Earnings Call Transcript - ZYME Q4 2022

Operator, Operator

Good day, everyone, and thank you for being here. Welcome to the Zymeworks Fourth Quarter and Full Year 2022 Results Conference Call. Currently, all participants are in a listen-only mode. Following the presentations, there will be a question-and-answer session. Now, I would like to hand it over to Mr. Jack Spinks from Investor Relations for Zymeworks. Please go ahead, sir.

Jack Spinks, Head of Investor Relations

Good afternoon, and welcome, everyone. My name is Jack Spinks, Head of Investor Relations here at Zymeworks. Today, we will discuss our fourth quarter and full year 2022 financial results, as well as provide an update to our ongoing business. Before we begin, I'd 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 presentation 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 those risks and uncertainties, we refer you to our latest SEC filings found on our website and as filed with the SEC. Later in this call, Chris Astle, our Senior Vice President and Chief Financial Officer, will be discussing our financial results, including certain non-GAAP measures. A description of our GAAP measures and a reconciliation to the most directly comparable financial measures as determined in accordance with GAAP are described in detail in our press release, which is available on our website at www.zymeworks.com under the Investor Relations tab. As a reminder, the audio and slides from this call will also be available on the Zymeworks website later today. Now I will turn the call over to Chris, our Senior Vice President and Chief Financial Officer. Chris?

Chris Astle, Senior Vice President and CFO

Thanks, Jack, and thank you, everyone, for joining us today for our fourth quarter and full year 2022 earnings call. As a reminder, I'd like to note that while I'll be presenting the prepared remarks today, Kenneth Galbraith, our Chair and CEO; and other members of our executive team will be available for Q&A following this portion of the call. With that, I'd like to begin today's call with an overview of our financial results followed by a few recent developments and noteworthy updates across our business before we open the lines for Q&A. This afternoon, Zymeworks reported financial results for the fourth quarter and year ended December 31, 2022. Zymeworks’ net income for the year ended December 31, 2022, was $124.3 million, or $1.90 earnings per diluted share compared to a net loss of $211.8 million for the year ended December 31, 2021. The swing from an annual net loss to net income was primarily related to revenue received from our collaboration agreement with Jazz, partially offset by increases in expenses incurred in 2022 relative to 2021. As reported, our revenue for 2022 was $412.5 million, compared to $26.7 million for 2021. Revenues for both the year and most recent three-month period ended December 31, 2022, primarily related to the $375 million in upfront payments received from Jazz as a result of the completion of the zanidatamab licensing agreement, combined with approximately $24 million in reimbursements from Jazz for expenses incurred for zanidatamab between October 19 and December 31, 2022. Research and development expense for the year ended December 31, 2022, was $208.6 million, compared to $199.8 million for the year ended December 31, 2021. This increase of $8.8 million or 4% from the prior year related primarily to higher manufacturing and clinical trial expenses for Zanidatamab in 2022 and due to the restructuring exercise undertaken in the first quarter of 2022. These were partially offset by a decrease in expenses related to reduced preclinical Zanidatamab overdosing-related expenses in 2022. As of October 19, 2022, Zymeworks is entitled to reimbursement from Jazz for all Zanidatamab-related expenses, related to ongoing studies under the terms of the collaboration agreement finalized in Q4 2022. General and administrative expense for the year ended December 31, 2022, was $73.4 million compared to $42.6 million for the year ended December 31, 2021. This year-over-year increase of $30.8 million or 72% was driven primarily by severance and other expenses related to our reduction in force and R&D reprioritization program that occurred in early 2022, and an increase in consulting and professional fees primarily related to the company's redomicile to become a Delaware corporation, the Jazz licensing agreement, and other non-recurring project-based expenses. During 2022, the company's workforce was reduced by more than one-third through the reduction in force and voluntary attrition from 450 full-time employees to less than 300 full-time employees. Our cash resources, consisting of cash, cash equivalents, and short-term investments were $492.9 million as of December 31, 2022, largely driven by the receipt of the upfront payments from Jazz totaling $375 million in the fourth quarter. Our cash resources as of December 31, 2022, did not include $24 million in reimbursements associated with Zanidatamab-related expenses from October 19 through year-end 2022. Our licensing and collaboration agreement with Jazz completed a series of financially beneficial transformation initiatives in 2022, which we believe will fund our planned operations through at least 2026 and potentially beyond. We completed an equity offering in January 2022 comprised of a combination of common shares and prefunded warrants for gross proceeds of $115 million, which included the exercise in full of the underwriters' option to purchase additional shares. As of March 3, 2023, we had approximately 65.25 million shares of common stock and prefunded warrants outstanding and shares issuable pursuant to our Canadian exchangeable shares. We did not issue any shares of common stock under our ATM facility, either during 2022 or as of March 7, 2023, for the current year. In January of this year, we also issued financial guidance related to our net operating cash burn for 2023. Given the significant change in our overall net cash burn, we expect to experience this year due in large part to the reimbursement of Zanidatamab-related expenses under our collaboration agreement with Jazz. We continue to expect our net operating cash burn for 2023 to be between $90 million and $120 million, including planned capital expenditures of $15 million. This cash burn guidance, as well as our cash runway guidance, includes forecasted expenses that are primarily related to our early R&D programs as well as incremental expenses to support our planned Phase II clinical development programs as Zanidatamab zovodotin. For additional details on our quarterly results and for a description of our non-GAAP financial measures and a reconciliation of GAAP to non-GAAP measures, I encourage you to review our earnings release and other SEC filings as available on our website at www.zymeworks.com. Now, I'd like to spend a few minutes talking about our early R&D portfolio, followed by a brief discussion on zanidatamab zovodotin and zenodetimab, our most advanced clinical product candidate. We reprioritized our R&D strategy early in 2022 and had an exciting and productive year with substantial progress on executing this new R&D strategy. To quickly recap, we recruited Dr. Paul Moore as our new Chief Scientific Officer in June of last year and hosted an early Research & Development Day in October, where we previewed preclinical product candidates emerging from both our antibody drug conjugate and multi-specific platform technologies, designed to overcome limitations of existing therapies. At that same event, we disclosed our two lead candidates for INDs by 2024, ZW171 and ZW191, both of which are on track to be submitted next year. Additionally, we set an ambitious target of progressing five novel and differentiated preclinical product candidates, including ZW171 and ZW191 into clinical studies by 2027. We believe that our pursuit of this goal, along with our scientific vision and path forward in the ADC and multi-specific antibody space will help generate a diverse and valuable oncology product portfolio of wholly-owned product candidates. In addition to developing our own internal oncology pipeline, we anticipate additional preclinical product candidates derived from our ADC and multi-specific technologies to progress with resources available from potential partners and collaborators. We are continuing to evaluate opportunities to form additional collaborations and partnerships around both our publicly disclosed and confidential preclinical product candidates. This partnership strategy is important as it can help us to accelerate development and advance potential opportunities without the use of Zymeworks' shareholder capital to complement our wholly-owned product pipeline. We hope to announce the completion of additional collaborations and partnerships before the end of this year for multiple preclinical product candidates. In helping further this objective, we are excited to announce the acceptance for publication of 11 abstracts at the American Association for Cancer Research, or AACR, to be presented in mid-April in Orlando, Florida. These abstracts will be made publicly available by AACR on March 14th. At AACR, we will be able to share with you additional progress and preclinical data on the announced preclinical product candidates that we spoke to at our early R&D Day last year as well as continued progress on our technology platforms for generating additional ADC and multi-specific antibody therapeutic candidates to add to our preclinical product pipeline beyond 2024. Subsequent to these presentations in Orlando, we will also plan to host our conference call to discuss the results and strategic impact these new data will have on our path forward. In addition to our in-house development efforts, we continue to have multiple active licensing agreements with key pharmaceutical and biotechnology partners. This portfolio of legacy platform partnerships consists of partnerships where we are required to expand little, if any, capital to advance the programs represents a significant source of past and potential future non-dilutive funding. To date, we have received approximately $180 million in upfront and milestone payments, not including any amounts received for zanidatamab or zenodetimab events. Further, throughout 2023 and 2024, we expect to earn additional milestone payments under existing agreements as product candidates continue to be advanced through development stages by our partners. We also retain the ability to monetize all or a portion of the future cash flows from these agreements pulling forward the value of future cash payments to provide an additional source of non-dilutive capital should it be needed. Here on slide 6, we can take a moment to touch on zanidatamab zovodotin or Zymezo for short. As you likely noticed from our earnings release issued earlier this afternoon, we are planning to continue with a data-driven development program for Zymezo and advance into selected patient cohorts in Phase 2 clinical studies. This will appropriately move this product candidate forward by studying Zymezo in combination with other approved agents, especially checkpoint inhibitors with incremental clinical investment and predetermined benchmarks. Previously, we had anticipated a protocol expansion of our ongoing Phase 1 clinical study. However, after careful evaluation and a better understanding of both timelines and what we believe will be the most valuable to any potential future partner, thus building potentially meaningful value to our shareholders, we have chosen to proceed with separate Phase 2 studies to be conducted. One, evaluating Zymezo in combination with PD-1 inhibitors in non-small cell lung cancer, and another, in patients with breast cancer after progression on T-DXd and HER2-low patients in combination with PD-1 inhibitors. With this design, we believe we can obtain the clinical data necessary to both enter into a registrational path for Zymezo before the end of 2025 and attract an appropriate partner to assist with ex-U.S. development and commercialization which is something we currently expect would be required before moving forward into a registration pathway. We continue to consider other areas of interest for clinical development in evaluating Zymezo with the current standard of care in HER2 amplified colorectal cancer patients, HER2 expressing gynecological cancer patients and HER2-positive gastroesophageal adenocarcinoma or GEA. We anticipate that our Phase 2 studies for Zymezo will be implemented using a Simon's Two-Stage study design. This allows us to clearly designate and define hurdle rates and stage our investment in Zymezo going forward. We expect that the conduct of these Phase 2 studies will be expanded geographically to additional clinical sites in Asia and Europe to both improve the speed of patient recruitment and lower the overall clinical development cost of patient recruitment. Our newly formed regional hubs will help us provide the appropriate support for this geographic expansion of our clinical development program for Zymezo. We continue to believe that the Phase 1 clinical data presented last year at ESMO, at 2.5 milligrams per kilogram dosed every three weeks, shows that Zymezo has a differentiated tolerability profile relative to other HER2 ADCs and acceptable single-agent activity in a range of HER2-expressing tumors. The keratitis seen in our Phase 1 study is well characterized and primarily low-grade, being Grade one or two, which is both manageable and reversible. An appropriate dose reduction management strategy was effective in managing any patients affected with keratitis in our Phase 1 study without any significant discontinuation from the clinical study. Importantly, we did not see other tolerability signals of concern, common to other HER2 ADC products and consequently, an attractive part of what we believe Zymezo can offer is the potential ability to combine with other agents currently used as standard of care in areas where we see the patient need and where we may be able to improve upon current efficacy seen with existing standards of care. Incremental investment in these Phase 2 studies, which are planned to begin enrolling patients in 2023, is warranted based on the clinical data generated to date and our recent interactions with KOLs and potential partners. While this spend represents a small component of our anticipated net cash operating burn guidance of $90 million to $120 million for 2023, we think that only now represents an important and investable opportunity worth pursuing as a differentiated HER2 ADC in post-TDXD patient population and could provide the company with the ability to retain development and commercial rights in the US while working with a partner in ex-US markets. Finally, on zanidatamab, while we have continued to enroll and follow patients in our Phase 1 study treated at the recommended Phase 2 dose of 2.5 milligrams per kilogram every three weeks with monotherapy, we will be closing the weekly cohort in order to eliminate any future additional costs associated with keeping this portion of the study open. We expect to be able to present further data before the end of this year on weekly data, as well as additional monotherapy data generated since the data cut-off for the 2022 ESMO presentation. However, going forward, we will be focused on opening the initial two Phase 2 studies and generating combination data as quickly as practicable. Finally, before we open things up for Q&A, I will briefly touch on zanidatamab, as we still have an exciting year ahead of us and recently presented important data at ASCO GI this January. At ASCO GI, we presented updated data from our Phase 2 trial evaluating zanidatamab in frontline HER2-positive metastatic GEA. These data included a first look at zanidatamab's overall survival data, which showed an impressive 84% overall survival at 18 months, with the median overall survival having not been reached. Further, the data included an overall confirmed objective response rate of 79%, including three complete responses, a median progression-free survival of 12.5 months and a median duration of response of 20.4 months after 26.5 months of patient follow-up. The regimen was manageable, tolerable and consistent with the observed safety profiles reported for other standard regimens for patients with HER2-positive GEA. We are working closely with Jazz and BeiGene to continue enrollment of patients in the Phase 3 randomized clinical trial, HERIZON-GEA-01, evaluating zanidatamab in combination with chemotherapy plus or minus tislelizumab as a first-line treatment for HER2-expressing metastatic or advanced GEA. We continue to expect top-line results from this pivotal study to be available in 2024. Additionally, last quarter, Zymeworks reported positive top-line data from our Phase 2b open-label, single-arm clinical trial, HERIZON-BTC-01 studying zanidatamab as a monotherapy in patients with previously treated HER2 amplified and expressing biliary tract cancers. With a confirmed objective response rate of 41.3% and a median duration of response of 12.9 months in patients with HER2 amplified and expressing or IHC2+ and 3+ disease, these data represent a potentially important step for HER2 amplified patients with BTC, because zanidatamab has the potential to be the first HER2-targeted therapy in this indication. It represents a chemotherapy-free treatment option for patients who would otherwise receive standard-of-care chemotherapy in the second line, which typically elicits overall response rates of between 5% and 15%. Further, we expect the full results from these data to be presented at a major medical meeting in the first half of this year, and look forward to confirming that presentation as soon as practicable. We remain very encouraged by these positive top-line results for zanidatamab as well as the recently presented results at ASCO GI, including the first look at overall survival data for zanidatamab in our Phase II. With our partners, Jazz and BeiGene, we continue to work towards the potential regulatory path forward with the relevant regulatory bodies in various countries where the BTC data may support an accelerated or full approval. We will continue to work with our partners who will provide guidance at the appropriate time for any regulatory filings. While the initial development path and global regulatory interactions will be focused on BTC and GEA, the two most advanced indications with ongoing pivotal trials, we and our partners continue to evaluate the development path in other indications beyond BTC and GEA. We have ongoing clinical development in additional indications and remain excited about the broad potential of zanidatamab in indications outside GI cancers. To this point, zanidatamab is currently being used in the Azymetric platform trial for patients with HER2 expressing tumors in the neoadjuvant treatment of locally advanced breast cancer. This and other ongoing development efforts for zanidatamab will help determine the path forward in these indications. Last year was an important year for the company with numerous ambitious goals that were set in January of 2022 to reset the company's strategy. As we reflect on the past year, we were able to make significant progress across multiple aspects of our business, including on the non-scientific front, where we successfully completed a redomicile to Delaware, resulting in positive inflows due to index inclusion in US-based indices as well as a stock exchange listing change from the New York Stock Exchange to the NASDAQ stock market, where we better align with peers in the biotechnology sector. As we look towards 2023, we have identified five important pillars of value, our enterprise value framework that we will look to advance in order to continue generating value. These five pillars are two zanidatamab collaborations with BeiGene and Jazz, our early research and development programs, zanidatamab zovodotin and our legacy platform licensing portfolio. From a business and financial standpoint, we believe we are well positioned for success with our new strategy. We have sufficient cash to pursue our planned development activities with a significantly reduced net cash burn, a focused clinical program with planned Phase II studies of zanidatamab zovodotin and a number of exciting preclinical product candidates that we are working to progress to clinical studies with a specific focus on development of a mix of antibody drug conjugates and multispecific antibodies. We believe this focused investment and moderated future spending, when combined with the scientific expertise and people working hard behind the scenes makes for a very compelling opportunity going forward. As we remain focused on our operational goals, we will also stay true to our vision to discover, develop and commercialize novel medicines that can make a meaningful difference in the lives of patients around the world impacted by difficult-to-treat cancers and other serious diseases. To all of those who have been with us through what was a challenging 2022 for everyone investing and working in biotech. Zymeworks now looks forward to the future from a strong financial and scientific footing and we expect to continue delivering upon these results, generating long-term value for our shareholders and ultimately improving the lives of patients are generating antibody-based therapeutics and with the potential to dramatically improve on current standards of care in difficult-to-treat cancers. With that, I'd like to thank everyone for listening to our prepared remarks, and I'll turn the call over to the operator to begin the question-and-answer session.

Operator, Operator

Our first question or comment comes from the line of Yigal Nochomovitz from Citi. Your line is open.

Yigal Nochomovitz, Analyst

Yeah. Hi. Thanks for taking the question. So on the ZW49 now called Zymezo, you mentioned that you're going to stop the Phase 1, I believe, except for one of the cohorts. So can you just go into a little bit more detail as to the thinking behind that to why you're moving into those two Phase 2s, one in the non-small cell, one in the metastatic breast cancer? Great to get a better understanding of the shift in strategy there. Thank you.

Kenneth Galbraith, Chair and CEO

Yeah. Sure. And I don't think it's as much a shift in strategy as more form over substance. So I think it was a clear preference from a regulatory perspective to initiate new cohorts – combination cohort in a Phase 2 format. So again, with ZW49, we're trying to do a few things here. One is, we're trying to reduce the per patient clinical development costs because our prior costs were too high. We're trying to improve the speed of patient recruitment, because I think they've been too slow. I think we need to improve the access to quality patients that we can screen for these clinical studies. And there's a number of things we've been doing about that to put ourselves in that position. The number one thing is to try and expand sites globally, because the Phase 1 were done in the US, Canada, and Korea, but not beyond. And I think going internationally gets some of those points I talked about. But clearly, if we're doing filings in new countries, starting fresh with a Phase 2 study as opposed to amending a Phase 1 study is preferable. I think some of the things we did over the early-stage development group, which we reorganized, definitely bring down the internal costs for these clinical development costs. And the same people in that group are preparing for 171 and 191 that need to be filed next year and clinical trials to be commenced. And also, we're reviewing a CRO, which we have for the Phase 1 to decide if we want to move forward in Phase 2. And I think we could definitely accomplish some of the costs of these objectives by potentially reviewing that contracting starting with this switch. So with all that being said, I think there's a clear preference from a regulatory perspective that we do this in Phase 2. It's not going to make a difference to the size of the studies, or to the timing of execution. There are also some benefits of moving forward, if we're able to generate some great data in combination with ZW49 in these multiple HER2 indications that we've already identified. I mean, that's right part product profile. That's our value proposition. We can prove that. We can move much more quickly forward to a registration pathway in conjunction with a partner, as we mentioned before in expedited markets by starting in Phase 2 now. So I think there are some forward-thinking that, if we are successful in being able to move ZW49 forward after these Phase II forwards, then we'll be in a better position to that even more quickly. Beyond that, we're comfortable with the advisory board and other work we've done around non-small cell lung cancer to move forward. I think with the breast-centric cohort, that makes sense. Our target product profile to show that ZW49 in combination with standard of care and provide some meaningful clinical benefit in several indications with a specific focus on those patients who have progressed after PSG. So those cohorts and those indications get us out, I think we're still going to continue to collect some additional in Phase 1 in our GEA cohort to be monotherapy, which I think will be useful in the ovarian and retail cancer indication that we mentioned before. We did mention, I think, when we talked about this last year or earlier this year, we were waiting on some view on the clinical data from the PanTumor02, especially in ovarian, endometrial to understand that the standard of care that we're looking at is going to evolve or not. And obviously, that data interstate will be forthcoming, which will be great. I think in the colorectal HER2-amplified population, that's a really interesting patient population for us with ZW49 expecting right now, we're continuing to confirm the FDA data around the size of that patient population because the published data has a pretty wide kind of deviation. And also, I think we're trying to make sure we understand the clear combination of standard of care that we would move ahead with so we can execute a local development plan to get some very good data. So I think we're continuing to evaluate some of those areas, we feel comfortable moving forward with the non-small cell lung cancer cohorts and the breast cancer cohorts in both the HER2 low and need to get the progress or failed population. And Phase 2, I think this is a better basis to do that in the international expansion and it could provide some benefits moving much more quickly later and it doesn't impact the timing right now.

Yigal Nochomovitz, Analyst

Okay. Got it. Thanks, Ken. And just on HERIZON-GEA-01, how much have you said there in terms of the powering of the trial? And also what is the primary comparison? Is it the doublet versus Herceptin chemo or the triplet versus Herceptin chemo? If you could just comment there? Thanks.

Kenneth Galbraith, Chair and CEO

Yeah. So we did publish the physical design and other features of the study in August of last year, and that's available on our website, if you'd like to take a look at this so we are doing a more obscure publication, so we did put our websites available. So there are more details which are available there. But each of the two arms are independently compared to trial plus chemo. So that's the way it works. We did describe that in the publication side I encourage you to read that. We did also disclose there that at the point where we're going to get a PFS that we'll do an interim OS at the same time and then decide what to do with that data. And we still believe we're on track that the top line data for that study will be available in 2024. And the sense that we can sharpen that guidance, we'll do that in conjunction with both Jazz and BeiGene as we move forward.

Yigal Nochomovitz, Analyst

Okay. Thank you.

Kenneth Galbraith, Chair and CEO

We are continuing to follow the patients in the study that BeiGene presented some initial data on last year concerning the triplet therapy. This is a Phase 2 study that BeiGene is conducting for first-line GEA patients using zanidatamab, chemotherapy, and tislelizumab PD-1. Last year, we shared some data, and we have since recruited more patients, which means the data is now more mature with a longer follow-up. We anticipate an update on this data set, which will hopefully provide additional insights into its potential utility for patient populations. We will await further information from BeiGene regarding the availability of this data set. They are also continuing to follow a Phase 2 study in first-line breast cancer with zanidatamab and docetaxel, as we discussed last year. There are more patients enrolled in that study as well, and we look forward to guidance on when these two data sets might be released, especially regarding the triplet therapy with more mature data to better understand its applicability in this patient population. We will provide updates from BeiGene as they become available.

Yigal Nochomovitz, Analyst

Okay. Great. Thank you, Ken.

Operator, Operator

Thank you. Our next question or comment comes from the line of James Shin from Wells Fargo. Mr. Shin, your line is now open.

James Shin, Analyst

Hey, thanks. I have a question about the HERIZON-GEA study. I'm comparing it to KEYNOTE-811, which seems to focus on patients with high PD-L1 and HER2, 3+. Can you provide any insights on whether HERIZON-GEA will include a more balanced mix of PD-1 and HER2-positive patients? I also have a follow-up.

Chris Astle, Senior Vice President and CFO

For PD-L1 status, we are not selecting based on PD-L1 status. Our goal is to recruit in a way that reflects the real-world scenarios of gastric and esophageal patients participating in our study. We will categorize this as a pre-specified subpopulation to analyze the effects of PD-L1 status in relation to PD-1. We haven't observed this in the KEYNOTE-811 trial yet. Ultimately, we aim to provide insights for key opinion leaders and doctors regarding its impact on that patient group. It appears that there is a slight bias when it comes to those with IP3+.

James Shin, Analyst

Got it. And then for ZW49's breast indications, what are the potential combo partners that you would explore with 49, or is that still sort of under wraps?

Chris Astle, Senior Vice President and CFO

Yes, it's still confidential. We've shared as much information as we can about the non-small cell lung cancer and breast cancer indications. Our goal is to initiate those studies and provide more details on ClinicalTrials.gov as soon as possible. Once that information is available, we'll be able to address further questions. We aim to use ZW49 in combination whenever feasible, particularly beyond pembro. We need to wait for everything to be finalized. We believe the value proposition lies in positioning ZW49 as the preferred HER2 ADC for combination use, particularly after the development of TDXD in various indications meaningfully. That's our objective and part of our product profile. We are defining methods to test that hypothesis and will adapt it as cost-effectively as possible. If we identify a beneficial opportunity, we plan to partner quickly and advance our registration strategy promptly.

James Shin, Analyst

Got it. Can I ask one question about the addition of zanidatamab? It's a really interesting study design where treatments can be added and removed based on their effectiveness. Is this being managed by Jazz and its partners, or was it something you were working on before transferring zanidatamab?

Chris Astle, Senior Vice President and CFO

This is a distinct study group evaluating multiple different agents. We had discussions last year about this, but we waited to complete the collaboration with Jazz to allow them to weigh in on the decision. This was the first action they took after the collaboration, indicating some level of interest. We have long believed that zanidatamab is most effective when used in the earliest treatment cycles for certain populations. Our previous data, particularly in first-line metastatic gastrointestinal breast cancer with over 90% HER positivity, supports this. We are eager to see the outcomes from this neoadjuvant study. The platform they have in IP5, now IP2, presents an interesting method to test multiple agents, which could provide valuable data for sponsors to determine future registration strategies.

James Shin, Analyst

Got it. Thank you so much.

Chris Astle, Senior Vice President and CFO

You’re welcome.

Operator, Operator

Our next question or comment comes from the line of Stephen Willey from Stifel. Mr. Willey, your line is now open.

Stephen Willey, Analyst

Yes. Thanks for taking the questions. Maybe just another quick one on the projected HERIZON GEA disclosure in 2024. Are you still planning on completing enrollment before the end of 2023? And I think in the European trial register, there is a suggestion that the primary PFS analysis is expected to occur within a month of the last patient being randomized. I guess, is that a description something that you would characterize as still being accurate?

Kenneth Galbraith, Chair and CEO

Yes. You've noticed a change in our guidance since the completion of the Jazz partnership, which is not uncommon. Jazz prefers to provide guidance based on top-line data rather than patient enrollment. Therefore, our guidance will focus on the top-line data anticipated for 2024, and if we can align that with Jazz and BeiGene, we will provide more detailed information than just the calendar year. However, that is our current guidance, and we won't provide anything beyond that. You can expect to see infant trials in the European registry, as well as various data points related to progression-free survival or completion studies. We won't elaborate further, but we are on track to obtain top-line data in 2024 from that study, which is very positive, and we're working to expedite that process as much as possible.

Stephen Willey, Analyst

Okay. And then maybe just a question for Chris, with respect to just clarity on Zani-related R&D spend in 2023. I know the quarterly numbers here have been fairly lumpy. I guess, if you look at the last three quarters, specifically. Is that lumpiness something that we should expect to continue into 2023, or have you guys done some of the necessary manufacturing work such that that should kind of smooth out a little bit as we get into 2023 with respect to just thinking about how the R&D reimbursement flows to the top line?

Chris Astle, Senior Vice President and CFO

Yes. Thanks for the question. So yes, we did have some lumpiness through 2022 as we were undertaking some of the manufacturing run. And a lot of that kind of expense is behind us now. As we go into 2023, there will still be some ebbs and flows. We won't be guiding on specific numbers for each individual quarter. But it's worth noting that as we incur expenses within a quarter, the reimbursement from Jazz will actually come back in the following quarter. So there will be a mismatch between the P&L and the cash flow from quarter-to-quarter as we advance through 2023. So, there will still be some quarter-to-quarter shifting that we can anticipate as we go forward.

Stephen Willey, Analyst

Okay. So that Jazz reimbursement comes a quarter in arrears, isn’t it?

Chris Astle, Senior Vice President and CFO

That's correct, yes.

Stephen Willey, Analyst

Okay. And then maybe just lastly, I guess, does the disclosure of HER2, HER2CLIMB-02 data, which is looking at tucatinib, Kadcyla in, I guess, mostly second-line patients, but I think a lot of the KOL conversations we've had would suggest that that's maybe a regimen that gets institutionalized post in the HER2 if that data looks good. Does that data set at all kind of change your thoughts around ZW49 in breast cancer?

Kenneth Galbraith, Chair and CEO

I'm not sure to it does yet. I mean, we obviously look at all data and evolving data and what impact it might have on commercial opportunities or development pathways or regular pathways for the program through tucatinib and ZW49. And I think you need to pay attention to that and try to react. I think from our perspective, our value proposition and our target product profile ZW49, I don't think is any different, which is we need to show the ability to combine with better care and show meaningful clinical benefit in more than one indication, some multiple indications, several in this case. And I think in breast cancer, we still need to see what that data looks like. We need to do it looks like in the HER2 low population, and we need to look at what it looks like, specifically in the patients who progress post XP and hopefully, in the quality of patient that doesn't have 11 or 12 or 13 prior therapies as we did in some of our Phase 1 data. So I still think it's a pretty interesting indication for us. I think breast cancer, with some evolving data, I think we've done enough advisory board work with KOLs, but we understand where the bit ZW49 agents. I think we've got enough potential partnering discussions to know what value will be paid for data generated. So I think for both non-small cell lung cancer and breast cancer. Those are just core cohorts of patients that we think we proved our target product profile with ZW49 we have the opportunity to do that with additional indications inside the envelope of how much investment we want to make in the time frame we have to make that under then we'll do that.

Stephen Willey, Analyst

All right. Thanks for taking the questions.

Operator, Operator

Thank you. Our next question or comment comes from the line of Brian Cheng from JPMorgan. Mr. Cheng, your line is now open.

Brian Cheng, Analyst

Hey, guys. Thanks for taking my question. It seems that you have a couple of presentations coming up at AACR next month. So what should our focus be there from your presentation, and you can give us some thoughts on this expectation that would be great.

Chris Astle, Senior Vice President and CFO

I believe everything is looking positive. From our viewpoint, we are trying to highlight the upcoming products that will enter the clinic next year, which is very important for us. We also want to demonstrate what the platform can do for future products, as we are preparing to select our targets and products to file in 2021. It’s crucial for people to understand both the next set of products and the products themselves. We have generated additional new data since our R&D Day presentation in October, and we plan to emphasize this newly developed data, which I hope will clarify what we are doing that sets us apart and why we believe in the success of the product formats and targets we have chosen. We aim to continue generating five new INDs in the next five years, including 171 and 191 next year, all of which will be novel and diversified within our RV portfolio, spanning both therapeutic areas and ADCs. We hope these will be differentiated, meaningful assets that we can keep free from external burden as long as possible. There’s a lot to discuss between the products and the two platforms we are currently developing. There’s also one on 49 and another unrelated project, and those will be presented as abstracts in a little over a week, specifically at AACR. We will be able to address more of those questions once the abstracts are released, and subsequently, we will have more detailed information available on the posters for all of those.

Brian Cheng, Analyst

And maybe just one follow-up on the ZymeZo. You talked about the importance of partnership to this program. And it seems that you're already in discussion with a couple of potential partners. When do you think that it will be a good time to bring in the partner for NSCLC and is there a bar that you need to hit for the Phase II that you're doing in NSCLC and also metastatic breast that you need to hit for before these partners jumping in? Thanks.

Kenneth Galbraith, Chair and CEO

Yes, that's a great question. We currently don't have clinical data that is uniquely distinguished from other standard treatments, which is a significant part of our value proposition for ourselves and our partners. Generating that data is crucial, and initiating discussions early helps us design the clinical program, which we appreciate. Our investment strategy regarding 249 views it as a strategic asset. While it's not central to our five and five strategy, we believe it holds digital value that we want to incrementally invest in during this Phase II clinical development stage. The aim thereafter is to secure an international partner to collaborate with us. If we obtain clinical data that supports progression, we want the terms of the partnership to be favorable enough so we can retain US commercial rights and continue development ourselves after the partnership, keeping that off our balance sheet. This data will facilitate a partner transaction that is valuable and also convince us that it's sensible to keep the US rights for further development and commercialization of ZymeZo. We also recognize the possibility of forming a global licensing deal with a suitable party since ZymeZo aligns with our five and five strategy regarding non-HER2 assets being developed alongside it. To achieve this, I believe we require evidence that ZW49 can be effectively combined with standard care in significant indications, showing promising efficacy signals to establish a registration pathway for it as a second-line therapy or the second choice HER2 ADC after TDX. This is particularly appealing in non-small cell lung cancer and breast cancer, among other indications we are still assessing. We will need some combination data to demonstrate its value to potential partners, as well as to validate the asset's worth for retaining US rights.

Brian Cheng, Analyst

Great. Thanks for taking my question.

Operator, Operator

Thank you. Our next question or comment comes from the line of Charles Zhu from Guggenheim Partners. Mr. Zhu, your line is now open.

Charles Zhu, Analyst

Hey, guys. Thanks for taking the questions. My first one, perhaps on zanidatamab in front-line gastric cancer. I'm kind of wondering, given that you've had that recent Zani plus chemo data earlier this year as well as what we saw from ASCO of 2022 last year from BeiGene. I guess with the potential update from the single-arm Phase 2 later this year, any color around like how much more confidence we could obtain the potential additive clinical benefit of layering on a PD-1 on top of your regimen? Thanks.

Kenneth Galbraith, Chair and CEO

Yes. I mean, the easiest way to answer that question would be the complete the Phase 3 study is going on now, which is fully randomized to 1:1:1 to try chemo, does any chemo doublet and the triplet including making it simpler. So, the best way for us to answer that question is include all the patients finish the study, re-dose PFS, and look at the subpopulation analysis that exist in the study that's pre-specified to be able to answer that question. That’s what we're working for as expeditiously as we can. Obviously, the data we put in January is pretty encouraging to KOLs and ourselves and guys in BeiGene on the doublet. Hopefully, we'll get a chance for an update on additional data from the triplet that they put out last year and get some more understanding of what that looks like or there's going to be more patient numbers in that. There's a longer-term follow-up. So, there might be something more to read into that. But obviously, the reason we're doing a large multinational, randomized study is to try and provide clarity on the answer to that question that you have.

Charles Zhu, Analyst

Got it, great. I have one more question about zani zov, which is a follow-up to something that has already been discussed. During your prepared remarks, you mentioned predetermined benchmarks that could support further development beyond the Phase 2 studies, particularly in long and post HER2 breast cancer. Can you provide more details on what those benchmarks might be or what your thought process was in establishing them? Thank you.

Kenneth Galbraith, Chair and CEO

Yes. I mean we've obviously like to start with some predetermination of what does clinically meaningful data look like in combination in the indications that were in study. So, we have some data that we've predetermined that we think would be meaningful and would be encouraging to attract next to a partner and would be encouraging for us to think about originating the US rights of zani zov to further development with the proceeds from partnership and use that as our first commercial on-trade to the US. So, we're pretty that ahead of time, which is a really good process to work through. It's obviously totality of data matters and quality of patients and quality of data matters. But they also all predetermined the same way that others will do. And I think once we generate that data will some ideas of what we think about moving forward or which indications make the most sense to move forward.

Charles Zhu, Analyst

Got it, great. Thanks for taking the questions.

Kenneth Galbraith, Chair and CEO

Yes. No. And we feel, we've done a lot of work since I got here a year ago on looking at the indication, the commercial market reserves, the ad boards you've done, we just did one recently in Japan in January, which we weren't able to do earlier because of COVID. So I think they have a pretty good sense from potential or partner discussions and our interactions of where ZW49 would have to generate data to be a fit for moving forward past time.

Operator, Operator

Thank you. Our next question or comment comes from Andrew Berens from SVB Leerink. Mr. Berens, your line is open.

Andrew Berens, Analyst

Hi. Thanks. A couple of questions for me on the ZW49 combination strategy at Checkpoint, can you share any preclinical data that you have to support combination strategy? Do you have any concerns that keratitis could be exacerbated by immunotherapy as ocular toxicity is known side effect with Checkpoint inhibitors? And then what do you think the regulatory strategy will eventually be to demonstrate that ZW49 will be added to the background efficacy you would see a Checkpoint inhibitor alone?

Kenneth Galbraith, Chair and CEO

Good question. We haven't shared any preclinical data regarding the combination yet. We don't expect any further impact on keratitis. That’s part of the reason we conduct combination studies in cohorts. We’ll confirm that as we proceed. A key aspect of ZW49, as an HER2 ADC, is that the tolerability issues we encounter are mostly limited to grade 1 and grade 2 keratitis, which don’t significantly lead to patient discontinuation or cause substantial dose reductions. Beyond that, we haven’t observed signals for neutropenia, neuropathy, or pneumonitis in our trials. We believe the tolerability profile allows for effective combinations without overlapping toxicities. Additionally, we think there may be synergies between P1 and ZW49 based on the payload mechanism. We will present one abstract at AACR regarding initial thoughts on the ZW49 mechanism, which may provide further insights. As for non-small cell lung cancer, PD-1 is utilized across various indications, including known alpha mutations, and there’s already valuable data on its use in this context. We need to demonstrate that the addition of ZW49 to PD-1 benefits the specific population. That’s a critical part of our cohort design targeting HER2 expressing, HER2 amplified, and HER2 mutant patients in non-small cell lung cancer. On the breast cancer front, PD-1 has shown effectiveness in indication studies, and we need to investigate whether combining it with ZW49 would enhance efficacy due to potential synergies. We aim to explore that in clinical settings and evaluate the data to determine its accuracy.

Andrew Berens, Analyst

Okay. Thank you.

Operator, Operator

Thank you. Our next question or comment comes from the line of David Martin from Bloom Burton. Mr. Martin, your line is now open.

David Martin, Analyst

Thanks for taking my questions. First question, regarding the Phase 2 indications for ZW49. When you presented Phase 1 data at ESMO last year, I think there was one lung cancer patient there were relatively few in HER2 failures and a few HER2 low patients. Post that presentation, did you then focus your recruitment on patients that fit the Phase 2 characteristics and will we see larger cohort or larger groups of those patients in the updated data later this year?

Kenneth Galbraith, Chair and CEO

Yeah, Steve, that's accurate. So, obviously, after the cutoff for ESMO, we continue to recruit in the Phase 1 study in monotherapy, both to test the weekly dosing, which we were doing, which we will report out on, but also to continue to recruit additional patients on monotherapy at the recommended Phase 2 dose of 2.5 mgs per kg every three weeks. And we focused on enrolling patients that were closer to our strategy going forward in combination. So hopefully, of that data set, which will put out, we haven't even guided yet for this year, but we'll do that as we're able to be specific, you should see additional monotherapy data and activity was going to be 49% in some of those patient populations where it would have been nice to see more before the ESMO cut-off. And obviously, that leaves a little bit of our thinking going forward into looking at the combination of strategy of just making sure we've got reasonable contribution single activity and the highest quality patients we can attract.

David Martin, Analyst

Great. And will the Phase IIs be randomized? Like, I assume, there'll be a dose escalation single arm initially, but then will they each turn into randomized trials?

Kenneth Galbraith, Chair and CEO

Yes. We haven't given any specifics yet about the core design. We will do that in all its up on control. Obviously, we're trying to just go quickly, recruit the right patients in the right cohort to answer the question as to whether we have a value proposition year with Zenith or not. And if we do, then be able to move really quickly into a registration pathway. And so, there's a lot of factors we're considering how we're designing and executing these studies. So I think once it on control start, we're happy to answer those questions about why we designed it the way we did.

David Martin, Analyst

Okay. Thanks. That's it for me.

Kenneth Galbraith, Chair and CEO

Thanks you.

Operator, Operator

Thank you. I'm showing no additional questions in the queue at this time. I'd like to turn the conference back over to management for any closing remarks.

Chris Astle, Senior Vice President and CFO

That's great. Well, thank you for your attention today and for your questions. We have made a lot of progress last year in Zymeworks. And I think 2023, we've got really good momentum across the business. We're really looking forward to having a great AACR coming up in April and those abstracts will be available publicly soon. We're very encouraged to have 11 different abstracts accepted for this meeting. Last year, we had zero. So we're really looking forward to having a fulsome disclosure of the products and platforms in the early R&D group in the 5x5 strategy that we have and talking more about that, and we look forward to doing that very quickly. So thank you for your time and attention. I look forward to reporting more progress as we move forward through the year.

Operator, Operator

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.