On March 7, 2023 Zymeworks Inc. (Nasdaq: ZYME), a clinical-stage biotechnology company developing novel multifunctional biotherapeutics, reported financial results for the fourth quarter and year ended December 31, 2022 and provided a summary of recent business highlights (Press release, Zymeworks, MAR 7, 2023, View Source [SID1234628294]).
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"As I reflect on the past year as Zymeworks’ new Chair and CEO, we made significant progress across all aspects of our business to reset the Company and its R&D strategy on a new path forward to building a successful biotechnology company. We recently outlined our enterprise value framework where we will continue to focus on advancing the business across the five pillars during 2023: our two zanidatamab collaborations with BeiGene and Jazz, our early research and development programs, zanidatamab zovodotin, and our legacy platform licensing portfolio," said Kenneth Galbraith, Chair and CEO of Zymeworks. "With the transformative nature of the completed collaboration with Jazz, we believe we are well positioned to advance all elements of our business during 2023 despite current challenging macroeconomic conditions, with a significantly reduced cash operating burn and expected cash runway extending through 2026."
Recent Highlights and Current Developments
Completion of Zanidatamab Licensing Agreement with Jazz Pharmaceuticals
During the fourth quarter of 2022, we advanced a significant licensing and collaboration agreement with Jazz Pharmaceuticals plc (Jazz) for the exclusive license to develop and commercialize zanidatamab throughout the world except for those Asia-Pacific territories previously licensed to BeiGene, Ltd. Through December 31, 2022, we received $375 million in upfront payments and are eligible for reimbursement of ongoing zanidatamab-related costs expended after October 19, 2022. We remain eligible to receive up to $525 million upon the achievement of certain regulatory approval milestones and up to $862.5 million in potential commercial milestone payments, for total potential payments of up to $1.76 billion. Pending approval of zanidatamab, we are eligible to receive tiered royalties between 10% and 20% on Jazz’s annual net sales of zanidatamab.
Zanidatamab Continues to Advance with Multiple Upcoming Clinical Catalysts
HERIZON-GEA-01, a global, pivotal study evaluating zanidatamab in 1L HER2-positive GEA, continues to enroll patients with expected top-line data in 2024. Data presented at the ASCO (Free ASCO Whitepaper) Gastrointestinal Cancers Symposium in January 2023 showed 84% overall survival at 18 months in 1L HER2-positive GEA patients treated with zanidatamab and standard chemotherapy. HERIZON-BTC-01, a pivotal study evaluating zanidatamab as monotherapy in previously-treated advanced HER2-amplified BTC patients, reported positive top-line data that 41.3% of enrolled patients with HER2-amplified and -expressing (IHC2+ and 3+) disease achieved a confirmed objective response rate (cORR) and a median duration of response of 12.9 months as assessed by independent central review. In conjunction with Jazz, we expect to present the full data set from HERIZON-BTC-01 at a major medical meeting in the first half of 2023. Zanidatamab was also recently selected for inclusion in the I-SPY platform trials for patients with HER2-expressing tumors in neoadjuvant treatment of locally advanced breast cancer, which continues to explore the potential use of zanidatamab in indications outside of GEA and BTC.
Eleven Abstracts Accepted for Presentation at AACR (Free AACR Whitepaper) Meeting in April
Zymeworks had 11 abstracts accepted for presentation at the 2023 American Association for Cancer Research (AACR) (Free AACR Whitepaper) meeting taking place April 14-19 in Orlando, Florida. We look forward to sharing additional information on our preclinical product candidates and zanidatamab zovodotin. Zymeworks plans to host a conference call discussing these data in April after the presentation of all abstracts. Additionally, during 2023 we expect to nominate an additional preclinical product candidate with a goal of an expected IND filing by 2025.
Zanidatamab Zovodotin (ZW49) to Progress in Phase 2 Clinical Trial
With the announcement of the recommended Phase 2 dose (RP2D) of 2.5 mg/kg every three weeks, development of zanidatamab zovodotin continues with multiple Phase 2 studies expected to commence enrollment in 2023. We continue to explore potential development and commercial collaborations prior to undertaking any registrational studies of zanidatamab zovodotin, which are expected to commence before the end of 2025 at the earliest.
5 by 5 Research & Development Strategy
"We have set an ambitious target of generating five novel product candidates to move into clinical studies over the next five years, starting with INDs for both ZW171 and ZW191 in 2024," stated Paul Moore, Ph.D., Chief Scientific Officer at Zymeworks. "With the capabilities of our platforms and productivity to generate novel antibody drug conjugate or multispecific antibody product candidates, we believe we can form new collaborations and partnerships around additional product candidates in order to advance further potential best-in-class opportunities with new external funding."
ZW171, our lead multispecific candidate, is a 2+1 bispecific antibody designed to co-engage tumor cells and immune cells (T cells) to enable T cell-mediated killing of tumor cells. ZW171 binds to the tumor target mesothelin (MSLN), which is expressed on many different tumors including pancreatic, mesothelioma, ovarian, and other mid to high MSLN-expressing cancers. Our team engineered and optimized the antibody design by layering our complementary technologies, including the use of Azymetric and EFECT.
ZW191, our lead antibody-drug conjugate (ADC) candidate, is engineered to target the folate receptor-alpha protein expressed on a variety of tumors. ZW191 delivers a cytotoxic chemotherapy, topoisomerase-1 inhibitor, to these tumor cells to kill the cancer. Using our Azymetric and Drug Conjugate technologies, our team customized the monoclonal antibody with enhanced internalization characteristics in order to potentially target high, mid, and low levels of folate receptor-alpha expression.
We also continue to have active licensing agreements with key pharmaceutical and biotechnology partners through our portfolio of legacy platform licensing agreements. Through this portfolio, we have received approximately $180 million in the form of non-refundable upfront and milestone payments to date, excluding any amounts received for zanidatamab or zanidatamab zovodotin. During 2023 and 2024, we expect to earn additional milestone payments under certain of these agreements as products continue to advance in development. Further, we continue to evaluate the option of monetizing all of or a portion of our rights to receive future milestone payments and royalties under these legacy agreements, should we need additional non-dilutive funding.
Leadership Appointments
During January, we made two key appointments in the clinical development organization with Jeff Smith, M.D., FRCP, appointed as Senior Vice President, Early-Stage Development, and Elaina Gartner, M.D., appointed as Vice President, Late-Stage Development. Dr. Smith has more than 30 years of drug development experience working for pharmaceutical, biotechnology and contract research organizations in Europe and North America, and is based in our new office in Dublin, Ireland. Dr. Gartner has more than 20 years of clinical research experience, and has been working with Zymeworks since 2019 located in our Seattle office.
Financial Results for the Year Ended December 31, 2022
Revenue was $412.5 million in 2022 compared to $26.7 million in 2021. Revenue for 2022 included $375.0 million for license and technology transfer fees from Jazz, $24.3 million in development support payments from Jazz, a $5.0 million upfront fee from Atreca, and $8.2 million from our other partners for research and development support under cost-sharing arrangements. Revenue for 2021 included $8.0 million from BeiGene for a development milestone, $8.0 million from Janssen for two development milestones, $5.0 million from Iconic for partner revenue, and $5.7 million from our partners for research and development support under cost-sharing arrangements.
Research and development expense was $208.6 million in 2022 compared to $199.8 million in 2021. Research and development expenses in 2022 included a non-cash stock-based compensation expense of $2.4 million comprised of a $3.2 million expense from equity classified awards and a $0.8 million recovery related to the non-cash mark-to-market revaluation of certain historical liability classified awards. Excluding stock-based compensation expense and restructuring, research and development expense increased on a non-GAAP basis by $16.2 million in 2022 compared to 2021. The increase related primarily to higher manufacturing expenses of zanidatamab for process performance qualification activities and clinical trial expenses for zanidatamab. These were partially offset by a decrease in expenses related to preclinical activities as well as a decrease in expenses related to clinical activities for zanidatamab zovodotin.
We expect research and development expenditures to increase over time, subject to periodic fluctuations that are in line with the advancement, expansion, and completion of the clinical development of our product candidates, as well as our ongoing preclinical research activities. As of October 19, 2022, Zymeworks is entitled to reimbursement from Jazz for expenses related to ongoing clinical studies of zanidatamab under the terms of the collaboration.
General and administrative expense was $73.4 million in 2022 compared to $42.6 million in 2021. In 2022, general and administrative expense included a non-cash stock-based compensation expense of $1.2 million comprised of a $4.1 million expense from equity-classified equity awards and a $2.9 million recovery from the non-cash mark-to-market revaluation of certain historical liability-classified equity awards. Excluding stock-based compensation expense and restructuring, general and administrative expense increased on a non-GAAP basis by $20.7 million in 2022 compared to 2021. This increase was primarily due to an increase in consulting fees, professional fees, and depreciation expenses as well as a non-recurring sales tax refund recognized in 2021, which partially offset expenses in the same period in 2021. The increase in expenses during 2022 were partially offset by a decrease in salaries and benefits expense as a result of a decrease in headcount due to our restructuring program.
Net income was $124.3 million in 2022 compared to net loss of $211.8 million in 2021. The increase in net income was primarily due to revenue from our collaboration agreement with Jazz, which was partially offset by both higher research and development expense and general and administrative expense as well as an increase in income tax expense.
"2022 was a very exciting year for Zymeworks as we reported annual net income of approximately $124 million, a substantially improved financial position, and a runway that allows for sufficient flexibility to fund our research and development and operating activities until at least 2026 and potentially beyond," said Chris Astle, Ph.D., Senior Vice President and Chief Financial Officer of Zymeworks. "We will continue to take a measured and cautious approach to our operating spend as we develop an exciting and broad portfolio of product candidates over the coming years. With continued R&D expenses for zanidatamab subject to reimbursement from Jazz, the vast majority of our net R&D spending going forward is related to the preclinical product portfolio with an additional staged investment in Phase 2 clinical studies for zanidatamab zovodotin."
As of December 31, 2022, Zymeworks had $492.2 million in cash resources consisting of cash, cash equivalents and short-term investments. Based on current operating plans, we expect to have cash resources to fund planned operations through at least the end of 2026, and potentially beyond. Further, with a substantially improved financial position and reduced cash burn rate, we have provided additional financial guidance to allow for an improved understanding of our future planned spending. For the calendar year 2023, we expect a net operating cash burn of between $90 million and $120 million, including planned capital expenditures of approximately $15 million.