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Zymeworks Reports Fourth Quarter and Full Year 2022 Financial Results


Zymeworks Inc. (Nasdaq: ZYME), a clinical-stage biotechnology company developing novel multifunctional biotherapeutics, today reported financial results for the fourth quarter and year ended December 31, 2022 and provided a summary of recent business highlights.

"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

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 Azymetrictm and EFECTtm.

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.

About Zymeworks Inc.

Zymeworks Inc. (Nasdaq: ZYME) is a global biotechnology company committed to the discovery, development, and commercialization of novel, multifunctional biotherapeutics. Zymeworks' mission is to make a meaningful difference for people impacted by difficult-to-treat cancers and other serious diseases. Zymeworks' complementary therapeutic platforms and fully integrated drug development engine provide the flexibility and compatibility to precisely engineer and develop highly differentiated antibody-based therapeutic candidates. Zymeworks engineered and developed zanidatamab, a HER2-targeted bispecific antibody using Zymeworks' proprietary Azymetrictm technology. Zymeworks has entered into separate agreements with BeiGene, Ltd. (BeiGene) and Jazz Pharmaceuticals Ireland Limited (Jazz), granting each of BeiGene and Jazz with exclusive rights to develop and commercialize zanidatamab in different territories. Zanidatamab is currently being evaluated in global Phase 1, Phase 2, and Phase 3 clinical trials, including certain ongoing pivotal clinical trials as a treatment for patients with HER2-expressing cancers. Zymeworks' next clinical candidate, zanidatamab zovodotin (ZW49), is a HER2-targeted bispecific antibody-drug conjugate (ADC) developed using Zymeworks' proprietary Azymetrictm and ZymeLinktm Auristatin technologies. Zanidatamab zovodotin is currently being evaluated in a Phase 1 clinical trial for patients with a variety of HER2-expressing, HER2-amplified or HER2-mutant cancers. Zymeworks is also advancing a deep pipeline of product candidates based on its experience and capabilities in both ADC and multispecific antibodies (MSAT). In addition to Zymeworks' wholly owned pipeline, its therapeutic platforms have been further leveraged through strategic partnerships with global biopharmaceutical companies. For information about Zymeworks, visit www.zymeworks.com and follow @ZymeworksInc on Twitter.

Cautionary Note Regarding Forward-Looking Statements

This press release includes "forward-looking statements" or information within the meaning of the applicable securities legislation, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements in this press release include, but are not limited to, statements that relate to Zymeworks' expectations regarding implementation of its strategic priorities; the anticipated benefits of the license agreement with Jazz, including Zymeworks' ability to receive any future milestone payments and royalties thereunder; the potential addressable market of zanidatamab; the timing of and results of interactions with regulators; Zymeworks' clinical development of its product candidates and enrollment in its clinical trials; anticipated clinical data presentations, including the expected presentation of full results from HERIZON-BTC-01 in 2023 expectations regarding future regulatory filings and approvals and the timing thereof; potential therapeutic effects of zanidatamab and Zymeworks' other product candidates; expected financial performance and future financial position; the commercial potential of technology platforms and product candidates; anticipated continued receipt of revenue from existing and future partners; Zymeworks' preclinical pipeline; anticipated sufficiency of cash resources and other potential sources of cash, including anticipated payments from Jazz, to fund Zymeworks' planned operations through at least 2026, and potentially beyond; Zymeworks' anticipated net operating cash burn and planned capital expenditures in 2023; Zymeworks' ability to execute new collaborations and partnerships and other information that is not historical information. When used herein, words such as "plan", "believe", "expect", "may", "continue", "anticipate", "potential", "will", "progress", and similar expressions are intended to identify forward-looking statements. In addition, any statements or information that refer to expectations, beliefs, plans, projections, objectives, performance or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking. All forward-looking statements are based upon Zymeworks' current expectations and various assumptions. Zymeworks believes there is a reasonable basis for its expectations and beliefs, but they are inherently uncertain. Zymeworks may not realize its expectations, and its beliefs may not prove correct. Actual results could differ materially from those described or implied by such forward-looking statements as a result of various factors, including, without limitation: any of Zymeworks' or its partners' product candidates may fail in development, may not receive required regulatory approvals, or may be delayed to a point where they are not commercially viable; Zymeworks may not achieve milestones or receive additional payments under its collaborations; regulatory agencies may impose additional requirements or delay the initiation of clinical trials; the impact of new or changing laws and regulations; market conditions; the impact of the COVID-19 pandemic on Zymeworks' business, research and clinical development plans and timelines and results of operations, including impact on its clinical trial sites, collaborators, and contractors who act for or on Zymeworks' behalf, may be more severe and more prolonged than currently anticipated; clinical trials may not demonstrate safety and efficacy of any of Zymeworks' or its collaborators' product candidates; Zymeworks' assumptions regarding its financial condition or future financial performance may be incorrect; Zymeworks may not recognize the anticipated cost savings and related benefits of its 2022 reduction in workforce; inability to maintain or enter into new partnerships or strategic collaborations; and the factors described under "Risk Factors" in Zymeworks' quarterly and annual reports filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K for its year ended December 31, 2022 (a copy of which may be obtained at www.sec.gov and www.sedar.com). Although Zymeworks believes that such forward-looking statements are reasonable, there can be no assurance they will prove to be correct. Investors should not place undue reliance on forward-looking statements. The above assumptions, risks and uncertainties are not exhaustive. Forward-looking statements are made as of the date hereof and, except as may be required by law, Zymeworks undertakes no obligation to update, republish, or revise any forward-looking statements to reflect new information, future events or circumstances, or to reflect the occurrences of unanticipated events.

ZYMEWORKS INC.

Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)

(Expressed in thousands of U.S. dollars except share and per share data)

 

Three Months Ended December 31,

 

Year Ended December 31,

 

2022

 

2021

 

2022

 

2021

 

(unaudited)

 

(unaudited)

 

 

 

 

Revenue

 

 

 

 

 

 

 

Research and development collaborations

$

402,493

 

 

$

19,870

 

 

$

412,482

 

 

$

26,680

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

 

52,967

 

 

 

54,865

 

 

 

208,596

 

 

 

199,752

 

General and administrative

 

30,131

 

 

 

5,854

 

 

 

73,358

 

 

 

42,561

 

Total operating expenses

 

83,098

 

 

 

60,719

 

 

 

281,954

 

 

 

242,313

 

Income (loss) from operations

 

319,395

 

 

 

(40,849

)

 

 

130,528

 

 

 

(215,633

)

Other income, net

 

1,041

 

 

 

326

 

 

 

4,706

 

 

 

3,274

 

Income (loss) before income taxes

 

320,436

 

 

 

(40,523

)

 

 

135,234

 

 

 

(212,359

)

Income tax (expense) recovery, net

 

(11,005

)

 

 

1,371

 

 

 

(10,893

)

 

 

516

 

Net income (loss) and comprehensive loss

$

309,431

 

 

$

(39,152

)

 

$

124,341

 

 

$

(211,843

)

Net income (loss) per common share:

 

 

 

 

 

 

 

Basic

$

4.65

 

 

$

(0.76

)

 

$

1.91

 

 

$

(4.11

)

Diluted

$

4.65

 

 

$

(0.95

)

 

$

1.90

 

 

$

(4.61

)

Weighted-average common stock outstanding:

 

 

 

 

 

 

 

Basic

 

66,510,825

 

 

 

51,841,032

 

 

 

65,194,775

 

 

 

51,553,869

 

Diluted

 

66,565,937

 

 

 

52,226,549

 

 

 

65,249,184

 

 

 

52,131,596

ZYMEWORKS INC.

Selected Consolidated Balance Sheet Data

(Expressed in thousands of U.S. dollars)

 

December 31,
2022

 

December 31,
2021

 

 

 

 

Cash, cash equivalents and short-term investments

$

492,232

 

 

$

252,608

 

Working capital

 

449,081

 

 

 

216,367

 

Total assets

 

648,725

 

 

 

389,132

 

Accumulated deficit

 

(558,763

)

 

 

(683,104

)

Total stockholders' equity

 

492,956

 

 

 

249,094

 

NON-GAAP FINANCIAL MEASURES

In addition to reporting financial information in accordance with U.S. generally accepted accounting principles ("GAAP") in this press release, Zymeworks is also reporting adjusted expenses and adjusted loss per share, which are non-GAAP financial measures. Adjusted expenses and adjusted loss per share are not defined by GAAP and should not be considered as alternatives to net loss, net loss per share or any other indicator of Zymeworks' performance required to be reported under GAAP. In addition, other companies, including companies in our industry, may calculate similarly titled non-GAAP or adjusted measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our adjusted measures as tools for comparison. Investors and others are encouraged to review Zymeworks' financial information in its entirety and not rely on a single financial measure. As defined by Zymeworks, adjusted expenses represent total research and development expenses and general and administrative expenses adjusted for non-cash stock-based compensation expenses for equity and liability classified equity instruments as well as expenses incurred in relation to the restructuring program implemented in 2022. As defined by Zymeworks, adjusted net loss per share - Basic represents net loss per share ? Basic adjusted for non-cash stock-based compensation expenses for equity and liability classified equity instruments on a per share basis as well as restructuring expenses incurred in relation to the restructuring program implemented in 2022 on a per share basis, and adjusted net loss per share ? Diluted represents net loss per share ? Diluted adjusted for non-cash stock-based compensation expenses for equity and liability classified equity instruments on a per share basis as well as restructuring expenses incurred in relation to the restructuring program implemented in 2022 on a per share basis.

Adjusted expenses are a non-GAAP measure that Zymeworks believes may be helpful to investors because they provide consistency and comparability with past financial performance.

GAAP to Non-GAAP Reconciliations

(Expressed in thousands of U.S. dollars except per share data)

(unaudited)

 

Three Months Ended December 31,

 

Year Ended December 31,

 

2022

 

2021

 

2022

 

2021

Research and development expenses

$

52,967

 

 

$

54,865

 

 

$

208,596

 

 

$

199,752

 

Stock-based compensation (expense) / recovery for equity classified instruments (*)

 

(1,724

)

 

 

(4,401

)

 

 

(3,174

)

 

 

(20,090

)

Stock-based compensation (expense) / recovery for liability classified instruments (*)

 

9

 

 

 

1,461

 

 

 

781

 

 

 

4,646

 

Restructuring (expense) / recovery

 

482

 

 

 

?

 

 

 

(5,659

)

 

 

?

 

Adjusted research and development expenses (Non-GAAP basis)

$

51,734

 

 

$

51,925

 

 

$

200,544

 

 

$

184,308

 

 

 

 

 

 

 

 

 

General and administrative expenses

$

30,131

 

 

$

5,854

 

 

$

73,358

 

 

$

42,561

 

Stock-based compensation (expense) / recovery for equity classified instruments (*)

 

(2,580

)

 

 

(3,924

)

 

 

(4,102

)

 

 

(18,184

)

Stock-based compensation (expense) / recovery for liability classified instruments (*)

 

(117

)

 

 

8,753

 

 

 

2,893

 

 

 

23,758

 

Restructuring expense

 

(476

)

 

 

?

 

 

 

(3,265

)

 

 

?

 

Adjusted general and administrative expenses (Non-GAAP basis)

$

26,958

 

 

$

10,683

 

 

$

68,884

 

 

$

48,135

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

2022

 

2021

 

2022

 

2021

Net income (loss) per common share ? Basic

$

4.65

 

 

$

(0.76

)

 

$

1.91

 

 

$

(4.11

)

Stock-based compensation expense (recovery) per common share

 

0.06

 

 

 

(0.04

)

 

 

0.05

 

 

 

0.19

 

Restructuring expenses per common share

 

?

 

 

 

?

 

 

 

0.14

 

 

 

?

 

Adjusted net income (loss) per common share ? Basic (Non-GAAP basis)

$

4.71

 

 

$

(0.80

)

 

$

2.10

 

 

$

(3.92

)

 

 

 

 

 

 

 

 

Net income (loss) per common share ? Diluted

$

4.65

 

 

$

(0.95

)

 

$

1.90

 

 

$

(4.61

)

Stock-based compensation expense (recovery) per common share

 

0.06

 

 

 

(0.04

)

 

 

0.05

 

 

 

0.19

 

Restructuring expenses per common share

 

?

 

 

 

?

 

 

 

0.14

 

 

 

?

 

Adjusted net income (loss) per common share ? Diluted (Non-GAAP basis)

$

4.71

 

 

$

(0.99

)

 

$

2.09

 

 

$

(4.42

)

(*): Research and development expenses and general and administrative expenses include stock-based compensation recovery related to the restructuring of $5,516 and $4,865, respectively, for the year ended December 31, 2022 (nil for the three months ended December 31, 2022).

 


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