On August 2, 2019 Zymeworks Inc. (NYSE/TSX: ZYME), a clinical-stage biopharmaceutical company developing multifunctional therapeutics, reported financial results for the second quarter ended June 30, 2019 (Press release, Zymeworks, AUG 2, 2019, View Source [SID1234538102]).
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"We had a notable second quarter that included significant activity from our pharmaceutical partners and was highlighted by a successful financing," said Ali Tehrani, Ph.D., Zymeworks’ President & CEO. "We are well capitalized to accelerate and expand the clinical development of both ZW25 and ZW49 and plan to provide updates in the near-term beginning with ZW25 single agent and chemo combination data this fall."
Second Quarter 2019 Business Highlights and Recent Developments
Raised Over $200 Million in Upsized Public Offering
Zymeworks completed a public offering of 7,013,892 common shares (including the exercise in full of the underwriters’ over-allotment to purchase 1,458,336 additional common shares) and, in lieu of common shares, to a certain investor, pre-funded warrants to purchase up to 4,166,690 common shares, for aggregate gross proceeds of US$201.3 million.
First ZymeLink Platform Deal and Progress from Existing Partners
We granted Iconic Therapeutics a license to the ZymeLink Antibody Drug Conjugate (ADC) platform for its ICON-2 Tissue Factor ADC, marking our first collaboration leveraging the ZymeLink platform and our third technology platform licensed to a collaborator. In addition, we received milestone payments from Daiichi Sankyo, Merck, and Celgene as a result of advancements they made with their Azymetric bispecifics towards the clinic. Furthermore, GSK broadened its Azymetric platform license resulting in increased potential milestone payments and royalties to Zymeworks.
Received Fast Track Designation to Expedite ZW25’s Development
The FDA granted ZW25 Fast Track designation for frontline treatment of patients with advanced HER2-overexpressing gastroesophageal adenocarcinoma, an area of significant unmet medical need. Zymeworks is currently enrolling patients in a frontline Phase 2 clinical trial in combination with standard of care chemotherapy with plans to initiate a registrational trial in 2020.
Expanded Board of Directors Increases Commercial Expertise
As Zymeworks advances into late-stage clinical development, we added Dr. Sue Mahony and Troy Cox to our Board, two pharmaceutical executives with extensive global strategic development and therapeutic commercialization experience.
Financial Results for the Quarter Ended June 30, 2019
Revenue for the three months ended June 30, 2019 was $7.9 million as compared to $22.0 million in the same period of 2018. Revenue for the second quarter of 2019 includes a $2.0 million development milestone received from Merck on its completion of a GLP toxicology study for its first program, $3.5 million received upon Daiichi Sankyo’s exercise of a commercial license option, $1.0 million recognized in relation to milestone revenue from Iconic, as well as a total of $1.4 million in research support payments. Revenue in the same period in 2018 was due to an $18.0 million upfront technology access fee in relation to our second licensing agreement with Daiichi Sankyo and a $4.0 million collaboration expansion fee from Celgene.
For the three months ended June 30, 2019, research and development expenses were $23.8 million as compared to $15.4 million in the same period of the prior year. The change was primarily due to an increase in clinical trial activity and associated drug manufacturing for ZW25, as well as an increase in other research and discovery activities compared to the same period in 2018. Research and development expenses included non-cash stock-based compensation expense of $1.5 million from equity-classified stock options and $1.6 million expense related to the non-cash mark-to-market revaluation of certain historical liability-classified stock options.
For the three months ended June 30, 2019, general and administrative expenses were $12.8 million as compared to $8.6 million in the same period in 2018, primarily due to an increase in employee compensation expense due to increased head count in 2019 over 2018, including non-cash stock-based compensation. General and administrative expenses in 2019 included non-cash stock-based compensation expense of $1.6 million from equity-classified stock options and $4.8 million related to the non-cash mark-to-market revaluation of certain historical liability-classified stock options.
The net loss for the three months ended June 30, 2019, was $29.1 million as compared to $5.9 million in the same period of 2018. This was primarily due to a decrease in revenue and an increase in research and development expenses associated with our lead therapeutic candidates and other programs, as well as increase in general and administrative expenses and the impairment expense recognized on our acquired IPR&D in 2019. This increase was partially offset by warrant valuation expenses recognized in 2018.
Zymeworks expects research and development expenditures to increase over time in line with the advancement and expansion of clinical development of our product candidates, as well as our ongoing preclinical research activities. Additionally, Zymeworks anticipates continuing to receive revenue from our existing and future strategic partnerships, including technology access fees, milestone-based payments and research support payments. However, Zymeworks’ ability to receive these payments is dependent upon either Zymeworks or our collaborators successfully completing specified research and development activities.
As of June 30, 2019, Zymeworks had $355.7 million in cash and cash equivalents and short-term investments.