response durability, it’s important to consider the number of patients showing positive results. Our overall response rate is quite promising, especially at the doses we aim to move forward with, specifically between 6.4 and 9.6 milligrams per kilogram. Notably, we have a broad therapeutic index with responses beginning at 3.2 milligrams per kilogram, which gives us significant confidence. From the swimmers plot shared in our poster, it’s encouraging that most responses, particularly at higher doses, occurred early. The waterfall plot indicates we achieved a good reduction in tumor size for target lesions, despite relatively short follow-up times. Additionally, the majority of patients are continuing with the treatment. When combined with our favorable safety profile, this should allow patients to stay on treatment for a longer duration, which is essential for achieving the progression-free survival and overall survival milestones we aim for in these indications.

Kenneth Galbraith, Chair and CEO

And then on the learnings from 171 to 209, were there any step-up dosing learnings you're looking to apply here as the DLL3 program gets into the clinic? I know you're not saying what dose levels you may start at, but I was just curious, the therapeutic window should be a very different consideration given the target differences in mesothelin and DLL3 from an off-target toxicity standpoint. Any thoughts there would be great. Yes. I'll let Paul talk about just learnings from our 171 program and how they're going to apply to our thoughts around 209.

Paul Moore, Chief Scientific Officer

Yes. And I think one of your questions was just thinking about the dosing and how we go about thinking about the step-up. And what we did for 171 was we used QSP modeling and we sort of leaned on prior clinical precedents to allow us to really nail what we thought was a good starting dose and then how we could accelerate through the dose escalation. And that approach we will use a similar approach for projecting the starting dose and the step-ups for 209. And what I would say is that those projections when we looked at the exposure levels in the PK, they seem to really fit nicely with what we had projected. So we're anticipating that we can use that again. Obviously, the target toxicity profile, the safety profile is a little bit different for DLL3 than it is for mesothelin. But we still think there's relevant learnings from the design of them from the clinical design. But then also there were also some design features in 171 that we're also carrying over into 209. I think that also gives us confidence then that we have that human experience with that approach that it sets us up well for 209.

Robert Burns, Analyst

Just one, if I may. So one of the things that I noticed in the presentation for ZW191 was that you used an H-score categorization, low negative 0 to 74, intermediate 75 to 199, and high 200 to 300 versus the majority of the competitors are using a PS2+ method to define high versus low. So I was just curious about the correlation between those 2 different scoring methodologies so we could sort of assess them in a more apples-to-apples comparison.

Kenneth Galbraith, Chair and CEO

Yes. Thanks for the question, Robert. I think I'll let Sabeen start addressing that question and then see if Paul has something to add to that response as well. But excellent question.

Sabeen Mekan, Senior Vice President of Clinical Development

H-score is a well-established and validated research method for assessing the expression levels of various targets. It factors in both intensity, typically measured in IC treatments for 1, 2 plus intensity, and the count of cells with positive scores. This method is effective for evaluating the number of cells expressing the target and shows a strong correlation with TPS scores commonly used in some commercial assays, as well as IHC scores. This is why we utilize the H-score. It's a composite metric that ranges from 0 to 300, providing a comprehensive assessment of expression levels. In our poster, we categorized the H-score into three groups: high, intermediate, and low. The high category we defined corresponds to a significant expression of the folate receptor, which is pertinent for treatment with ELAHERE. This allows us to measure the response of patients who were suitable for ELAHERE compared to those categorized as low or negative who were not candidates for that treatment. Paul, feel free to add anything if you wish.

Paul Moore, Chief Scientific Officer

Yes, I think that's good. Great, Sabine, you covered it. The H-score provides us with more detailed insights compared to the PS2+ score. With the H-score, we can also calculate the PS2+. We can analyze that data in various ways. However, we believe that for this analysis, showcasing the H-score was the right approach, as it offers a broader understanding of the patient profiles we are observing.

Robert Burns, Analyst

Yes. No, I completely understand that, and I appreciate the granularity. So just if you don't mind, like would it be an accurate assumption to say the patients that you defined as high expression per the H-score of 200 to 300 would fit the category of PS2 plus greater than or equal to 75? Or would there be some discrepancy between them?

Sabeen Mekan, Senior Vice President of Clinical Development

It should be a very high correlation.

Robert Burns, Analyst

I guess the last question for me. Given the data that we've seen from RENA-S as well as the Eli Lilly compound, obviously, they're using a PS2+ scoring system. In those non-high patients, how do you think that ZW191 stacks up against those 2 compounds in the lower expressing or intermediate expressing folate receptor alpha patients?

Sabeen Mekan, Senior Vice President of Clinical Development

So as you saw from our data, we showed pretty transparently across a spectrum of H scores across low and negative that we observed clinical activity across folate receptor expression levels. We're looking at data from which we are pretty confident about, and we're showing pretty good activity. Given in our sample size, we had roughly around 2/3 of patients who were low negative roughly, which correlates very well to the number of patients who are not candidates for ELAHERE. And comparing our data to the competitors you talked about GES and Lilly, I think we feel pretty confident about our activity in the low negative patient population from what we've observed so far. Obviously, we're going to continue to follow our patients. We are enrolling very actively in our study with more patients in dose escalation and longer follow-up, and we are initiating our Part 2 dose optimization, which will provide us more data at the doses that we would like to move on. I think that would give us a lot of confidence in our activity across the spectrum for expression levels, including low and negative.

Phoebe Tan, Analyst

This is Phoebe on for Akash. On ZW191, it looks like a key differentiator between this and other next-gen folate receptor alpha ADCs is safety, specifically on Grade 3 cytopenia. Can you talk about the importance of this difference in terms of potential combinations maybe in earlier treatment lines?

Kenneth Galbraith, Chair and CEO

Good question. I think we see a number of potential differences, differentiating factors between ZW191 and data we've seen from others. But I'll let maybe Sabeen talk specifically about the tolerability profile we've seen so far in our data set.

Sabeen Mekan, Senior Vice President of Clinical Development

We are very pleased with the tolerability profile, especially regarding our safety event rate. Most of the safety events we observed were expected and primarily did not involve vomiting cytopenias. Our cytopenia rate is something we are happy with because it aligns with what is typically expected from a topoisomerase ADC. The rates we observed for anemia, neutropenia, and thrombocytopenia are well within the anticipated range for an ADC, particularly considering the relatively high doses we are using compared to other ADCs with similar payloads. This gives us confidence that it will support efficacy and allows us to combine it with treatments in earlier lines of therapy. In ovarian cancer, these earlier treatment lines often involve a combination of platinum, taxanes, and bevacizumab, which enhances our confidence in combining these treatments. We've noticed issues with other ADCs, specifically neutropenia leading to dose reductions that can impact efficacy. However, we believe that our safety profile, particularly the lower rates of neutropenia, will allow ZW191 to be used alongside platinum agents more effectively. Additionally, considering tolerability in earlier therapy lines, we are focused on the ability to treat patients for longer durations, especially in maintenance settings. These are all areas where we believe we can stand out.

Jonathan Miller, Analyst

I'll follow on a question on the DLL3. I guess we've seen some really great data from other T-cell engagers there even pretty recently. So I'd love what do you think are the key places where you'd hope to differentiate? What would make your molecule a best-in-class molecule in your opinion? And where do you think you can target that? And then I've got a follow-up.

Kenneth Galbraith, Chair and CEO

Okay. Paul, do you want to...

Paul Moore, Chief Scientific Officer

Yes, I definitely believe there is a lot of excitement around DLL3. It is an appealing target for solid tumors, and we are observing encouraging response rates. We believe there may be patients who could benefit, even if they don't respond initially or lack the T-cells needed for a significant or lasting response. Our goal is to change the game with our molecule, aiming for enhanced response and durability. We think that the inclusion of CD28 co-stimulation presents an opportunity to achieve this. Additionally, there might be benefits in the mechanism that could influence the duration of response and our dosing strategy. There could also be inherent advantages in the design, particularly with the additional T-cell response, but we will need further analysis for confirmation. Ultimately, our aim is to see more patients responding and experiencing longer responses, as our preclinical data indicates a likelihood of achieving that.

Akash Tewari, Analyst

This is Phoebe on for Akash. Congrats on the progress. Maybe just a quick one from us. You spoke on it a bit already, but just wondering if you could provide additional color on potential timelines of third-party milestones beyond what might be expected from Jazz.

Kenneth Galbraith, Chair and CEO

Yes. We haven't, as a practice, provided much guidance in that regard. Obviously, we've tended to wait until we've earned or received milestone payments as we did this quarter with the $25 million that we earned from Johnson & Johnson with respect to pasritamig moving into Phase III studies. So for right now, I think we'll keep that guidance. I think as we move forward, especially with Ziihera into commercialization, we might provide some additional guidance around milestones from both Jazz and B1 as they become closer, more approximate, and more probable just so people understand a little bit more about cash flows that might be realized in those licensed products and then obviously, then where that capital might be allocated. So until then, you just have to wait and see, but not too long, I think.

Operator, Operator

This concludes today's presentation. You may now disconnect.