Zymeworks Inc. Stock

Thank you for standing by. This is the conference operator. Welcome to the Zymeworks conference call and webcast to discuss the acquisition of Theravance Biopharma. [Operator Instructions] The conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Shrinal Inamdar, Vice President of Investor Relations. Shrinal, please go ahead.

Good morning, everyone, and thank you for joining us. Today, we will discuss the closing of the Theravance Biopharma Acquisition and what this transaction means for the next phase of Zymeworks. Scott Platshon, our Chief Business Officer, will begin with an overview of the transaction, including YUPELRI and the acquired R&D portfolio and how it advances our strategy at Zymeworks. Kristin Stafford, our Chief Financial Officer, will then discuss the financing structure, financial outlook, and capital allocation framework.

At the end, Ken Galbraith, our CEO and Chair, will open the call for questions. As usual, we will be making forward-looking statements during this call, including statements regarding the Theravance Biopharma acquisition, our financial outlook, the performance and growth of YUPELRI, potential development and commercialization opportunities, future business development, and capital allocation.

These statements are based upon our current expectations and various assumptions and are subject to risks and uncertainties, including those associated with companies in our industry and at our stage of development. For a discussion of these risks and uncertainties, we refer you to our latest SEC filings as found on our website and as filed with the SEC. With that, I will turn the call over to Scott.

Thank you, Shrinal, and good morning to everyone joining us. We are thrilled to have closed our acquisition of Theravance. This transaction brings an important new medicine under the Zymeworks umbrella in YUPELRI. This only-in-class once-daily nebulized LAMA delivers meaningful clinical benefit to COPD patients who struggle to use handheld inhalers and is supported by a world-class commercial partner, Viatris.

This acquisition also serves as a strong demonstration of the types of economics we are well suited to acquire at attractive prices for several reasons. First, Theravance maintains responsibility for hospital promotion, which introduces operational and structural complexities that render this transaction less attractive for traditional royalty buyers. Despite having a strong partner in Viatris who manages most of the complexity associated with commercial promotion, this component is off strategy for a pure financial buyer.

Second, we were able to provide an offer to acquire 100% of the equity of Theravance, while traditional royalty buyers prefer asset acquisitions for structural reasons. Third, we were able to finance the acquisition via a $350 million nonrecourse royalty-backed note with OMERS at an attractive cost of capital. This financing is secured solely by YUPELRI cash flows and demonstrates how our differentiated model allows us to collaborate with large financial institutions, leveraging their lower cost of capital rather than competing with them for assets.

Finally, YUPELRI is not the only source of value in this deal. The transaction also includes additional collaboration and royalty economics, an R&D portfolio, very significant Irish tax attributes, and an experienced commercial organization. Importantly, almost all of these other potential sources of value served purely as upside and were not valued as contributing to returns. Since the transaction was announced in late June, our conviction has strengthened that there are more derisked trapped cash flows and assets that we are uniquely set up to access.

The ability for Zymeworks to acquire whole organizations for access to R&D assets or cash flows makes us a differentiated acquirer with multiple avenues for value creation. Turning to the financial profile of the transaction. Our base case underwriting anticipates a mid-teens IRR over the long term, driven primarily by YUPELRI with a small contribution from VIBATIV, an important powerful antibiotic sold by [ Epitex ].

As mentioned, the base case does not assign any value to a number of additional opportunities. These include the potential utilization of approximately $2.5 billion of Irish tax attributes, future value from the acquired R&D portfolio, and certain potential future milestones or other business development opportunities. The profit share from Viatris adds to our recurring cash flow foundation alongside Ziihera while also providing an opportunity to actively manage upside opportunity.

The retained hospital organization is an important part of that opportunity. Hospital sales grew approximately 25% year-over-year in the second quarter of 2026, demonstrating continued momentum in the channel, and we are thrilled to be welcoming a lean, skilled, and highly experienced commercial and medical teams to Zymeworks. The retained team has demonstrated strong execution and understands the market, customers, and product. We believe the hospital channel will continue to provide strong momentum to the brand over the coming years.

As previously mentioned, Viatris is responsible for promoting in the community and managing most of the complexities associated with commercial promotion and reporting. As we evolve the organization, we are also investing in the experience needed to support a more diversified business. With this in mind, we are adding new senior leaders from Theravance across technology, data science, and AI as well as intellectual property.

[ Stuart Knight ] will become Executive Vice President and Chief Information Officer of Zymeworks, where Stuart will guide the company's future technology strategy, including continued investment in the company's existing AI, data science, and machine learning capabilities. Stuart brings substantial experience in biotech and pharmaceutical companies operating in both the United States and Europe. Stuart will also be joined by Jesse Fecker as Vice President of Intellectual Property.

We plan to hire a seasoned pharmaceutical executive with experience building and leading commercial pharmaceutical organizations to lead the commercial operations of Theravance. We will continue to evaluate the combined organization and provide updates on any future changes. For now, these additions strengthen the infrastructure we need to execute the next phase of our strategy. Beyond the commercial assets, Theravance Biopharma also adds an R&D portfolio to Zymeworks.

This expands our existing pipeline of wholly owned and partnered programs and gives us additional opportunities to create value through development, partnering, and other strategic alternatives. I'd like to reiterate, we do not assign any value to these programs in our base case IRR. We will only allocate capital to programs that have a clear attractive risk-adjusted value creation potential. We will also evaluate partnering, licensing, or other alternatives when those opportunities make sense.

As a reminder, as R&D expenses in 2Q '26 were 20% lower than in 2Q '25, which is consistent with our planned reduction in R&D expenses. This approach allows us to preserve the upside associated with R&D while operating from a more diversified financial foundation. With that, I will hand over to Kristin to talk through the financial updates.

Thanks, Scott. As Scott mentioned earlier, another component of the transaction is approximately $2.5 billion of Irish tax attributes that we acquired. We have assigned no value to the utilization of these attributes in our base case IRR and expect to assign no value to the attributes of purchase accounting as well. It's important to note that the tax attributes exist because of the depth and breadth of the R&D in the business as we've just reviewed.

We will evaluate potential opportunities to utilize these attributes in connection with future Irish revenues, IP structuring, and potential acquisitions or investments involving our Irish legal entities. Our existing Irish R&D operations provide an important foundation for that evaluation. The actual utilization, timing, and value of these attributes will depend on applicable tax laws, regulations, and the facts and circumstances of any future transactions. So similar to the R&D portfolio, we view the tax attributes as additional optionality rather than an assumption underlying the transaction.

On this slide, I wanted to return to the financing structure and remind everyone that a significant portion of the transaction was financed through a nonrecourse note with OMERS Life Sciences secured by the YUPELRI cash flows at a very attractive cost of capital in relation to the mid-teens IRR we expect the transaction to provide. The structure is designed so that the note is serviced by the underlying YUPELRI economics and is nonrecourse to the broader Zymeworks business, subject to the terms of financing arrangements.

YUPELRI is currently generating approximately $60 million of annualized cash flows at current run rates, providing the durability and predictability that allows us to structure this financing. During the note period, OMERS received 75% of the YUPELRI profit share cash flows to service interest and principal with the residual economics retained by Zymeworks. Once the note is repaid, the remaining cash flows revert to Zymeworks. This financing structure allows us to access a high-quality commercial asset while preserving capital for other opportunities across our business.

The transaction is expected to be accounted for as a business combination and the purchase price will be allocated to the fair value of the net assets acquired and primarily includes rights related to YUPELRI with any remaining amount recorded as goodwill. YUPELRI is expected to represent the principal identifiable intangible asset and will be amortized over its estimated useful life generally through the expected loss of exclusivity period.

We also expect to recognize a tax liability due to an uncertain tax position as part of the accounting for the business combination. And upon expiration of the applicable audit period in October 2026, the liability may be reversed, resulting in the recognition of a noncash income tax benefit in the fourth quarter of 2026. When looking at the Viatris collaboration agreement, it's important to remember that Theravance does not record product sales.

Viatris records 100% of YUPELRI's net sales while Theravance reports a single line item in its financials, which is called Viatris collaboration agreement revenue. This number is a net figure that includes Theravance's 35% share of profits and losses and adjustments for shared costs. To model the quarterly cash flow from YUPELRI, you must apply the 35/65 split across 3 distinct buckets. For net sales, you need to take 35% of the total U.S. net sales.

For Theravance commercial expenses, you need to add back 65% of the commercial costs that Theravance incurred since Viatris owes Theravance for its share of these costs. And for Viatris commercial expenses, we need to subtract 35% of the commercial costs Viatris incurred since Theravance owes Viatris for its share. An illustrative example has been provided on the right-hand side of the slide with actual revenue and expense line items for the financial year 2025.

With the completion of the Theravance acquisition and the $250 million milestone payment triggered by the FDA approval of Ziihera and GEA on August 25, 2026, the company has provided updated financial guidance, utilizing relevant financial metrics that it believes provide a more suitable framework for evaluating operating performance of the business. The company expects total revenue for 2026 to be between $278 million and $292 million and 2026 adjusted EBITDA to be between $114 million and $128 million, excluding the impact of any future transactions.

At the current time, we won't provide any specific revenue guidance by source, specifically referring to milestone revenue or [ Zara ] royalties from Jazz and BeOne. Recently, Jazz has updated peak sales guidance for Ziihera to be between $3 billion and $5 billion. As an illustrative example, annual royalties due to Zymeworks would be between $485 million and $885 million based on those peak sales estimates using the 20% royalty rate for sales above the $2 billion threshold as previously disclosed.

Sales of Ziihera by BeOne in their Asia Pacific territory would be incremental to these sales estimates from Jazz as with the resulting royalties to Zymeworks. Adjusted EBITDA is a non-GAAP financial measure and a reconciliation between GAAP reported and non-GAAP financial information presented for historical periods can be found in the appendix at the end of this presentation. Our guidance today reflects our current expectations for the acquired business and the broader Zymeworks operating profile.

As with all forward-looking guidance, actual results may differ based on a number of factors, including commercial performance, collaboration revenue, operating expenses, and other risks described in our public filings. Going forward, we believe total revenue and adjusted EBITDA provide a more meaningful framework for evaluating Zymeworks as we transition toward a business supported by multiple sources of revenue and operating cash flow.

We will provide updates on our 2026 financial guidance as needed with respect to future events and transactions and expect to provide initial guidance for 2027 in conjunction with the release of our annual financial results for 2026 expected in the first quarter of 2027. One of the most important changes following the Theravance acquisition as well as Ziihera approval in GEA is the increased role of cash flow in our capital allocation framework.

As we generate cash from the commercial and royalty portfolio, we have multiple avenues for deploying that capital. We can continue to invest in our wholly owned R&D programs. We can advance the R&D programs acquired through Theravance internally or through out-licenses or spinouts. We can acquire additional R&D programs, royalty streams, or commercial assets individually or in multicomponent acquisitions, and we can repurchase shares when we believe that represents an attractive use of capital as we have done since August of 2024.

We will evaluate these opportunities based on expected risk-adjusted returns, strategic fit, and our broader financial position. The objective is not to prioritize one use of capital permanently, but to allocate capital toward the opportunities we believe can create the greatest long-term value. I'd like to highlight what we believe this means for Zymeworks. Historically, the company was primarily driven by R&D catalysts and individual development events. Following the Theravance acquisition, we are beginning to build a more diversified business.

We now have growing royalty revenues, commercial cash flows, and multiple sources of operating revenue. At the same time, we retain our wholly owned R&D programs, our partner pipeline, and the ability to pursue additional acquisitions and partnerships. This creates a different financial foundation for Zymeworks. Recurring cash flows provide greater visibility, commercial growth can provide operating leverage. Our R&D portfolio provides additional opportunities for future value creation and disciplined capital allocation allows us to connect these pieces and continue investing in the opportunities we believe offer the most risk-adjusted returns.

We believe the Theravance acquisition is an important first step in demonstrating that model at scale. And importantly, this transaction does not change what Zymeworks is fundamentally built to do. It gives us a stronger financial foundation from which to do it. The acquisition of Theravance Biopharma is the first tangible validation of the strategy we outlined less than a year ago, and we believe it demonstrates something genuinely new in how life sciences capital can be deployed.

There are 3 things we want investors to take away from today. The first is about access. Zymeworks can acquire operating companies where valuable cash flows such as royalty streams, profit participation, and commercial economics are embedded within a broader business structure that traditional royalty investors are not typically structured to acquire. Because we can acquire the whole company, we evaluate those cash flows alongside commercial assets, including R&D pipelines that we have the potential to develop, tax attributes that we may be built to leverage, and other sources of value that would otherwise remain embedded within the operating business and in some cases, at no incremental cost.

What this means in practice is that Zymeworks creates a new origination channel. Companies with embedded royalties have a path to monetize those assets and royalty partners have access to high-quality opportunities they may not otherwise be able to source or structure. In acquiring the commercial royalty economics, Zymeworks also gains access to R&D pipelines and platforms that are embedded within these businesses, which we can develop, partner, or spin out. We believe that is a meaningful and durable competitive position.

The second is about structure. We've demonstrated that durable contracted cash flows directionally can directly support acquisition financing, including nonrecourse structures that align the financing instrument with the underlying asset economics. This allows Zymeworks to pursue acquisitions of meaningful scale while aligning the financing with the cash flows of the acquired business and preserving capital for other uses.

During 2026, we have accessed approximately $600 million of nondilutive financing through nonrecourse notes at an attractive cost of capital with proceeds supporting both the Theravance acquisition and continued share repurchases. This financing strategy, together with our repurchase program reflects our focus on minimizing equity dilution for shareholders. Our last public equity offering was in January 2022, and we currently have no plans for another equity issuance.

The third is about value creation beyond the initial cash flow. In addition to the commercial and royalty streams, Zymeworks retains the ability to generate value through active development, profit share arrangements, licensing, and potential future spin-outs that distinguishes our model for traditional royalty organizations where returns are largely defined at the point of acquisition. For us, the acquisition is the starting point.

Recurring cash flows provide a foundation from which we can fund R&D, pursue additional acquisitions and partnerships, or return capital to shareholders based on where we see the best risk-adjusted returns at any given time. We are pleased with how this transaction has come together, and we believe it gives investors a clear picture of what Zymeworks is building and how we intend to keep building it. This is not the end of the story for the year.

We have additional catalysts ahead, including the continued U.S. commercial launch for zanidatamab in GEA by our partners, upcoming data presentations from our partners, J&J and Jazz as well as important updates from our own pipeline, including the Phase 1 optimization data for ZW191 that we expect to present at ESMO in Madrid on October 24. We look forward to sharing those developments with investors over the coming months. With that, I'll ask Ken to join us as we open the line for questions.

Thank you, Chris and Scott. Operator, we're ready to open the question-and-answer period now.

[Operator Instructions] Our first question comes from Yigal Nochomovitz with Citigroup.

This is [indiscernible] on for Yigal. Congrats on the progress. One quick question from us. With YUPELRI hospital sales growing 25% year-over-year. And as you look towards third quarter, can you help us understand whether acceleration is driven primarily by existing accounts or expansion into new hospitals or improved conversion in the community setting?

Okay. Thanks for the question. I'll ask Scott to provide a general answer. Obviously, we won't be able to any specific until the third quarter is reported by us in November. But I'll see if Scott has any general comments to address your question.

Yes. Thanks for your great question, and it's a very attractive part of this franchise. We're really excited to welcome a very lean and skilled team that's responsible for the remarkable performance in the hospital to date. I'm going to make just a few high-level comments about the hospital channel broadly. The first point is that the hospital sales cycle is very different than the community.

It's a very skilled and slightly longer return on investment and getting new hospitals online and getting on to formularies can often take 6 months to multiple years. And there's still a lot of opportunity for additional accounts to come online. There is also opportunity for growth in existing channels. So it's a little bit to your question, the answer is both, and we're really excited to have a great team to help us drive that channel that remains pretty underpenetrated at this point.

Our next question comes from Charles Zhu with LifeSci Capital.

This is Sue on for Charles. Congrats on progress. Following up on the hospital channels, can you share your plans to maximize hospital channel sales, including how many of Theravance's account managers and medical liaisons you retained, whether you plan to add headcount and what leading indicators you will use to measure progress?

Great. Thanks for the question. I'll see what else Scott wants to add to that some of the detailed question we won't get into, but I'll see if Scott has something to add generally to your question beyond what we answered in the last one.

Yes. Thanks for the question. I think we're going to shy away from any sort of specifics. At a high level, there's a huge opportunity in the hospital. COPD, 15 million to 16 million patients in the U.S., 2 million-plus really strong candidates for YUPELRI. And there's a really strong rationale for why YUPELRI should play such a great role in the hospital. And I can give you just sort of a few of those anecdotes.

Patients with COPD exacerbations find themselves hospitalized. A therapy like YUPELRI makes a lot of sense, supports tidal breathing. It's really the right way to deliver a medication. And it being the only in-class long-acting has a real pharmacoeconomic benefit. We have respiratory therapists going in 3, 4, 5 times a day to deliver short-acting nebulizers that are often used inappropriately or take a lot of time. And so there's an enormous opportunity.

I think we'll shy away from giving sort of any specific trends we're looking at. At a high level, I will say about the team, this is an exceptionally talented team, an average tenure well above industry norms. And we think that there's several years ahead of continued hospital, very meaningful hospital growth for the brand.

Our next question comes from Gregory Renza with Truist Securities.

Congrats on the deal closed. Guys, just with respect to some of the R&D assets that you've discussed about potentially looking externally, namely the [ pan-RAS ADC ] portfolio as well as ZW191. Can you just provide some updates of how that's either going to be accelerated or how you're evolving the framework with which you want to take that forward with externalization?

Yes. Thanks for the question, Greg. I'll take that question on directly. I think as we talked about early in the year, we did talk about the fact that we had a really rich and diversified wholly owned R&D portfolio. Since then, we've made new disclosures around the pan-RAS ADC, which wasn't even public at that time. And I think it's obvious that we have a very productive R&D group working in multiple teams in both ADCs and multispecific antibodies that we would like to find ways to bring in partnerships, collaborations, external capital so we can move as much of that forward as possible where it's justified by continued data, but without relying just on our P&L to be able to do that because I think we have our own financial metrics in mind.

And so we're trying to find ways that partners can have resources and dedicated teams where maybe a spin-off entity that's dedicated to a particular portfolio, as we talked about with the pan-RAS ADC portfolio might again have dedicated resources, dedicated focus, and we can move as much of the portfolio as justified forward. In the same way, we've been working all through this year to understand what collaborations make sense for us, which parts of the portfolio versus which parts we'd like to keep holding on to ourselves and move forward with our own capital.

I think as we mentioned, we're not finished this year with potential catalysts in our operating plans for the year. So I think as we can complete such transactions, we'll announce them. And I think as we move along with some partnership collaborations and spin-offs, you'll get a better sense of how that shapes the R&D portfolio. We're certainly not running out of substrate of things that are really interesting we'd like to pursue. We just have internal limitations on capital, very high standards for things to move forward, but I can certainly see how a few key partnerships and collaborations, a spin-off entity would help us exploit the totality of the R&D portfolio and by retaining royalties and milestone interest, equity interest in the case of spin-off, we can find a way to create, continue to share in the success of those future portfolio in the same way we will or expect to with [ zani ] and eventually pasritamig.

And so you just have to wait for those transactions. But we're making good progress, and I think we're excited about some of the options that are available to us to move some of those programs forward, but not with just our own P&L.

Our next question comes from Brian Cheng with JPMorgan.

This is Sarah on for Brian. You continue to emphasize that $2.5 billion of Irish tax attributes, but they're still excluded from the base case IRR and purchasing accounting. As we sit here today, what do you view as a realistic path to using them? Is it the existing activities that you have, future acquisitions, or some form of IP structuring?

Yes. Good question. I'll let Kristin come on and answer that question if you -- with whatever guidance you'd like to provide, Kristin.

Yes, sure. So we see that the reality is these $2.5 billion of attributes really depend on the nature of the attributes and the amount and the timing of the future taxable income and tax rules, as we mentioned. So we're working through the appropriate ways to incorporate them into our broader structure, but we do see potential paths to use them, as we mentioned, kind of more broadly over the presentation.

And just to confirm, those are not included in our base case mid-teens IRR. So any ability to utilize those would be upside for us and the investment that we've made in the Theravance acquisition.

Our next question comes from Yaron Werber with TD Cowen.

This is [indiscernible] on for Yaron. Congrats on the progress. You highlighted 25% year-over-year growth in YUPELRI hospital sales in Q2 and continued margin expansion. Is this similar to what we should expect for the product revenue trajectory for the next 3 to 5 years? And long term, how are you thinking about YUPELRI's peak sales opportunity in COPD?

No. Thanks. I'll see what Scott wants to add to that question.

Great question. We're not going to be providing any product-level specific guidance today, but as previously highlighted, the hospital channel is really important for a couple of reasons. You highlighted the 25% growth year-over-year in the second quarter. We do see opportunity. The hospital channel should continue to drive momentum over the coming years and contribute to the brand.

I think I will just take this opportunity to highlight the importance of the hospital channel beyond just the exact figures that are provided year-over-year. YUPELRI is really an amazing medicine for patients and also recovering from an exacerbation partly because of the value it delivers to them. But the other really important thing to remember about the hospital sales force that we're really thrilled to welcome to Zymeworks is as patients leave the hospital and transition back into the community.

There's a lot of incentives, both from the hospitals and payers and for the benefit of the patient care to keep them on an amazing medicine like YUPELRI. And so it does serve as an important sort of funnel into the outpatient community setting where Viatris is responsible.

So I think we'll shy away from any sort of specific guidance around the hospital channel other than to say the hospital channel itself is an area we expect continued growth, and it has continued impact as patients transition back out into the community.

Our next question comes from Stephen Willey with Stifel.

Yes. Thanks for providing all the color here. So I guess it looks like your volume growth is flat in the community setting when you back out pricing. And I know that's Viatris's detail. But do you have any estimate? I know Scott just talked about this, of the percentage of community sales that actually originate with a hospital-based script? And I guess how much more runway do you see in the community setting if you're able to grow the hospital-based component and potentially increase the conversion rate?

Yes. Thanks, Steve. Good question, Scott.

Yes, great question. We see continued opportunity for growth from a volume perspective in both channels. The latest estimates are that about 12% to 13% of volume comes from the hospital channel in terms of volume.

In terms of origination, that's a very hard data set to nail down with that level of precision. We have a lot of ideas about where that figure stands and really are excited to welcome the Theravance team on board and see how we can continue to drive that, given the robust growth in the hospital that should be continuing to trickle down into the community. But it's very hard data to give an exact figure on beyond that sort of 12%, 13% split by current volume in each channel.

Our next question comes from Reni Benjamin with Citizens.

Congrats on closing the deal. I guess, two from us, what are your peak sales expectations for YUPELRI and kind of what is the potential timing of that? Are there any potential indications which could further expand this TAM? And just one for the R&D portfolio. Could you maybe give us a sense -- it's an extensive portfolio. I'm sure you've had a chance to kind of look at it.

And I understand the commentary you made during the call, but which assets do you think could drive value over the next 12 to 24 months for you?

Yes. Thanks, Reni. Let me take your first question, and then I'll give the next one to Scott. I think on the details for YUPELRI, I think we haven't given any peak sales guidance on YUPELRI and Viatris hasn't either. So we would only usually talk about that if our commercial partner was in a position to do that. We've obviously talked about peak sales for zanidatamab being between $3 billion and $5 billion eventually, and that's because that's Jazz's guidance, and we're simply reflected against that guidance, what our share of that would be from a royalty perspective.

So that's why we talked about that, but we've not given any peak sales guidance for YUPELRI and will not do so unless our commercial partners at Viatris decided that, that was something they'd like to do. And maybe you want to answer the second question on the R&D portfolio, Scott.

Yes, absolutely. Theravance is a historic company in our industry, right, coming up on 30 years since its founding and really a robust and rich history of successful drug development at a very broad autoimmune and inflammatory portfolio that we'll take over.

We're not in a position today to point you towards any one asset, but one of the advantages of the model of having sort of an asset and royalty aggregation strategy alongside a robust R&D team is we feel we're very uniquely set up to look through that portfolio and maximize value. And whether that's through spinouts or out-licensing or very targeted capital investments on our own that we'd come back and explain in detail remains to be seen, but it's something that we feel could provide a very meaningful upside.

Again, just to remind and reiterate, we allocated 0 value in that mid-teens IRR to that portfolio. And I think now that the closing is behind us, there will be an opportunity for us to dig through that portfolio in depth and come up with the right plan and hopefully come back in short order to the market with a little bit more information.

And just to add, Reni, before we finish that. So we are hoping to schedule our next R&D Day in Q1 of next year. I think our last one was December 2024, and we'd like to do it every 2 years or so. So once that's scheduled in Q1 2027, by that time, we'll probably be in a position after some evaluation to talk a little bit more about any R&D investment or potential out-licensing efforts around the acquired Theravance R&D portfolio.

So maybe Q1 next year is a good time frame for us to be able to answer that question with some real plans and as a part of our presentation then.

Our next question comes from Mayank Mamtani with B. Riley Securities.

I appreciate the level of detail. I know you're not breaking out guidance components, it doesn't seem there's a whole lot of Ziihera royalties included if we consider the seasonality part in the YUPELRI 4Q for them generally being the strongest, both from volume and also stocking dynamics. I was just wondering if you could give us any color and also how the hospital investment aspects, Scott, could change in your hands.

And also I was wondering if there's any progress to report on the ampreloxetine regulatory and partnering process standpoint. I think you have that on your slide.

And then just lastly, the third part to my question was, how do you think about the $100 million sale milestone in context of when you talk about special dividends versus buybacks and managing this cash flow building but also maintaining dry powder for future transactions?

Yes. Thanks for the multiple part one question. You're always good at that. I'll take the first one, and then I'll pass the other 3 to Scott to comment. But I think we thought very thoughtfully about the type of financial guidance we could start providing and the operating metrics that would be useful. In the end, we settled on total revenues and adjusted EBITDA, things that would be worthwhile to start guiding on. It's the first time we've given this type of financial guidance to kind of replace the normal activity-based guidance or cash runway guidance.

We decided to give some guidance for 2026, just because we thought it would be helpful to start with. We're obviously trying to be a little conservative in making sure that we only guide on metrics that we have some good predictability or transparency around to share publicly and that are meaningful. And obviously, trying to be conservative with providing a range of guidance that targets where the actual performance may end up.

So you might think our guidance for Q4 is a little bit conservative. But hopefully, as we -- over time, as we gain a little bit more confidence in predictability, we'll be able to be maybe a little less conservative in the ranges that we provide. So I think I wouldn't read too much into that other than we're trying to be conservative in the way that we think about it starting this process of providing meaningful financial guidance on a regular basis to help folks guide their evaluation of the company. That's all I would read into it.

And I'll let Scott answer the other 3 parts of your 1 question.

Yes. Thanks for your question. I'll do my best to hit all 3 at a different part. Well, I think your first question was a bit about what changes you might expect to see on the hospital promotion. I think it's important to remember that we feel that Theravance's hospital team has done an exceptionally good job. This product launched in 2018, 2019, still finding 25% year-over-year driving formulary uptake is really quite impressive.

Of course, we always aim to see if we can find ways to improve both the hospital in the channel itself and in that transition to the community setting as patients leave the hospital. The drug is really underpenetrated if you look broadly. Again, I mentioned earlier, 15 million to 16 million U.S. COPD patients, 2 million-plus really well suited for a nebulized therapy like YUPELRI, where patients have for one reason or another issues with using a handheld.

And we're very much in the single digits penetrated into that. Both the community and the hospital have room to grow, and we'll see how we can drive some additional growth there. You asked about the Trelegy milestone, I believe, that, just to remind folks, would be triggered based upon 2026 sales from Trelegy, and we believe that's a very high confidence milestone that we'll look forward to receiving assuming the sales track from our partners in Royalty Pharma.

In terms of allocation, it will be similar to the framework, that capital will be allocated to the highest return and we certainly don't prespecify if that's going to go towards an R&D, towards additional M&A, or towards returning capital to shareholders. And nothing really to say at the point on the ampreloxetine. We have a 20% share that ultimately does find a home, but I think we'll leave it at that for now.

Our next question comes from Jonathan Miller with Evercore ISI.

Congrats on getting this deal closed and really showing us what you mean when you're talking about transitioning the business model at the end of last year, really great to see it. Just multiple ones for me. You said that YUPELRI is a starting point here, and I want to come back to that, but it seems like your expectations for YUPELRI, you're very excited about it. You're excited about the hospital potential, but it seems like your expectations here are on the high end, what consensus was estimating before the acquisition.

And so I'd love to get a sense for where you think the market has been wrong on the product and about the prospects, especially in hospital, but as excited as you were, what were people not appreciating about this potential ramp here?

And then thinking beyond YUPELRI, as you say, at the starting point, we talked a little bit about no explicit value being given for R&D assets or the Irish tax asset. You talked a little bit about when we could expect that to change for R&D. But what about all the other portions of this deal that you think are potentially valuable but are not getting explicit valuation in your deal math, the Irish tax assets, et cetera.

When could we start to see the impact from those things be a little bit more explicit in your go-forward evaluation?

Great. No, thanks for the multiple questions, Jon. I'll let Scott answer both of those.

Yes. Great question, Jon. Good to have you back on asking questions again as well. So YUPELRI is really an interesting and privileged position. Being an enormous market, I think there can occasionally be sometimes a bit of dogma around handheld versus a nebulized therapy like YUPELRI, but it's really an amazingly important medicine for patients that I think has through both safety and efficacy sort of stood the test of time.

There's an amazing wave of innovation happening in the COPD space around some new biologics and great to see Merck recognize the amazing value of a nebulized product in [ ensifentrine ] with their [ Verona ] acquisition. And so I think a little bit versus consensus has been the dogma changing around the importance of nebulized therapy for that reasonably sized population within COPD that struggles with their handheld.

I would also say elaborating on my sort of pro's kind of position that YUPELRI has in the market is, it's really only in class. And so as we see more interesting biologics come on, this is a foundational therapy that is early in the treatment paradigm. And so we see additional innovation, additional medicines coming into COPD is only benefiting YUPELRI.

And the last thing I would say is that the hospital sales cycle, in particular, can be long. It's a very, very different sort of type of selling than you'll see particularly in the community. And so the IP being cleared well into the [ 2030s ] and having that clarity to invest in some of the channels that maybe take a little bit longer time to turn on gives us confidence in the continued growth for the years ahead.

Jon, would you just repeat your second question?

Just on the stuff that wasn't explicitly valued as part of the deal, you mentioned a bunch of other pieces of Theravance that you thought were exciting, but you weren't giving explicit monetary value. So when does that change? When can you start talking about your view on explicit value?

Yes. I think give us a bit of time. We have some preliminary ideas. But I think, as Ken mentioned, I think an R&D Day where we can talk a little bit more about this sort of in the early part of next year might be a good venue for us to come back and talk a little bit more about that. Again, just to reiterate, no value to those. And so those would only be sort of potential upside if we're able to find interesting opportunities for those.

Yes, just to add to your comment about what the market was missing about YUPELRI. I think that the asset yield was a pretty interesting structure that Theravance has with a 35% profit share and the ability to co-promote in the hospital space in the U.S. that's interesting to us.

And I think YUPELRI has a lot more growth in it than maybe people realized. And I think that's just because it was kind of stuck under a pretty extensive R&D portfolio that unfortunately for Theravance had some clinical setbacks over a number of years, which I think was the incentive to think about maybe a sale of the company.

So I think it just kind of got lost under those R&D efforts, R&D portfolio. And for us, those are the types of things where maybe we can make a multicomponent acquisition without having to pay fair value for every component, which is in that. So I think justifying the transaction and our purchase price based on mid-teens IRR that's really driven by a very modest growth for YUPELRI gives us some confidence that we paid the right price, we can generate those returns, and there's upside, which could be from optional additional investments for us? Or this may be upside without any additional capital investment for us.

I think those are the types of things that we look for is multi-components in a biotech company that might not be all fairly valued because there is someone who's missing the point on one of those key aspects, and we can acquire at the right price, sort it through and hopefully drive an IRR that's really well beyond the mid-teens IRR using as the base case to justify the transaction.

[Operator Instructions] Our next question comes from [ Nicole Britton ] with Wolfe Research.

This is Nicole on for Kalpit. Just wanted to ask now the transaction is closed, would you be able to give us any color on when the OMERS note may be repaid and reverts to that 25% to 100% of the YUPELRI cash flows. Are you looking to for maturity in 2030, any color you can give.

Yes. Thank you for the question, Nicole. I'll ask Kristin if she can answer that question. If you're able to hear, Kristin, can you answer that?

I did hear the question, I think. We are not giving specific guidance on when we expect that note to be paid down. But I think, Nicole, if you're looking at our own models, you can see -- you could model the pay down of the interest and principal as you can. I think you can probably reflect that as well. I think you understand that it's 75% paid towards interest and principal and then it would revert to us. I think what we explained is probably all the main share as far as expected pay down.

And I'm not showing any further questions at this time. I'd like to turn the call back over to Ken for any further remarks.

Great. Thank you, operator. And again, thank you for attending the conference call and the questions. I hope you found the additional detail on the Theravance acquisition, the rationale for what we see going forward is helpful. And hopefully, the financial guidance that we started providing today on total revenues and adjusted EBITDA for 2026 useful for you to have as well.

As we said at the beginning of the call, we have a number of other catalysts and objectives inside the company for the remainder of 2026. So I don't think we're done with the things we'd like to accomplish inside Zymeworks. So hopefully, I'd just advise all of you, please stay tuned and look forward to reporting additional progress as we move ahead for the remainder of 2026. So thank you very much.

Thank you. Ladies and gentlemen, this does conclude today's presentation. We thank you for your participation. You may now disconnect, and have a wonderful day.

All right. Hello, everyone. My name is Frank Tang, and I'm with the Investment Banking Division at Morgan Stanley. Thank you all for joining us for the Fireside Chat with Zymeworks. I'm joined here today with -- by the Chairman and CEO, Ken Galbraith.

Ken, a lot has -- welcome back, and a lot has evolved since last year, since we were here? It would be great if you could provide an update on where Zymeworks stands today and give us an overview of your broad model across licensed royalty assets, zani, the wholly owned TCEs, your ADC platform, and now the Theravance acquisition.

No, it's a great thing. And again, great to be back here again this year with you, back to school, back to work. I think it's a long week already, but I'm really happy to be here and have a chance to update you on Zymeworks. For 2026, we've had an amazing year already as a company, and it's not finished yet. But obviously, with the recent FDA approval of zanidatamab in first-line GEA patients and HER2-overexpressing GEA patients, we've made this amazing journey from discovering this molecule inside our company 11 years ago.

With a great protein engineer came up with this idea of creating this bispecific antibody that would really create a brand new class of agent to be able to use in the HER2 class. And over the past 11 years, we've traveled that journey of trying to move that into clinical studies and move that closer to commercialization, in this case with our partners, Jazz and BeiOne, in different territories. And we found ourselves in this position of getting an FDA approval at the end of the day in the place where every biotech wants to be. We changed the standard of care after 12 years of an amazing molecule, Herceptin, to be able to make an advancement for patients.

And whenever you're in a situation where you can move the median OS 6 or months or more for a patient population overall, in this case, it was seven months, you just realize the fundamental change you're going to make in people's lives and a large group of patients on a global basis. It's the reason that we do this in this business. So having that really just recharged us to think again about how do we build a company with that behind us. And in front of us, how do we do that again? And how do we do that maybe in different ways when we think about success? So what else comes with that is obviously there's a tremendous financial return that comes to the company from being the innovator and developer of that agent.

And so when we start to look at the royalties and milestones that will come to us in a product that Jazz has guided recently to be a $3 billion to $5 billion peak sales opportunity. And so we have some responsibility for those financial returns for our shareholders to make sure that we take care of them, protect them, grow them, use them wisely. And that's, kind of, the next step for us. But certainly amazed at the journey that zanidatamab has taken Zymeworks on to get here.

Beyond that, we have another Phase III trial readout coming from zanidatamab in metastatic breast cancer setting in a post-HER2 patient population, which is going to be fully recruited by mid-next year, and then read out by late 2027, early 2028. So we have another chance to be back in front of the FDA with something that might make a meaningful change in that breast cancer setting with zanidatamab. That's not that far away.

And in addition to this, our next product that we've worked on with J&J, pasritamig, which is an incredibly innovative KLK2 CD3 T cell engager, will have its first Phase III readout next year. And it's something that J&J has guided to the potential of $1 billion to $5 billion in peak sales. Very excited about it and increasing their clinical development investment in that agent, and that reads out next year.

So I think for us, we clearly see where we've come from. It's amazing to be in this place, a biotech company, and certainly solidifies our financial future. But we have some additional Phase III readouts coming very quickly for us next year, and at the same time we've moved our wholly owned R&D portfolio forward this year, in four or five different themes between oncology, hem-onc, and also autoimmune inflammatory. We have an opportunity over the next 6 to 12 months to showcase some additional clinical data and preclinical data around that diverse part of the portfolio. It's still wholly owned.

And we did set goals earlier this year to figure out how we would integrate partnerships, collaborations, maybe the use of spin-off vehicles to bring other capital in that so that we can move forward this very broad and diverse portfolio. So that's been really exciting this year. And at the same time, we made our first acquisition, which we talked about as a strategy. So we haven't closed our acquisition of Theravance yet. But really hopefully, it really showed what our acquisition strategy is about in trying to find interesting companies who have multi-component that we can attribute value to, whether it's a royalty stream or a profit share like they have in the YUPELRI, which is on the market, an R&D asset to our portfolio that we can evaluate to decide if we want to move forward or license.

Some tax attributes and other things. So hopefully we illustrated the way we think about the acquisition strategy, helping the overall growth of our company moving forward, did all of that within the capital discipline that we have inside the company, and at the same time continued to buy back our own shares, which was one of our goals we set out back in the summer of 2024, was to try and buy back a significant part of the company before everyone else caught up on the value -- the underlying value of the assets that we think we have in front of us.

So since the summer of 2024, including this year, we've repurchased 10.5 million common shares. That's about 14% of our outstanding stock. Allocated about $215 million to that allocation, and we certainly think that just provides liquidity for current shareholders who want to exit. But more importantly, it will provide an additional advantage to total shareholder return as we continue to grow the company. And so we've been able to continue to do that this year. So I think every aspect of what we set out to do in January, we've been able to execute so far. 2026 not finished.

And I think we have a number of things we'd like to get done before the end of the year that hopefully people will see as another illustration of how we run this company in the future. But nothing can be as great as getting an FDA approval on something that really changes the standard of care for a big group of patients after an 11-year journey from lab to hospitals where docs can treat patients with something they didn't have available to them before -- it's why we do this. It just encourages us to do it again. Maybe we do it in different ways.

But we're really, really excited and energized by that.

Great. I mean, you have so many different major pillars for the story. And thank you for giving us that overview. I'd like to maybe first start by going a little bit into -- more deeper into zani. Last year, we were focused on the timing of GEA data. And now that you've secured approval in first-line HER2-positive, could you walk us through what that approval means, how that launch is going with your partners, and, kind of, maybe the -- a little bit into the milestones and the financial side of those partnerships?

Yes, absolutely. I think when I took this job, almost five years ago to become the Chairman and CEO of zani -- sorry Zymeworks, we had zanidatamab, which was just getting ready to go into Phase III trials. And I think there was this tremendous feeling that zanidatamab did not have a place. It could not be a meaningful medicine. At that time, we started to see the launch of T-Dxd, which seemed like it was going to dominate the market segment in every indication available. And we just felt that zani could be a meaningful medicine in a way that others couldn't be. And the differentiation of being really the only bispecific antibody being developed in the space just made us think about where it could be positioned to do well.

And we certainly focused on the gastric cancers, both GEA and BTC, which was subject to our first approvals, to look for a situation where we could be the first-line therapy. We could be standard of care. And so it was an important step for us to really execute clinical studies in those segments as opposed to maybe moving to try to compete with T-Dxd in metastatic breast cancer or try to be one of the others that would be behind the first line, what was going to eventually be the first-line therapy in T-Dxd. And I think after five years of clinical studies, we certainly see now where we can be the standard of care on those indications. And that provides us a leverage point to then look at other indications, which you can add on to that in the HER2 space, but obviously gives us a base of revenues for our partners to start with. It gives us a base royalty and milestones that we can then utilize in the rest of the business. So that was a very important thing for us to do.

I think these are indications that I think if you look at our partners, Jazz and BeiOne, they're ideally suited to execute on. I think if you look at Jazz's strategy of wanting to be more of a rare disease company and whether that's rare CNS or rare oncology, it's an excellent fit with their capabilities and what their strategy is. And if you look at the benefit of what we saw on our GEA studies of looking at the combination of zani and chemo and a PD-1, I think BeiOne was very well positioned to bring Tevimbra to that combination and that provides them an opportunity for another indication to build the Vimbra sales and also to sell zani in their markets in Asia Pacific, and Asia Pacific sell both. So I think our commercial partners are doing a great job of positioning, getting the product approved and positioning it commercially to make it as broadly available as they can.

This is a U.S. approval. We've obviously got filings and future filings to go around the world, but I think they're perfectly suited for maximizing or optimizing the brand. And beyond GEA, I think Jazz has already laid out the next clinical studies they hope to do beyond the metastatic breast cancer Phase III that's reading out next year. They've outlined a registration study in metastatic colorectal cancer, and non-small cell lung cancer in the HER2-overexpressing market, an early gastric cancer indication, because there is an early gastric cancer patient setting as well as some additional early breast cancer indications of interest. I think they've laid out a pretty aggressive and broad clinical development investment behind zanidatamab that's going to be necessary to build that to that $3 billion to $5 billion in peak sales eventually.

And so I think we're well positioned for launch. I think they've done a great job of understanding what will be necessary. They've been in the marketplace for a while with the biliary tract indication, which has allowed them to do things like get a J code and get on formularies and like 90% of the centers where you might then want to prescribe zani for GEA. So they've done really well in preparing for the rapid adoption of zanidatamab and this new indication approved by the FDA. And we're just waiting to see the results of that in the next couple of quarters, but we're really expecting this to -- it is the standard of care, it's a new standard of care, it's a huge improvement over what was available for patients and things like that usually see some rapid adoption curve.

And it's good to see the rapid expansion beyond GEA. I guess you mentioned metastatic breast cancer as well as colorectal. Any other specific tumors that you're excited about that it might be expanding into?

Yes, I think if you look at -- we also have had a pan-tumor study underway for some time, which could get us a tumor agnostic label indication in the U.S., similar to what T-Dxd did, and I think that has had a positive effect on T-Dxd usage in the U.S. So that study has been underway for some time frame. So that would be interesting to take a look at. I think if you look at the Phase I data set that we had a number of years ago, you could see that zani could be meaningful and useful in a whole range of patient settings, similar to where you've seen tras usage, but even broader than that, and overlay where you might see T-Dxd usage as well.

So I think there are a number of other tumor types think zani could be beneficial of, most of those in a first-line setting, most of those looking at it as an interesting combination agent with other classes of molecules, and whether that's chemotherapy or checkpoint inhibition. So I think its combinability is one of its strongest features and its tolerability is so good. You seem to be able to combine it very well with different classes of molecules. And I think that was very important in the trastuzumab becoming the top-selling agent in the HER2 space. We certainly have some elements of that, and we have at least a randomized study with an FDA approval that shows that in that first GEA indication, zani provides more activity than trastuzumab in different combinations. So excited to explore the full range of indications that we can, try to reach every patient we can everywhere in the world where zani can provide the standard of care improvement that we've been able to show so far in GEA.

It's a great foundation. Moving on a little bit to talk about T-cell engagers, including your next generation T cell engager approach, including your DLL3 program, and ZW209, kind of, heading into IND. What is your -- how would you characterize your T cell engager effort today? Where does it stand, and how do you expect ZW209 to differentiate from other DLL3 targeted therapies?

Yeah, we obviously -- we've been trying to following the development of bispecific T cell engagers for some time. I think I've been working in that field for 20 years now, and certainly they're becoming more meaningful, but not yet enough approved. And I think we felt a couple years ago that there was an element that might be missing to try and improve upon activity and tolerability for a bispecific T cell engager. So we started this idea that because we can engineer multi-specific antibodies, we could look at a tri-specific capability. And if you had an extra arm and a bispecific that you could add, what would you add for functionality? What would you add for durability?

And so we came up with this concept, of which ZW209 is the first agent, which is due to go in the clinic this year, of trying to incorporate a CD28 co-stimulatory factor in with a T cell engager and really provide some more durability activity to CD3, but not as an independent signal, but as a conditional signal. And so conditionally activated CD28. And so what we found, at least in preclinically, is that we were able to generate something completely different than looking at a standard bispecific T cell engager. So DLL3 is the first one we selected. We just thought that was really interesting.

We certainly have validation with tarlatamab being available in the marketplace now on its own or with PD-1. And the thought is that maybe we could provide something extra than tarlatamab for that specific indication in small cell lung cancers. That's the first place we started, but that's not the only place we think this could be potentially applied. We have a host of other solid tumor targets in hem-onc and also in autoimmune inflam, which are again around this tri-specific understanding. It may be a tri-specific, though more complex, can provide more functionality to a bispecific antibody. I think it's what a number of companies have been trying to do, proper protein engineering is really the key to solving that. And so we think we've come along with something that's really interesting. And if ZW209 can show that in concept in clinic that we're correct, then we can replicate that many more times against different targets and different tumor types, and so we're just looking forward to putting 209 into the clinic and seeing where that part of our R&D strategy can go to.

Any, any key milestones to be aware of in the next 12 to 18 months?

Yes, I tried out a lot of them. We're pretty active in a whole range of things within the company, so I think for us, you'll see for ZW209, you'll see that go to the clinic, but we'll start to give some visibility to what's behind that in our tri-specific TCE portfolio.

Got it.

I think we've said before, we need to integrate some partnerships and collaborations and funding sources into our R&D portfolio because it's wholly owned now, but it's really diverse and broad. Our R&D group in Vancouver is very productive, which is great, but they're providing too many opportunities for us to try to pursue on our own capital. So I think trying to find a way to integrate partnerships and collaborations from others into that portfolio, finding opportunities where we can maybe think about spinning off something to a dedicated entity, which we can work them with outside investors on, while maintaining an equity stake and a royalty stake. And that's something we're pursuing as well.

As we talk publicly, we're thinking about that as an outcome for our Pan-RAS inhibitor payload ADCs, which we disclosed earlier this year at AACR. And that seems like that might be a good structure for us to move a part of our portfolio forward faster and broader than if we relied just on our own capital.

Yes. Yes.

And we can maintain a very significant equity stake and royalty interest in that development. And so we're kind of excited about executing on a number of those things to see how they move forward. And so we look forward to being able to announce some of those completed transactions that we had talked about earlier this year.

Yeah, I -- thanks for mentioning ADCs, I think it's a good shift. You've now demonstrated very strong data from ZW191 in platinum-resistant ovarian cancer. What do you think is the takeaway from that data set? What do you want investors to take away from it? And then how do you expect it to differentiate in the competitive folate receptor alpha landscape?

Yes, we set out in 2022 to develop our own portfolio of TOPO payload ADCs in therapeutic areas where we thought there was some improvement needed. And we focused, as we talked about before, on gynecological tumors, on thoracic, especially lung, and also in GI. So we developed our own proprietary payload, we came up with our own strategy, and we developed ZW191, and folate receptor alpha and we developed the ZW251 and GPC3 ADC targeted ADC and a ZW220, which is our NaPi targeted ADC, and all those in our portfolio. So I think when you look at that portfolio, we got some initial clinical data already from 191. ZW251 is in Phase I right now, so we'll see some data on that at the appropriate time. So I think we're really excited about the concept of how we design those TOPO-ADC payloads with the idea that the antibody is extremely important. There's some really unique attributes of every antibody that we have attached to those ADCs.

And focusing on tolerability, this idea that being able to dose at a much higher level than you might have seen with TOPO-ADCs before was going to benefit patients by having more drug exposure, and maybe be more tolerable, having more prolonged drug exposure. I think if you look at 191, and we were able to dose that DAR8 version at a much higher level than you might have seen before. ZW251, which is our GPC3, which is in Phase I for HCC patients, that's a DAR4. And we're dose escalating at a level that has almost never been seen before in TOPO-based ADCs. And we'll see if that high-dose strategy, though it's tolerable, drives enough activity for us to think about that justifies the thesis we had about that being important for things like antigen sink, but also prolonged exposure at higher levels. So really excited about that. And we're almost just getting started in the clinic to understand what those agents can do.

We also realized in 2024 that TOPO payloads were becoming more common, getting a little bit more crowded. We need to go to the next generation as well. We were trying to find the next generation payload that would be something we'd want to buy into beyond the TOPO payloads. And we decided that was targeted small molecules. So a different approach than maybe looking at toxins delivered by ADCs. And that's where we stumbled upon the idea of delivering Pan-RAS inhibitors in an antibody-directed way. And so for the last two years, we've worked on that. First disclosure in April this year at AACR, with again, a portfolio of 3 opportunities that cover all the RAS mutated cancers that you would be interested in covering.

And so that's the really interesting next generation. I know it seems funny to go to the next generation when we haven't really got clinical proof of concept for the first generation. But that's how quickly you need to move these days to the next, next thing. And so I think we're trying to continue to be innovative while still supporting what was innovative for us a while ago. And so I think both of those two ADC portfolios though different, hopefully illustrate the types of skills we have at being a great antibody company, good protein engineers, but also our medicinal chemistry and bioconjugate skills showing as well.

Yes. I mean, you've already hit on the 3 ADC programs I was thinking of, including the Pan-RAS. Any other assets in the pipeline that investors should be paying attention to? Any update you'd like to highlight for us?

I mean, it's a very diverse R&D strategy, but it's a very productive group and a really cost-effective group when you look at what we're able to accomplish. So we have our two separate ADC strategies that we're pursuing with both our TOPO payload and the RAS inhibitor payload strategy. There's other technological developments behind that I won't talk about in dual payload, et cetera. And then if you go to the other side of the house, which is our multi-specific antibody programs, we talked about the tri-specific TCE programs, which is really interesting for us, and ZW209 is the first of possibly many behind that.

If you go beyond that, we're also looking at our dual engineered checkpoint inhibitors. And obviously, we have one that's targeted to go in the clinic next year, ZW1528, which is a bispecific against IL-4 receptor and IL-33. And having just come from Barcelona recently, looking at the AstraZeneca data around their IL-33 antibody and Phase III results is pretty amazing. So the idea of combining, Dupixent, what's really Dupixent and IL-4 receptor alpha target and IL-33 target in the same bispecific molecule could be really interesting for the future of COPD. And so that's the next piece of what we're doing. We have other dual engineered cytokines below that for different specific indications as well. That's another area of research that we're very interested in.

And then beyond that, we like this idea of tri-specifics, but they don't necessarily to have to be T cell engagers. So we like this idea of trying to combine three arms of antibody or more and trying to understand what functionality can be built in. So I know checkpoint inhibition has gone now to dual checkpoint inhibition. Think about things like PD-1 VEGF. And we look at that and we go, that's a great innovation. What we start to think about is if you had a third arm to add to PD-1 VEGF, what would it be? What could you add to add functionality to something as interesting as that. And so you'll start to see from us a little bit more some preclinical presentations around how we think about tri-specifics and beyond. And when I say beyond, we've got things like a penta-specific antibody, which is really interesting, hard to think about. But just -- It's not just adding complexity, you're adding functionality, and hopefully driving more activity, or improving tolerability, or other factors. And so I think we have the engineering skills to make complex biologics which can drive more activity. And so that's what we're really exploring.

So it's four or five different diverse research themes inside the company. Very productive. So no shortage of opportunities. So when we think about integrating partnerships and collaborations that are wholly owned to our R&D portfolio, we're not in any danger of running out of novel, unencumbered opportunities in the future for the company.

Yes. Yes, that's a great overview on the pipeline. I think on that same topic, I'd like to move a little bit into corporate and strategy with such a strong, with a strong balance sheet today, $300-plus million in 2022, and you have an active buyback, how do you think about the future of the collaboration strategy, acquisition strategy, capital return, and how should investors think about, kind of, financial runway with you guys under this new model?

Yes, so we've been talking to investors about this for probably a year now, about how we think this strategy can help us build into something in the future that's very valuable, although it might be a little bit different than a traditional biotech strategy. We definitely made a decision back in 2022 that the best thing for zanidatamab was to partner that with someone who could then fund development, fund commercialization, we would simply take a good share of the success from that. But we wouldn't forward integrate to be a commercial organization. That's just what we decided to do. And I think when you look at the peak sales potential of zan and how to optimize that globally, that was the right decision. But it definitely left us with this thought back in 2022 that in a number of years, we might be faced with the problem of having a pretty substantial durable, long-term cash flow stream from royalties and milestones from zanidatamab success.

Yes.

And we, it would start to look like a royalty company or a royalty portfolio. And I think, you know, we've seen this in biotech before and I think it scares some biotechs. And you think, well, I should just monetize that, make it cash and go back to doing what I'm doing as an R&D biotech company. We looked at that and we said, look, these cash flow streams that come from commercial assets are very valuable and getting much more valuable in our marketplace when you look at the amount of capital that's now chasing to have exposure to biotech through royalties and underlying products as opposed to equity. So our thought was if these are so valuable, why are we not keeping those for our shareholders? And if we're going to keep these for our shareholders, it's going to be a long-term basis. So we might as well actively manage those royalty streams and not simply just collect cash when it comes in. So when you look at where zanidatamab can go over its lifetime, pasritamig is successful in Phase III next year and J&J can take that to market. That'll add another royalty stream for us on top of that.

You know, the Theravance acquisition is a way for us to kind of manage that, so we're adding a profit share from the sale of YUPELRI, which has, again, long-term, durable, predictable cash flows. So we're actually trying to manage that in an active way. And I know it makes it seem like we look like a royalty company, but there's tremendous value in those cash flows that are all generated from, at least the first two, from our own R&D innovation. And YUPELRI is from someone else's, we just happened to acquire it and bring it inside Zymeworks. So those are very valuable cash flow streams. We'd love the value of all of that as it appreciates in the future from development stage to commercial for zani and pasritamig, to have that flow to our own shareholders. Which means we have to be comfortable having the skill sets to actively manage these at, making sure we know where value will come from, from holding onto those, why we're holding onto those rather than seeing those as a source of financing because we don't. We've shown structure this year, how we've used those to maybe access capital to help that strategy.

So we did earlier this year complete a financing with Royalty Pharma where we borrowed against our future zani and cash flows to bring in $250 million in capital this year. We allocated half of that to buying back our shares because we felt that was a good transaction. And the other half went in to fund our share of the acquisition of Theravance. So we've used some debt structure to move capital around and be thoughtful capital allocators, reduce share counts, and add another royalty stream to that part of the house. So that's great. But we're still an R&D company at heart. So we're still creating innovative molecules, which we can use in different ways.

We can partner them to create our own royalties, but also the types of acquisitions we look at, like at Theravance or these multi-component, we can access maybe some of these acquisitions that a traditional financial player can't. Because we have an R&D organization. We can develop assets. We have an operational infrastructure to manage drug development. I can apply that to someone else's assets that weren't invented inside the company. So I think trying to get the best out of both worlds, these royalty assets are tremendously valuable. I want to hold on to them. R&D innovation can create something really valuable like a zani, any time. Need to manage the amount of investment you need, you have there and the capital intensity and risk of that.

But we can do that if we're financially disciplined and thoughtful about capital allocation. So in the same ticker symbol, we can get the best out of royalty exposure and the best out of R&D innovation in the same ticker symbol. We don't choose one or the other.

Yes.

We don't have to split them as we've seen in our sector done before. And I think the combination of those two things running synergistically with the same management team, the same capital structure, is really, really interesting when you look at the financial model and look at the future risk-adjusted cash flows that are generated and the total shareholder return that comes out of running a business like that and reducing share count at the same time. That's where you can accomplish outsized returns in our sector. And I know it's not traditional biotech. And it's not traditional royalty financing. It's somewhere a composite of both of those together. And I know that's differentiated, but we can create differentiated products. We can also create a differentiated strategy as a company and maybe create some differentiated returns and differentiated risk profile against those returns. That's the whole thing that we're trying to accomplish. We've shown some of that execution this year, we've got more things to do before the end of the year to show that. I think over time, we'll show the execution against that strategy. We haven't gotten credit for a lot of it yet, but eventually we're hoping that that will catch up with us as we continue to execute and outperform against the strategy.

Absolutely. It's a unique place to be and a unique positioning in a competitive but very interesting and profitable sector or portion of the biotech sector. Moving on a little bit to to talking about the sector, there's been a lot of talk about Chinese biotechs again this past year. I would say even more than when we spoke last year. How will you be reacting, you as Zymeworks, reacting to this heightened competition and how does it factor into your strategy?

That's interesting. I -- so next year will be my 40th year in biotech. And one of the first things I did in my first biotech company, which happened to be in Vancouver, Canada, is went to China in 1988 and struck the first collaboration between a North American biotech and a Chinese research group. Maybe 25 or 30 years ahead of my time because it didn't work out that well for cultural reasons, but we can certainly see the power then, obviously, of what China might bring to global drug development. I think from our standpoint at Zymeworks, we've tried to take advantage of that every step of the way. We use preclinical contractors in China because they're high quality, but sometimes they can move faster or be less expensive. We use manufacturing capabilities in China, which are as good as anywhere in the world for quality and delivery. We partnered with BeiOne, or BeiGene as it was known almost 10 years ago because we could see that developed zanidatamab, especially in gastric indications, we were going to have to have access to clinical trial subjects in China. Not just in China, but as a part of a global study. And it was probably easier to do that with a partner than not. And I think without that BeiOne relationship that we struck 10 years ago, zani would not be approved where it is today.

I think we've tried to take advantage of everything that's available in China. We can certainly do more. There's certainly a tremendous amount of licenses there with royalties, I think people like Royalty Pharma and others are trying to figure out how to access. There's definitely more collaborative activity there. There's definitely product acquisition we could take advantage of. We've done very well with collaborating with the qualities that China brings to global drug development and we'll do that. Think broader, you can start to see that already operating in places like Korea, Singapore, India.

So I think China's not the only place on Asia Pacific where I think you can take advantage of the capabilities they bring to a global drug development strategy. It's just China was at the front of the curve. But I think from our standpoint, we'd like to do more in Asia Pacific and have that help our global programs. And I think if you structure in the right way, it's going to be fantastic for us and the rest of the sector.

Well, that's all the questions I had. So I'd like to thank everyone for joining us today. And thank you, Ken. And I look forward to our next conversation.

Yes, appreciate your time. Thanks for coming.

Thank you, everyone.

Thank you for standing by. This is the conference operator. Welcome to Zymeworks conference call and webcast to discuss the acquisition of Theravance Biopharma. [Operator Instructions] The conference is being recorded. I would now like to turn the conference over to Shrinal Inamdar, Vice President of Investor Relations. Shrinal, please go ahead.

Thank you, operator. Good afternoon, everyone, and thank you for joining. During today's call, Ken Galbraith, our Chair and CEO, will provide an overview of the strategic rationale for the proposed acquisition of Theravance Biopharma by Zymeworks as announced by press release this morning.

Scott Platshon, our Chief Business Officer, will then provide a deeper understanding of Theravance's business and the value of its underlying assets and cash flows. Lastly, Kristin Stafford, our Chief Financial Officer, will provide an overview of the key terms of the non-recourse financing with OMERS Life Sciences, and then we will open up the floor for Q&A at the end.

As usual, I'd like to remind you that this call will contain forward-looking statements, including, without limitation, those forward-looking statements identified in our slides and the accompanying oral commentary. Forward-looking statements are based on our current expectations and various assumptions and are subject to risks and uncertainties, including those associated with companies in our industry and at our stage of development. For a discussion of these risks and uncertainties, we refer you to our latest SEC filings as found on our website and as filed with the SEC. I'll now hand over to Ken.

Thank you, Shrinal, and good morning or good afternoon to everyone. We're thrilled to announce our proposed acquisition of Theravance Biopharma this morning, the first concrete execution of the strategy we committed to in November 2025. We believe this transaction validates our unique business model, which combines the synergy of our operational infrastructure with a diversified portfolio of cash flows and partners.

The addition of Theravance meaningfully expands our portfolio of medicines that deliver significant value to patients and shareholders. YUPELRI is a highly attractive asset that aligns well with our strategy of acquiring durable cash-generative healthcare assets that deliver meaningful benefits to patients. It's the only once-daily nebulized LAMA approved for COPD maintenance in the United States, serving a distinct patient population with a differentiated clinical profile.

Combined with Orange Book listed patent protection extending to October 2039, YUPELRI offers the long-duration cash flow characteristics that we look for when deploying capital. The acquisition price of $17 per share represents a total transaction value of approximately $929 million, expected to close in the second half of 2026.

Zymeworks would expect to use approximately $219 million of cash from the balance sheet to acquire Theravance, of which $100 million is expected to be recouped in the first quarter of 2027 based upon projected near-term milestone payments. An important aspect of this transaction is how we financed it. A significant portion of the consideration is funded through nonrecourse financing secured solely by the acquired YUPELRI royalty cash flows rather than Zymeworks' balance sheet.

Combined with the acquired cash and expected milestone receipts, this structure substantially reduces the amount of our own corporate capital required to complete the transaction, enabling us to pursue a larger multicomponent acquisition while preserving financial flexibility for future capital allocation.

We've secured a $350 million nonrecourse financing from OMERS Life Sciences with repayments solely from YUPELRI's own cash flows. This note is no recourse to any of Zymeworks' cash or existing assets or cash flows. This enables us to complete the acquisition without issuing equity and without encumbering our broader asset base.

Due to the profit-sharing nature of YUPELRI's collaboration with Viatris and the co-promotion rights, these are exactly the kinds of long-duration cash flows that are typically not accessible by traditional royalty players. Zymeworks' net investments in the acquired business enables us to gain access to an asset expected to be generating around $60 million in annualized cash flows at current run rates with potential for continued growth.

The durability and predictability of the YUPELRI cash flows allowed us to finance 75% of the business value with OMERS in the form of the nonrecourse note at an attractive cost of capital. This net investment in the business from Zymeworks utilizes approximately 50% of the proceeds from our Royalty Pharma note borrowed earlier this year, with the remaining 50% allocated to fund the current stock repurchase program.

Importantly, the collaboration structure and economic split from YUPELRI provide meaningful participation in the future success of the assets, while the commercial infrastructure and day-to-day execution remain largely in the hands of an experienced operating partner of Viatris. This allows us to benefit from continued commercial performance while maintaining our disciplined operating model.

While YUPELRI is the cornerstone of the transaction, it's not the only source of potential value expected to be realized by Zymeworks. The proposed acquisition also brings a potential near-term $100 million milestone payment from Royalty Pharma for 2026 TRELEGY ELLIPTA net sales expected to be received in the first quarter of 2027. 20% royalties above a threshold of up to $100 million cumulative on the data, an important injectable antibiotic, approximately $2.5 billion of Irish tax attributes and a pipeline of early-stage I&I assets that can be evaluated for future possible development, spin-offs, licenses and partnerships.

The multiple avenues for value creation provide potential upside opportunities for Zymeworks shareholders and are another reason this transaction is not accessible to traditional royalty buyers. This transaction combines a differentiated commercial asset, attractive financing, additional embedded value streams and strategic assets that provide the opportunity to contribute to long-term shareholder returns. Most importantly, it is just a transaction when closed that fits squarely within the capabilities we've built as an organization. And in a base case, we anticipate a mid-teens IRR over the long term. And we expect YUPELRI to start providing immediate returns on our investment after closing the transaction.

Today's proposed transaction, once closed, will meaningfully diversify and expand our partnered portfolio beyond Ziihera and pasritamig. As a reminder, we remain highly confident in the regulatory review for zanidatamab in first-line GEA with a regulatory decision expected on or before the PDUFA date of August 25, 2026. If approval is received as expected, this will result in a $250 million milestone payment from our partner Jazz Pharmaceuticals. This near-term milestone will strengthen the balance sheet and provide means to continue to fund future stock purchases beyond the current approved plan as well as consider further acquisitions and other opportunities after closing of the proposed Theravance transaction.

Funding of current R&D priorities at Zyme for 2026 are unaffected by this transaction. This transaction, therefore, aims to diversify revenue sources and increase visibility on a diversified recurring revenue base on top of our established partnerships such as those with Jazz, BeOne and J&J. We believe this proposed transaction is consistent with Zymeworks' disciplined and thoughtful capital allocation framework, prioritizing assets that can generate near-to-midterm diversified cash flows while preserving long-term opportunities for growth. Meanwhile, we've continued to deliver on our objective to further our research and development efforts in increasingly novel modalities and targets with the recent unveiling of our pan-RAS ADC platform and candidates.

Our wholly owned pipeline continues to provide us with additional upside opportunities from value-creating catalysts such as development milestones, data readouts, partnerships or spinouts. With that introduction, let me hand over to the team to talk through the commercial and financial details. And first, over to you, Scott.

Thanks, Ken. I'm really pleased that we've been able to move efficiently from search and evaluation efforts through to announcing such a high-quality multicomponent proposed transaction for our first acquisition, just 7 months from announcing our new strategy in November 2025.

COPD is a progressive lung disease and the sixth leading cause of death in the U.S. Long-acting muscarinic antagonist or LAMA, serve as a foundational therapy for nearly all patients with COPD. For the millions of patients who are transitioning from hospital to home care, who struggle with inhalers or have impaired inspiratory flow, who suffer from some level of cognitive decline or are just not well controlled on short-acting bronchodilators, there is only one nebulized LAMA option, YUPELRI.

The continued product growth is driven by underlying demand and persistence, which speaks to the meaningful value delivered to patients and aligns with the overwhelmingly positive feedback we received from physicians. Combined with its differentiated profile, long patent life and foundational position in the treatment of COPD patients, we believe YUPELRI has the characteristics of an asset capable of generating very durable cash flows.

As Ken mentioned, the proposed acquisition of Theravance provides Zymeworks with a 35% participation in U.S. net profits from YUPELRI. Viatris is responsible for promotion in the community, while Theravance manages the hospital setting. The commercial infrastructure supporting the product is already in place. Our diligence provided clear insight into 6 years of impressive execution by both the Viatris and Theravance teams.

In particular, it is clear that Theravance team continues to drive further growth into the hospital channel for this brand. Zymeworks intends to substantially preserve the existing hospital promotion infrastructure from Theravance's commercial organization. Taken together, this is an attractive combination of established commercial performance, long-duration exclusivity, embedded milestone opportunities and ongoing participation in future growth. We believe this type of asset will fit exceptionally well into our model. It leverages the capabilities we've already built, provides attractive financial characteristics and expands the range of opportunities we can pursue as we continue to grow our business.

YUPELRI generated U.S. net sales of $266.6 million in 2025, representing 12% year-over-year growth. First quarter sales of 2026 were $62.4 million, representing 7% year-over-year growth. Theravance remains eligible to receive an additional $125 million in commercial milestone payments from Viatris based upon reaching certain thresholds of U.S. net sales as well as double-digit tiered royalties and additional milestones on ex-U.S. net sales.

Settlements have been reached with all YUPELRI generic filers for April 2039, subject to certain exceptions and other provisions customary for agreements of this type. The proposed acquisition also includes several additional sources of value that are independent of YUPELRI, including a near-term $100 million milestone payable by Royalty Pharma based upon GSK's 2026 net sales of TRELEGY. 2025 sales of TRELEGY were approximately $3.9 billion and Consensus 2026 forecast exceed $4 billion.

As a result, we view this milestone as highly visible and an attractive source of near-term value. The acquisition, once closed, will include additional royalty interest that further diversify the cash flow profile of the transaction, including a 20% royalty interest in Vibativ, which continues to generate commercial revenues through its marketing partner, Cumberland.

Beyond the core commercial assets, the transaction, once closed, will strengthen our existing infrastructure by adding an immunology and inflammation R&D portfolio from Theravance, which we will evaluate within the broader context of our established pipeline and capital allocation framework. These assets could selectively expand our internal development capacity or be externalized if the opportunity is attractive.

Finally, following closing, this acquisition will bring ampreloxetine. A designate from Theravance will explore the opportunity to license, divest or otherwise monetize ampreloxetine for the period through 12 months post close with any economics shared 20-80 between Zymeworks and Theravance shareholders. The proposed acquisition also includes very significant Irish tax attributes, which following closing, we will incorporate into our broader financial and operating structure.

These attributes have the potential to very meaningfully enhance the economics of future investments and improve our capital efficiency. Individually, these assets are not the primary drivers of the acquisition rationale. Collectively, however, they contribute additional diversification and optionality.

With that context, let me hand it over to Kristin to take you through the royalty-backed note and financials.

Thank you, Scott. Since joining Zymeworks, I've had the opportunity to reconnect with colleagues in the royalty space as we've explored potential partnerships and financing opportunities. One consistent takeaway has been that there are attractive health care assets that don't fit neatly within the traditional royalty model, whether due to operating complexity, tax considerations, commercial participation structures or other factors, these opportunities often require a different ownership and financing approach. These are precisely the situations where Zymeworks' differentiated capabilities could create a competitive advantage. Our business model gives us the flexibility to evaluate a broader range of health care assets and structure transactions in ways that align the interest of sellers, financing partners and shareholders alike.

We've stated previously that our goal is not to compete with established royalty organizations, but to broaden our opportunity set by partnering with them. This transaction demonstrates that approach. By combining our infrastructure, which allows for the acquisition and optimization of complex health care assets with OMERS' ability to provide nonrecourse capital, we're able to execute transactions that neither party would have pursued in the same way independently, creating value for both organizations.

I'll now walk through the transaction structure and financing in more detail. As you've heard on the call today, I want to reiterate that there's no Zymeworks equity component to this deal and thus 0 shareholder dilution. $350 million nonrecourse note from OMERS Life Sciences with a coupon of 8.25% and an expected maturity date of 2036 will be used to finance the transaction. Once the note is repaid, the residual profit share reverts to Zymeworks. I want to highlight that this financing is nonrecourse to any other part of Zymeworks' business.

As you can see on the right-hand side of the slide, the YUPELRI net sales first flow through Viatris and then Zymeworks 35% YUPELRI profit share is distributed. This is approximately $60 million annually at the current run rate. Upon distribution of the 35% YUPELRI profit share, OMERS retains a 75% portion of the cash flows to service the note, first interest and then principal. Then the residual 25% cash flows go to Zymeworks.

Once the note is repaid, all cash flows will be retained by Zymeworks. The financing also includes a declining call protection schedule as shown on the slide, providing flexibility to refinance over time while offering appropriate downside protection. The financing structure enables Zymeworks to maintain a strong balance sheet with lasting capital beyond 2028 to fund continued R&D investment, future acquisitions and share repurchases.

From a financing perspective, the headline purchase price materially overstates Zymeworks' actual capital risk. The transaction value is approximately $929 million. That's funded through 3 sources: approximately $300 million (sic) [ $360 million ] of cash acquired at closing, $350 million of nonrecourse royalty financing provided by OMERS and approximately $219 million of Zymeworks own cash on hand. Taking into account the anticipated $100 million milestone payment from Royalty Pharma related to sales of TRELEGY by GSK, Zymeworks effective net investment is expected to be reduced by approximately 50%.

The OMERS' financing is self-servicing and nonrecourse to Zymeworks, meaning repayment is supported directly by only the underlying YUPELRI profit share. Our current capital structure is designed around 3 principles: isolating risk, preserving flexibility and protecting shareholder upside. The financing structure reflects each of these priorities by limiting our capital at risk, preserving balance sheet capacity and optimizing long-term value creation for shareholders.

Upon closing, Zymeworks intends to complete Theravance's previously announced organizational restructuring to align its resources with its commercial focus on YUPELRI, which is expected to significantly reduce R&D expenses and general and administrative costs as well as pursue additional synergies in the cost structure of the combined entities.

In addition to the proposed transaction announced today, we previously secured a $250 million nonrecourse facility from Royalty Pharma backed by Ziihera royalties. This is another source of nondilutive capital that further supports share repurchases, strategic acquisitions and extends our operating runway beyond 2028.

As we announced in May, we have implemented a new $125 million share repurchase program for 2026, we view this as an efficient way to return capital while maintaining flexibility to continue investing for growth, and we expect to continue executing against this repurchase plan with visibility into substantial milestone payments expected related to potential near-term approval of Zanidatamab globally.

As of June 29, 2026, the company has repurchased 1,437,073 million shares of common stock for $35.4 million, exclusive of commission expense and estimated excise tax, which represents an average purchase price of $24.63 per common share. Importantly, none of this comes at the expense of the pipeline. We will continue funding our clinical programs in early-stage R&D with disciplined cost management. Across every facility, our objective is the same: structure capital in a way that limits downside exposure while preserving long-term shareholder upside. With that, I'll hand the call back over to Ken for closing remarks.

Great. Thank you very much, Scott and Kristin. To summarize, our novel strategy is built around 2 complementary engines is starting to materialize with real progress on both sides. On the royalty portfolio, once the acquisition announced today has closed, we will have secured the YUPELRI profit share at what we believe is a disciplined valuation while maintaining capacity for future opportunities.

On the R&D side, we've continued to make progress on our goal of advancing assets to key clinical inflection points and expect additional clinical and regulatory milestones over the coming [indiscernible]. We look forward to providing further updates on our goal of partnering or monetizing portions of our R&D pipeline and platform capabilities in ways that can create upfront value, long-term royalties and continued pipeline optionality.

Together, acquisitions diversify the foundation for durable revenue growth through recurring cash generation, while R&D raises the ceiling through innovation and future potential upside. Ultimately, success for us means helping more patients, both those who depend on important therapies available today and those still waiting for the breakthrough medicines we're working to create.

What makes this opportunity particularly meaningful is that it brings together 2 things that matter our mission, helping patients today while [indiscernible] resources develop medicines for patients tomorrow. At the same time, the predictable cash flows generated by established medicines like YUPELRI can help fund the next generation of innovation at Zymeworks. We expect this transaction to close in the second half of 2026, and we look forward to updating the market as we advance towards closing and future information becomes available. With that, I'd like to now open the line for questions. Operator?

[Operator Instructions] And the first question will come from Yigal Nochomovitz with Citigroup.

Congrats on this transaction. I was just curious with respect to the... Can you hear me?

Yes, I can hear you.

Okay. Great. No, I was just asking with respect to the time to repay the debt. I think Kristin mentioned the maturity in 2036. And looking at the Theravance filings, it looks like about $75 million of that is the net profit. So you're paying about $55 million back to OMERS. So given your assumptions with respect to the growth in YUPELRI, could you just talk to whether you could repay sooner than the maturity or that's the expectation?

Yes. I think, Yigal, we -- I wouldn't want to comment further on some of those details. I think we feel really comfortable with the financing structure we have negotiated with OMERS. I think they're going to be a great financial partner for us for this acquisition. And I think their faith and belief also in YUPELRI growth allowed us to do this. transaction.

As always, having flexibility in future financial structures is always something that's good. And I think we've been able to negotiate a really good financing package today to allow us for this acquisition. And we have some flexibility and optionality in the future over how we might organize our capital structure. And I think we have, as we said before, like the long-duration cash flows and whether that's with Ziihera or YUPELRI, and we've tried to match that as we did with Royalty Pharma earlier with some longer duration obligations for repayment while maintaining some protection to be able to evolve those structures earlier if the situation indicates.

And our next question will come from Eva Verdejo with Wells Fargo.

Congrats on the progress.

A quick one from us. How are you thinking about YUPELRI's peak sales potential in COPD?

Yes. Thanks for the question. And again, we can't provide too many details until closing of the transaction. But I don't know, Scott, do you want to talk something about the -- what we've seen historically from this product that gives us some belief that there's good growth remaining in the long duration of YUPELRI that it has left?

Yes, absolutely. Thanks, Ken, and thanks very much for the question. We're going to be limited in what we can comment on at this point until the transactions close. But the best way to comment about this is really the dramatic benefit for patients and the feedback we received from physicians about YUPELRI being really a foundational treatment.

We've seen really robust growth in the hospital channel, and I've been very impressed by Theravance's execution and have expectations that, that continue. Beyond that, I think we'll hold off providing any additional sort of long-term guidance, but eager to take over the program pending close and drive that growth further.

And our next question is going to come from Charles Zhu with LifeSci Capital.

Congrats on this acquisition. Maybe just a follow-up here. Can you talk a little bit about some of these channel dynamics between hospital and community practices, why it seems to be so heavily weighted towards the latter as of right now as well as how much more upside is there in the hospital channel for which you/Theravance will be responsible and how much investment you would need to capture the value in that segment?

Yes. Great. Thanks for the question, Charles. Scott, do you want to address that with Charles?

Yes. Thanks, Charles. I appreciate the question. And we have a similar observation of being really impressed by the small commercial team at Theravance. We have a high confidence that they'll be able to be retained and continue their work driving really robust growth into the hospital.

I think what you're seeing there is really the dramatic value that YUPELRI offers those patients that have a need to receive their medication just with tidal breathing. There -- these patients that are in the hospital and at risk of exacerbation and recovering really can benefit from the dramatic safety enough and established efficacy profile of YUPELRI, and we have received really positive diligence about the ongoing growth in the hospital.

We think the structure with Viatris where they do a lot of the heavy lifting around the commercial org makes this very manageable infrastructure, and we're really pleased with that setup and do expect that [ program ] to continue.

And our next question will come from [ Greg Renza ] with Truist Securities.

It's Anish on for Greg. Congrats on the deal. Just on YUPELRI, how are you thinking about the fit of a commercial COPD asset within Zyme's longer-term identity as an oncology antibody platform company? And is this the start of a broader commercial diversification strategy? And just a quick one on the deal mechanics, if I can squeeze that in. How usable are the $2.5 billion of Irish tax attributes given your current profitability profile? And how much of that did you ascribe value to in today's total deal value?

That's great. Could you repeat that question? I missed the first part of it, if you could.

Just on YUPELRI. I just wanted to know how you're thinking about the fit of a commercial COPD asset within Zyme's longer-term identity as an oncology and antibody platform company.

No, it's great. Thanks for the question. And obviously, we have been working in COPD for a little while with our first research asset, ZW1528 and looking to put that in the clinic next year. So I think as a part of that, we have been ensuring we have a sufficient understanding of the commercial marketplace for COPD as we think about where 1528 might be applicable in that -- in those patient settings.

So I think it's an area that we felt that we have been working in from a research perspective and understanding the market. So I think from that perspective, at least in the therapeutic category, we have been working outside of oncology for some time now. So we felt we had expertise and access to other expertise. So at least be able to understand this at the same time, this is a product that's been on the market since 2019. I think we take some comfort from Viatris being the main commercial partner under the joint venture that was established some time ago with Theravance and Viatris.

And I think we've gotten a good understanding of the co-promotion capabilities, and I think we're starting to understand at least how we can integrate that into Zymeworks and still drive the type of value that we think we can on a returns basis to reach that mid-teens IRR as this being an important part and an immediate source of returns post closing. And then I'll ask Scott if you'd like to comment further on that aspect.

Well, I think you said it well, Ken. We really see the ability to access royalty-like economics with a very small commercial sales force, while Viatris is doing a lot of the heavy lifting, managing the day-to-day operations of the community part, the long duration and predictability of that cash flows in an area that we know well given our presence with 1528 lets us create more capital inflow for the company that can be allocated to our innovative R&D, additional share repurchases and so we're looking at future M&A once closed.

Yes. Thank you. And just to add to that, too, I just -- I think from a royalty portfolio, partner royalty portfolio, we do like the eventually, since we hold the diversity of cash flows. And therefore, we want to pay attention to the source of those cash flows from the partner, the therapeutic category, the product modality. And so I think our royalty portfolio is going to be meaningful over the long term. It can't just come from one source or just from bispecific antibodies we created for the oncology marketplace.

I think having some diversity does provide us with some additional thought of value that, that diversity might provide. We try not to stay too far with this from a therapeutic standpoint. I think we feel comfortable that in COPD, we can understand how to value this asset [indiscernible] other products in this portfolio are royalties, and we're not participating in the commercial piece. We do like the fact that this is royalty like but not royalties. So there could be some upside from participation in commercial performance that's driven by having a 35% profit share versus a royalty.

And we also, along with that, have some co-promotion ability to drive investment or reinvestment of that gross margin back into building the top line. And so it might give us a little bit more and maybe some more upside for us in actually participating along with Viatris as a part of this. And I think as long as we are able to drive the same gains that sales force has driven for in Theravance, then I think there might be something more interesting upside than a pure royalty where we can impact the top line aspect or growth of that.

So I think there are some parts of that, that are actually positive, although they might be a little bit more diverse from where we have been versus our own sources of royalty we created with our own [indiscernible] products.

And our next question is going to come from Mayank Mamtani with B. Riley Securities.

Congrats on the deal. So sorry if I missed this earlier, specifically valuing the Irish tax attributes and maybe just how that's unique to the Zyme's operating model relative to any other royalty-focused company, if you could maybe just give insight so we understand what sort of future deals you might be looking for? And then just on the math here, you're shelling out net $119 million from your balance sheet to have what seems like $60 million of cash flows, but net after the OMERS note would be about $15 million. Are we thinking about this right?

And lastly, on the ampreloxetine CVR, could you just give us a little bit more color on what the post model has been after the CYPRESS results? And if there's any rough cost and time line for refiling or anything that's been factored in as part of this transaction?

Yes. You always manage to get multiple questions in a one question limit. So we'll try to address them if we can. No, no, no, no, we get used to it. We're good at it. No, I think from our perspective, at least first point, I think you're getting this right. I mean we've allocated about half of the financing from Royalty Pharma to allow us to do this deal and it obviously required other financing [ arrangements ] inside Theravance to be able to do this.

But we think we get a -- and we like multicomponent deals. So we think we get a multitude of assets in this transaction, which provides near-term return, but lots of optionality for us in how we utilize those assets moving forward.

Obviously, in acquiring the entire company as opposed to the product, we're entitled to other assets that might come along with that. And obviously, in Theravance, as has been noted, they have a pretty substantial level of Irish tax attributes, which may have the potential of being utilized in the context of us running the combined businesses going forward. I wouldn't make -- I wouldn't talk more about that at this point until closing.

We think the base business of YUPELRI is enough to drive the [ mid-teens ] IRR that we talked about and any other optionality around other assets, be it R&D or financial strategic assets would be a boost to that IRR.

So I think we'll leave that until later. But it's an important attribute of why buying the company and reorganizing or sorting through the different components might be more beneficial than just accessing the product itself. But we think we get a lot for that allocation that we've made to this acquisition. There's a lot to work with. And I think it's an immediate return, as you said, I think we do have to finance the piece with OMERS who's entitled to 75% of the gross margin to service their debt, but there still is a near and immediate cash return and some long-term optionality for an investment that was -- we had the ability to fund and felt we got -- we're disciplined about price to ensure we could get the type of returns that have to go along with the cost of capital from both the Royalty Pharma financing and from the OMERS financing.

But I think you're right. We think we've got a lot for what we were able to spend to make this acquisition, and we can generate those types of returns from there. I think one of the items that we discussed with Theravance was their belief that with ampre, although it had failed in a Phase III trial recently that there was something they still saw that might provide a benefit to patients that was an unmet need, and they wanted the ability to see if there was a pathway for that to be continued, not in our capital, but in some other way.

So we've provided for that opportunity for Theravance's current thinking that there might be a pathway forward for this medicine for patients. So we've allowed for that in the transaction. We obviously have consent and approval rights of any transaction. So we'll look at that, but we're quite happy to give them the ability to see if there is a pathway to patients for that medicine. It's obviously not counted in our IRR at all, and we haven't assigned any value to that aspect.

If they are successful to go ahead and find a pathway, then we're happy to keep 20% of that value for our shareholders. So with that, I'm not sure if -- Kristin, do you want to add anything to anything we talked about there?

I think you had mentioned the cash out for the inflows that we were getting. And I just want to clarify that we're referring to the $219 million of assigned cash, right, to acquire the $60 million -- the $60 million run rate of cash flows, right? But that $219 million is reduced by the near-term TRELEGY milestone that's coming in. So that cash that we're using is really effectively reduced to really more of a 50% level. So I just want to clarify that it's a much smaller net investment going out to acquire that Theravance piece on the other side.

Hopefully, we answered your multiple questions.

And our next question is going to come from Reni Benjamin with Citizens.

Congratulations on this very nice deal. Can you maybe help quantify the expected impact on the expense side, right? And so the operating expenses once this takes place, how much do you think it might increase? Are there certain synergies that we should be thinking about, again, on the expense side? And just kind of related to this, why wouldn't this acquisition be something that Viatris as the partner would consider? What is it that was unique that you brought to the table that they couldn't?

Yes. Let me try and answer your second question. And the first one, I'll provide a summary and then ask Kristin to follow along. I think from our standpoint, not specific to Viatris, but just overall, I think Theravance's strategic committee had -- they've been under strategic review for some time frame looking for different options for [indiscernible] the company further. I think we've provided them with what we think is a really excellent opportunity for an outright acquisition of the company. And we think that's a very attractive proposition for their shareholders, and that's why we're both pursuing that.

Right now, it may be that we were quite comfortable with the multiple components that would come with an outright company acquisition and sorting through those to understand the value that can be derived from that, whereas traditional royalty players or others may have been interested in aspects but not everything.

And so we certainly see an ability for us to go and extract value from everything that's available to us from this acquisition for the capital that we've invested in it alongside our partners. From the perspective of the go forward, we can't talk too much until we get to close. I mean, obviously, we've seen some prior disclosures from Theravance publicly about the reorganization of their company following the Phase III study outcome earlier this year, and their belief that they could modify the company's cost structure to a situation where they could start driving annualized cash flows from YUPELRI and other things that would be substantial.

Obviously, there'll be other synergies in that if that was done within one entity post closing as opposed to separately, and we'll obviously take advantage of those. But I think they were doing organizational and strategic changes that were things that we would have done to get to the value of the underlying assets within Theravance. And so we'll continue that work and obviously add some things of our own, but we would expect that YUPELRI would make a positive contribution from day 1, and that would be overall as well. I don't know if you want to say anything more, Kristin, about that. I mean a little bit limited what we could say close. Anything you want to add, Kristin?

Yes, I would just say regarding the operating expenses, we are going to continue to remain focused on cost discipline. And as Ken said, with the integration planning, including restructuring initiatives designed to reduce R&A and G&A, we will think about providing updated guidance for the combined business once the transaction is closed.

And our next question will come from Yaron Werber with TD Cowen.

Congrats on your first meaningful deal.

I have one question, maybe if you can, I'll take it in 2 parts. I guess the first one, because they're interrelated. Is this going to be -- so let's say, about $60 million, $75 million of profit, $75 million obviously being paid to OMERS, but you are bringing in a whole company. Is this going to be accretive to you immediately? I know you're not profitable. But net-net, is this going to be -- you're going to be each year on an annual basis operationally, is going to be accretive or not immediately?

And then secondly, you do have an 8.25% coupon. I assume, is that coupon going to be literally net interest annually of about $28 million, $29 million? Or is that going to be sort of capitalized as part of the royalty, the way you do with the rest of the deals? Because there's no -- this deal is sort of open-ended, right? It's 2036. I don't see an upper cap of like 2x to 350 or so, right? So that's an open-ended 10-year deal.

Yes. I'll let Kristin walk through the mechanics of the repayment with OMERS. I think on the first part, I think we can't say too much, but obviously, Theravance had started a process of reorganizing themselves to be in a position where they could be generating positive annualized cash flow from the overall business driven by YUPELRI and other mechanics.

So we think that was the right direction. And obviously, we're supportive and we'll continue that. So we do believe that this investment that we're making can be accretive, and we'll provide some updated guidance on that overall. At the same time, in our own business, we know that we're expecting because we're confident the outcome at FDA with the PDUFA date for zani to get a $250 million milestone payment this year with a positive outcome before the PDUFA date. So we will need to, because of that and the closing of this transaction, update our own guidance around the combined P&Ls of those organizations.

But we do expect, as I said in the remarks, that we'll begin to get a return on our investment after closing immediately from YUPELRI and the reorganization that's already going on inside Theravance. And I'll let Kristin answer the second part of that.

Sure. What I would just say is if you look back on the slide in the presentation, the way that the cash flows come in is when OMERS gets their 75% and then the residual flows to us, that first part goes to repay interest and principal. So although it's not capped, it should be very easy to forecast because their -- the principal is paying down over time with their interest. I don't know if that will help clarify.

Yes. Got it. So it's principal and interest, Great. And the you're essentially -- at this point, you're inheriting the whole company and then you're going to make some decision as to the pipeline, right? I mean it sounds like you're going to keep the commercial organization, but you'll figure out whether you want to continue to downsize the company you've taken on -- is that fair?

Yes, yes. I mean they've obviously -- we can't say much more until closing. But obviously, they have made public statements about reorganizing the research group, [indiscernible] G&A, reducing their cost structure. in such a way as to get to a positive annualized cash flow by Q3. And obviously, we agree with that, and they'll continue to make those changes between now and closing. And at closing, we will talk about what other changes we might want to make for this.

Obviously, the cash flow that we can generate from YUPELRI is an important part of the return for us from this arrangement and the co-promotion arrangement with their own sales force in the U.S. with Viatris seems to be still continuing to drive some good growth and providing some meaningful profit share from that 35% profit share. So that's an important element. And then we'll evaluate the other opportunities for other financial milestones, the early-stage R&D assets that they have. We'll evaluate that and make some commentary when we close.

But we believe YUPELRI's base business is significant enough on the trajectory that we have that it can drive that mid-teens IRR. And we have optionality on other assets, which could drive returns further depending upon what we plan to do with the other assets, whether they're financial, strategic or R&D.

[Operator Instructions] And the next question comes from Stephen Willey with Stifel.

Congrats on the transaction, pretty creative. I guess now that you have an operational acute care sales force in place, does that now inherently incentivize additional transactions there just as a way to further leverage the carrying cost of that commercial infrastructure?

Good question again. We'll have more to say after closing the transaction. But I think it's fair to say that, that hospital-based co-promotion for us to Theravance on YUPELRI does a good job with just that product and the amount of investment that's made and its impact on sales and how that flows through to their profit share.

So I think that is just a sustainable investment as a group if it continues to be that productive as it has been over the past few years. So there's no need to think about leveraging the cost of that. It's a pretty small and efficient group that has an impact on sales and their profit share in a meaningful way. And as long as that can continue, then I think we're happy to allow that to continue.

So I don't think it means any other strategy for us to leverage that group or what that means for our own COPD asset that we're putting in the clinic next year. I think as a stand-alone, it's certainly a high-performing group that drives a good return. If there were ways to leverage that, we would obviously evaluate that, but it's not going to drive the next transaction around that set of commercial force that exists in the U.S.

And I am showing no further questions at this time. I will now turn the call back over to Ken for closing remarks.

That's great. Thank you, operator, for moderating the Q&A, and thank you for the questions. We certainly really appreciate your time today to understand the rationale for our proposed acquisition of Theravance Biopharma. We think it's a really interesting transaction. And hopefully, we've been creative around the way that we were able to finance [indiscernible] And we do believe that we can drive good returns out of this transaction and look forward to reporting progress against closing the transaction, and we'll obviously provide much more guidance post closing of how we intend to integrate and drive value out of the combined operations and look forward to being able to do that. And thank you very much for your time today.

Thank you. This does conclude today's conference call. Thank you for your participation, and you may now disconnect.

Good day, and thank you for standing by. Welcome to Zymeworks First Quarter 2026 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Shrinal Inamdar, VP of Investor Relations. Your line is open.

Thank you, operator. Good afternoon, everyone, and thank you for joining our first quarter 2026 results conference call. As usual, I'd like to remind you that we'll be making a number of forward-looking statements during this call, including, without limitation, those forward-looking statements identified in our slides and the accompanying oral commentary. These forward-looking statements are based upon our current expectations and various assumptions and are subject to the risks and uncertainties, including those associated with companies in our industry and at our stage of development. For a discussion of these risks and uncertainties, we refer you to our latest SEC filings as found on our website and as filed with the SEC.

In a moment, I'll hand over the call to Ken Galbraith, our Chair and CEO, who will provide an overview of recent business updates. Ken will then hand the call over to Kristin Stafford, our Chief Financial Officer, to discuss our cash position and financial results for the first quarter 2026. Dr. Paul Moore will then provide a brief summary of new preclinical data disclosed at AACR on our pan-RAF ADCs. And following this, Dr. Sabeen Mekan, our SVP and Chief Medical Officer, will provide progress updates on both the Phase I clinical trial of ZW191 and ZW251. At the end of the call, Ken, Kristen, Sabine and Paul will be joined for a Q&A session with Scott Pashon, our Chief Business Officer; and Adam Chherowitz, Head of R&D. As a reminder, the audio and slides from this call will also be available on Zymeworks website later today. I'll now hand the call over to Ken.

Thank you, Sal, and good afternoon, everyone. We're pleased to be reporting on further progress this quarter on both our wholly owned and partnered assets. The PDUFA date of August 25, 2026, for zanidatamab and first-line GEA in the U.S., together with the completion of an sBLA filing in China for first-line GEA marks an important inflection point and near-term foundational value-driving opportunity for Zymeworks. These regulatory milestones provide increasing visibility towards commercialization in first-line HER2-positive GEA and accompany continued clinical development in additional settings such as breast cancer, helping to establish a clear baseline for zanidatamab's value. If you didn't get a chance to tune in, we'd urge you to listen into Jazz's disclosures within their earnings call earlier this week on preparedness and launch activities for GEA in anticipation of an FDA approval later this year on or before the PDUFA date.

With our partners, Jazz and B1, bringing established commercial capabilities, we believe zanidatamab is well positioned to translate potential approvals and label extensions into meaningful uptake, significant milestone payments and durable royalty revenues. This includes near-term milestone payments of $250 million upon approval in the U.S. for GEA from Jazz and $15 million upon approval in China for GA from V1. Importantly, this momentum also illustrates the broader strength of our business model. Recent data presented at the American Association for Cancer Research Annual Meeting, alongside this continued regulatory progress for Zanidatamab reinforce the strategic advantage of integrating our R&D portfolio with royalty participation within a single organization. We will continue to be intentional about maintaining a portion of our R&D portfolio unencumbered, preserving optionality for future transactions and aiming to capture upside beyond structured royalty streams.

Advances across our ADC portfolio at AACR, including the presentation of 3 new preclinical RAS targeting ADC candidates featuring proprietary payloads as well as encouraging Phase I data for ZW191 highlight the scalability of our platform and its ability to generate multiple potential future value drivers. Taken together, we believe this integrated model anchored by near-term catalysts such as potential global approvals for zanidatamab and supported by a productive and innovative pipeline that provides future optionality for our emerging royalty portfolio positions us to deliver durable compounding returns for shareholders over time.

Over the past quarter, we've also strengthened our leadership team with the addition of Kristen and the full-time appointments of Scott and Adam, who bring deep experience in strategic capital allocation, investment and dealmaking. Also pleased to announce the appointment today of Mr. Paul Schneider, who joins us as General Counsel from Pfizer. All of these appointments enhance our ability to systematically identify, structure and execute opportunities that align with our long-term value creation framework. With that, I'd like to hand the call over to Kristen, who will provide an overview of our financial highlights for the first quarter of 2026.

Thank you, Ken. Having now spent my first month at Zymeworks, what stands out for me is the potential for us to build a novel strategy of royalty aggregation and growth, one that's differentiated by the integration of our productive R&D engine with a quality portfolio of royalty interest.

My focus as I step into this role is to ensure we execute with discipline, particularly in how we allocate capital, prioritize programs and pursue external opportunities. That includes maintaining a high bar for investment, strengthening operational rigor and leveraging our integrated model to drive both near-term visibility and long-term compounding value. I'm excited to join the team to build on this momentum and to position Zymeworks as a leader in this emerging model. As part of this, we're evaluating ways to potentially evolve our financial reporting in order to provide better visibility into returns on invested capital and the performance of both our R&D and royalty portfolios. We intend to build on the OpEx framework we introduced last quarter, adding greater transparency around how that investment translates into key value drivers for shareholders.

I'll now talk through the financial results for the first quarter of 2026. Total revenue was $2.4 million for the 3 months ended March 31, 2026, compared to $27.1 million for 2025. The decrease was driven mainly by the achievement of nonrecurring clinical milestones in 2025 as well as continued declines in development support and drug supply revenue from Jazz. Revenue in the current year period reflects ongoing collaboration activity and increased royalty revenue, which is expected to grow over time as commercial sales of iHARA increase. Overall operating expenses were $49.5 million for the 3 months ended March 31, 2026, compared to $52.7 million for 2025.

The decrease in research and development expenses was primarily driven by lower third-party program costs following reduced activity on later-stage and discontinued programs, partially offset by increased investment in early-stage clinical and preclinical programs as well as increased unallocated costs related to leadership transition. The decrease in general and administrative expenses was primarily driven by lower professional fees, consulting and information technology-related costs, partially offset by higher salaries and benefits reflecting the previously disclosed leadership transition.

Net loss was $44.2 million for the 3 months ended March 31, 2026, compared to a net loss of $22.6 million in 2025. The change in 2026 was primarily due to a decrease in revenue driven by the nonrecurring clinical milestones earned in the first quarter of 2025. Despite the year-over-year change in earnings, we ended the quarter with a strong cash position, providing flexibility to fund operations and execute on our capital allocation strategy.

Turning to capital allocation. We have made progress on our share repurchase program, which reflects our commitment to disciplined capital allocation and enhancing long-term shareholder returns. As of May 6, 2026, the company has utilized approximately $95.8 million of the approved $125 million repurchase program to acquire 3,930,734 shares at an average price of $24.37 per share exclusive of commission expense and estimated excise tax. As of May 6, 2026, the company had approximately 73 million common shares outstanding. As of March 31, 2026, we had $403.8 million of cash resources consisting of cash, cash equivalents and marketable securities compared to $270.6 million as of December 31, 2025.

Based on our current operating plans and assuming full execution of the $125 million share repurchase plan, we expect our existing cash resources as of March 31, 2026, when combined with the anticipated regulatory milestone payments of $440 million related to the potential approvals of Ziihera and GEA in the U.S., Europe, Japan and China to fund our planned operations beyond 2028. This anticipated cash runway does not take into account any contribution from additional future milestone payments or royalties related to Ziihera or other current licensed product candidates or contributions from future partnerships and collaborations. For additional details on our quarterly results, I encourage you to review our earnings release and other SEC filings available on our website at www.zymeworks.com. I will now pass the call over to Paul, who will provide a summary of our preclinical presentations at AACR.

Thank you, Kristen. Well, it certainly has been another busy AACR for Zymeworks with 6 poster presentations, an oral presentation for ZW191 and 2 invited talks from our research leadership team, one covering multispecifics and the other ADCs. For the call today, I wanted to focus on the pan-RAS ADC platform that we unveiled at AACR, which has attracted a lot of attention over the last few weeks.

You may recall at our R&D Day at the end of 2024, we first outlined our plans to pursue novel payloads, and so it is particularly satisfying to now see that intention translated into clear execution. Against that backdrop, the decision to focus on RAS payloads reflects both the strength of the screening outcomes and the quality of the candidates identified. It marks a meaningful step forward in delivering on the strategic direction originally outlined. As you're aware, we have also been encouraged by the continued translation of our proprietary to payload, purpose-built for ADCs from the preclinical setting into the clinic, which Sabeen will talk about in a few minutes. Based on that foundation, our focus has been on what comes next.

As we think about the next generation of ADCs, we've been intentional in addressing certain core aspects, deploying additional mechanisms of action through payload selection, enhancing efficacy, overcoming resistance and further improving safety. These priorities have guided our investment in both novel targets and novel payloads, particularly as resistance can emerge through multiple mechanisms, including target evolution or following sequential ADC treatments. In parallel, RAS inhibitors have generated significant interest given recent developments in the field. However, toxicity remains a key limitation. We believe an ADC-based approach offers a compelling way to address this by improving targeting and enabling more sustained tumor exposure with the potential to enhance efficacy while reducing systemic side effects. This profile may also better support combination strategies.

To explore this, we generated and functionally screened more than 170 novel pan-RAS inhibitors derived from our scaffold work in-house. First thesis for our total payload, our selection criteria extended beyond potency alone. We prioritized molecules with properties best suited for an ADC modality and as shown in this slide, supported potent efficacy in xenograft models, favorable pharmacokinetics, meaningful bystander activity and a tolerability profile in nonhuman primates that are collectively supportive of further development.

From a safety perspective, our lead payload candidate evaluated in the context of a LI-6E pan-RAS ADC demonstrated encouraging results in nonhuman primates with no observed body weight loss, skin toxicity or GI tox at doses up to 120 mg per kg, representing the maximum dose tested. The data set on this slide also highlights the ability of an ADC approach to sustain tumor targeted inhibition of the RAS pathway over an extended period and how it differentiates both in distribution and biological effect to a pan-RAS small molecule inhibitor delivered orally.

Following a single dose of RAS ADC in a mouse xenograft model, we observed sustained accumulation of the RAS payload in the tumor at levels higher relative to that observed in normal organs. This differential exposure is also reflected in the durable RAS pathway inhibition as measured via DUSP6 levels in the tumor out to 14 days with again, clear differentiation between tumor and normal tissue. In contrast, while a small molecule pan-RAS inhibitor delivered orally achieves RAS pathway inhibition, the magnitude of inhibition in tumors overlaps with that observed in normal tissues such as skin, liver and colon consistent with the broader distribution and uptake of the small molecule, as shown in the top right relative to the tumor targeted design of the pan-RAS ADC.

Again, for the pan-RAS ADC, what we see is a more selective inhibition of the RAS pathway in tumor relative to skin in contrast to the small molecule that shows activity across both skin and GI, aligning with the tox profile observed clinically for pan-RAS inhibitors. Taken together, we believe this differentiation underscores the potential for ADCs to fundamentally reshape how RAS-targeted therapies can be deployed in patients. As far as the mechanism goes, we have not developed full details, but it is a RAS(ON) inhibitor.

Our focus so far has been on the functional behavior of the molecules and how the overall design translates into pathway modulation and tolerability. At AACR, we presented also on the application of this platform across 3 different therapeutic candidates. We chose our targets with intent to reach deeply into cancers where RAS mutations drive disease at scale, including non-small cell lung cancer, pancreatic cancer and colorectal cancer, ensuring both relevance and impact. All candidates incorporate the bystander active pan-RAS payload at DAR8. While on the antibody side, we will leverage our antibody engineering expertise to optimize internalization, tumor penetration and kinetic properties that ultimately determine whether this modality delivers on its promise to provide target-driven tumor-selective RAS inhibition.

The candidates, as you can see here, include ZW439, a Claudin 18.2 targeting pan-RAS inhibitor, ADC for the treatment of RAS-mutated pancreatic cancer. Z427,A-6E targeting antibody drug conjugate bearing a novel pan-RAS inhibitor payload for the treatment of RAS-mutated cancers, including colorectal, pancreatic and non-small cell lung cancer; and ZW418, a barotropic PKK7 targeting ADC, incorporating the same RAS inhibitor payload for the treatment of non-small cell lung cancer. The data we've seen so far across the 3 candidates targeting PTK7, LI-6E and Claudin 18.2, respectively, that we shared at AACR reinforces both the design of the payload and the broader principles underpinning our ADC platform. I'll leave it there for now and happy to go into more detail during the Q&A session. Sabine, I will now hand over to you to run through the updates on our clinical development program for 191 and 251.

Thank you, Paul. As the data presented at AACR, we observed strong antitumor activity for ZW191 across both ovarian and endometrial cancers. Starting with ovarian cancer, we observed tumor regression of at least 30% in 68% of patients and importantly, some degree of tumor shrinkage in 85% of patients. Disease control was achieved in 94% of patients with an overall response rate of 56% across all dose levels. When we look at the clinically relevant dose range of 6.4 to 9.6 milligram per kilogram, disease control was observed in all patients with a confirmed ORR of 61%.

It is important to underscore that this ovarian cohort represents a particularly challenging population was heavily pretreated. All of these patients were resistant to prior platinum therapy, majority had prior PARP inhibitor exposure, and there was no limit to the number of prior lines of therapy. This makes cross-trial comparisons difficult and in our view, highlights the strength of the antitumor activity of ZW191. In relapsed or refractory endometrial cancer, we observed tumor regression of at least 30% in 50% of patients with 70% experiencing some degree of tumor shrinkage.

Disease control was achieved in 80% of patients with an overall response rate of 40% across all dose levels. At 6.4 to 9.6 milligram per kilogram dose range, ORR increased to 57% with disease control in 86% of patients. Across both tumor types, responses were observed starting at 3.2 milligram per kilogram dose. And importantly, activity was seen regardless of FR alpha expression level, including in low or negative tumors. Median follow-up time was approximately 7 months with a number of patients still on treatment, supporting the durability of signals we have discussed.

Turning to safety. ZW191 is being evaluated at meaningfully higher doses than some other programs in this space. Regardless, we're pleased with the safety profile we're observing at these doses, which mainly consists of cytopenias and DI events at low rates that are very manageable and types of events that are in line with the total ADC class. Importantly, no unexpected or new safety signals were observed with longer follow-up. These 6.4 and 9.6 milligram per kilogram doses are being further evaluated in a larger data set in dose optimization.

As previously reported, this approximately 60 patient cohort is fully enrolled and the results should assist in defining the optimum dose to move forward into subsequent clinical studies. Given the consistency of efficacy across the active dose range, we believe we have the flexibility to optimize dose to further refine tolerability without compromising activity. We also believe the profile remains compatible with combination approaches with appropriate dose selection and monitoring. At AACR, we presented a poster on preclinical combinations with ZW191.

In nonclinical studies, ZW191 demonstrates activity across all levels of FR alpha expression and shows promising combination potential with standard of care therapies supported by a favorable tolerability profile. These data provide an important translational foundation for the clinical observations of activity in low and negative FR alpha expressing tumors and support the breadth of activity we're beginning to see emerge in the clinic. In addition, the combination data reinforce the potential to position ZW191 in earlier lines of treatment. We believe these combinations should be feasible with appropriate dose selection and monitoring. Overall, we view these data as supporting a compelling and increasingly well-defined benefit risk profile for ZW191.

We look forward to the opportunity to present additional updates on our Phase I study at future medical meetings, including at ESMO BIN in Denmark during June, where we will be presenting efficacy analysis on folate receptor alpha expression levels from the Phase I study.

I also want to touch briefly on the protocol updates for our ongoing trial for ZW251. As we think about expansion opportunities beyond our initial indication for hepatocellular carcinoma, GPC3 expression provides a compelling biological rationale across multiple tumor types. Across published data sets, we see GPC3 expression in approximately 86% of hepatocellular carcinoma and more broadly in a range of 60% to 100% depending upon the tumor subtype, staining methodology and age population.

Notably, in squamous non-small cell lung cancer, GPC3 expression has been observed in roughly 60% of tumors which supports the inclusion of squamous non-small cell lung cancer as a relevant population for further exploration. We're also exploring cell tumors where high GPC3 expression has been reported, particularly in non-geo minimated subtypes such as tumors and choriocarcinoma. While pediatric germ cell tumors are relatively rare, expanding into adult germ cell tumors meaningfully broadens the addressable population and introduces more heterogeneous mixed histologies.

Importantly, in these mixed tumor settings, the bystander effect associated with our ADC may be particularly relevant as it has the potential to address both GPC3 positive and adjacent antigen lower negative tumor cells within the same lesion. In our Phase I study, we are assessing GPC3 expression retrospectively from available tumor samples. This approach allows us to better understand the distribution of KPC3 expression across tumor sites without restricting enrollment and helps inform future patient selection strategies.

Overall, we believe the addition of these tumors positions us to efficiently map KPC3 expression across tumor types and identify those settings where the biology and mechanism of action are best aligned. Our Phase I dose escalation study continues to recruit on schedule, and we look forward to having the opportunity to share the clinical data at the appropriate time at a future medical meeting. I'll now hand the call back to Ken to provide for closing remarks.

Yes. Thank you very much, Sabine. Looking ahead at the potential catalyst for 2026, we remain on track to deliver on the majority of these objectives and continue to see opportunities for a steady cadence of data and pipeline progress. As I mentioned earlier with the near-term U.S. PDUFA date set for zanidatamab and the sBLA submission in China, Zymeworks has a greater visibility to near-term milestone payments from JASSB1 and more meaningful royalty revenues upon potential launches in the U.S. and China. We also continue to follow progress from our collaboration partner, J&J Innovative Medicines with respect to their broad clinical development program for przlitamig, a novel KLK2 T-cell engager for prostate cancer patients.

I do want to highlight that we are now guiding to an IND in 2027 for ZW1528 compared to our prior expectation of 2026. As we continue to evaluate the IL-33 biology across the competitive landscape, we see an opportunity to further deepen our understanding and refine the clinical development strategy as recent clinical data outcomes are disclosed at upcoming medical meetings. Given the novelty of the target, we believe taking this additional time positions us to enter the clinic with a more focused and differentiated plan. However, the core preclinical package, including GLP toxicology is largely complete and compelling.

More broadly, we're also evaluating how partnerships and collaborations can support the advancement of our R&D pipeline. As we think about capital allocation and execution, we do see opportunities to bring in external partners where in doing so, we can enhance speed, scale or probability of success. We remain very encouraged by the progress of ZW209 as well as the broader TriTCE portfolio behind it. ZW209 is IND-ready and still maintained as a potential IND in 2026, which we believe should provide confidence in both the maturity of the program and its underlying safety profile. We have multiple additional targets in development within the TriTCE platform, and we continue to view this as a key driver of long-term value.

We've demonstrated our ability to repeatedly extract high-quality assets from a single platform. Our asymmetric platform enabled the development of zanidatamab, supported partner programs such as taZridamig and continues to drive our wholly owned pipeline, including our topo ADC programs built on optimized antibodies and our RAS targeting ADC candidates as well as our multi-specific antibody product candidates behind ZW209 and ZW1528. Importantly, we believe this capability is transferable beyond our internally generated R&D pipeline. We have the ability to supplement and scale our existing capabilities through acquisitions, rapidly apply our technologies and efficiently advance novel candidates into the clinic as we've consistently demonstrated.

We've been very active in external processes to assess potential acquisitions and feel well funded to do so with the proceeds of the Royalty Pharma note and the upcoming expected GA approval milestones and enhanced royalty income from Zanidatamab. But we are also remaining disciplined in our approach to acquisitions to ensure we find the right opportunities for our long-term strategic objectives and the right price. At the same time, our capital allocation framework remains disciplined and highly focused on per share value creation.

Since initiating our share repurchase program in 2024, we retired approximately 8.3 million shares through the deployment of roughly $155.8 million in capital for a weighted average repurchase price of approximately $18.70 per share. This represents over 10% of our common shares outstanding. Notably, our average repurchase cost remains at a meaningful discount to today's share price, reinforcing our view that these buybacks have represented an attractive and accretive use of capital on behalf of shareholders. Over time, repurchases are designed to continue to reduce our share count while increasing each remaining shareholders' participation in the future economics of the business.

We believe these repurchases have represented an attractive use of capital given the disconnect we've seen between our market valuation and the long-term value of our commercial royalty interest and development pipeline. This balanced approach of pairing growing and durable royalty revenues with opportunistic share repurchases and a disciplined investment is designed to enhance intrinsic value per share and support increasing total shareholder return over time. With key leadership appointments recently completed, we're well positioned to execute with focus and discipline.

We look forward to advancing our strategic priorities and providing clear updates on our progress in the quarters ahead. Overall, while we are being thoughtful in how we sequence and advance programs, we remain confident in the depth of the pipeline and the opportunities it presents. With those closing remarks, I'd like to thank everyone for listening, and I'll turn the call over to the operator to begin the question-and-answer session. Operator?

[Operator Instructions] Our first call is from Eva Fortea with Wells Fargo.

Congrats on the progress. A couple from us. First, how should we be thinking about cadence of data for some of your internal pipeline programs in the next 12 months? And the second question is on the [indiscernible] ADCs. Can you provide some color on timing to reach the clinic and whether you plan to pursue the early clinical stages of development yourself?

No, thanks for that question, Eva. I'll just maybe take the first one, and then I'll pass the second one to for Paul to answer and then happy for Adam to add to Paul's comments as well. I think we've tried to provide as much guidance as we can on the cadence of data. Obviously, we presented some additional updates on ZW191 at AACR and also just had an abstract accepted for ESMO GIN in June in Copenhagen. So I think we'll continue to have a cadence of -- as we understand our data, then we'll be able to present that always in a peer-reviewed format, as I think we've talked about because we think that's the best practice. And so I think you can expect that at oncology meetings throughout the course of 2026 that you will see some additional progress on both clinical and preclinical programs in our oncology portfolio. And until we provide guidance about accepted abstracts, just as we're doing now with the ESMO GIN conference coming up next month, then that will be the only forward guidance we'll provide. And I'll turn it over to Paul to see if he'd like to answer that second question.

Yes. I think your second question, Eva, was on the timing of the RAS ADCs and when they could be in the clinic. I think what we shared at AACR is the strength of our conviction in the choice of the targets and choice of the payload and the mechanism. There are certain IND-enabling activities that you still need to do the manufacturing and be ready for the Phase I. But we're well positioned from here to enter into that phase. I think as Ken alluded to and maybe Adam can also expand upon, our balance of what we can push internally through -- as well as through partnerships is something very much at the front of our mind. And so that will also be a factor in driving when they enter the clinic. But certainly, they are well positioned where we are to enter into the IND-enabling stage and be ready shortly for clinical testing. Anything you want to add, Adam, are you okay with that?

No, I think as Paul said, right, we've got a lot of belief in these compounds. It's super exciting coming out of ACR, and we're moving forward as we can. as soon as we have a real definitive date, we'll share with you guys.

Our next question comes from Charles Zhu with LifeSci Capital.

Perfect. No technical difficulties this afternoon. Great. Congrats on all the progress. Two quick ones from me, if you don't mind. One, so it sounds like you had amended the protocol for ZW51 to include additional tumor types. I guess as you head towards initial clinical data for that particular asset, how important or not would it be to include some of those other tumor types beyond the liver cancer as part of that initial clinical data package? And then second question, it sounds like the IND filing for 1528, your IL-33, IL-4 receptor alpha bispecific has been pushed out a little bit. It sounds like you're waiting to understand or see a little bit more about the IL-33 biology. Could you perhaps -- I presume you're talking about the Astra compound. Could you help us understand what you're looking for in the full data? And maybe also remind us on your asset, are you able to block both oxidized and reduced forms of IL-33?

Great question, Charles. We'll take your second one first. I'll just make a comment, and I'll pass it to Paul for more of a technical question, and I can go back to the 251 with Sabine. But I mean, obviously, we saw some data results last year with respect to IL-33 antibodies and other programs that were not successful. And I think we've tried to understand as clinical data was presented at medical congresses, what that meant and why. And obviously, this year, as you mentioned, we've seen a top line data release of a positive Phase III study outcomes in all 33 in a patient population similarly, we would like the study. I haven't seen the detailed data yet presented at medical congress.

I think we'd like the opportunity to understand that data when it's presented and hopefully that's soon and make sure we understand that and discuss that with our clinicians who are helping us with our planning around the clinical development program we have in mind for 1528. So I think that it's a prudent thing to do to make sure we understand the differences between some of the negative studies and this -- what's seen as a positive study before we dive into the clinic. And maybe I'll turn that last technical question over to Paul and then Sabine can follow up on 251.

Yes. Thanks, Charles. Yes, we've -- your question was about the blocking of IL-33 that oxidized in the reduced form. And we've obviously been characterizing and understand that. And we feel that we do have the potential to block both pathways. We're still dissecting that more on the mechanism. But clearly, we have a very potent IL-33 blocker, and it works very well also in the context of the bispecific. And there's biology also associated with binding. -- having the IL-33 binder in a bispecific format with the IL-4 that we are very excited about and we think really differentiates our approach to others. But to your point, we feel that we can -- on the IL-33 side, we will be able to block both forms.

To your question regarding ZW251 of inclusion of additional tumor types for squamous non-small cell lung cancer and germ cell tumors. I think I can explain our rationale behind it. Previously, as we entered into the clinic withZW251, we chose hepatocellular carcinoma as a lead tumor type due to the high unmet need in this tumor type and also the high levels of expression for GPC3 in this tumor and very little expression in normal tissue.

As we've gotten over time more comfortable with our ADCs and particularly with our folate receptor alpha ADC, where we saw activity in lower levels of expression for the target, we became more comfortable in other tumor types as well. And also over time, there's very little data with regards to expression of GPC3 in other tumor types. We've been able to go through the literature and also including our data for GPC3 expression in squamous non-small cell lung cancer and germ cell tumors where we feel very comfortable in including these tumors in our study. It's fairly common for dose escalation studies to include multiple solid tumor study tumors, which is what we're doing at this stage.

Our next question is from John Miller with Evercore.

Congrats on all the progress. I'd like to ask my question on the novel pan-RAS ADCs. In particular, in the criteria you had for selecting the pan-RAS payload that you ended up choosing. It looks like you looked at a number of different molecules here across a variety of different characteristics. It's notable that most other second-gen or next wave pan-RASs have prioritized high potency, and it doesn't seem like that was your priority next other things. So I'd love to get a little bit more granularity in what you were selecting for in the payload and why you didn't think that pushing potency as far as it could go was the key to success in the next-gen space.

Yes. Thanks. Paul, do you want to take that?

Yes. Thanks, John. Yes, maybe I should clarify that there. It may be that the messaging was that we've looked at payloads that work well as ADCs and emphasize their compatibility as ADCs, and that may have signaled that we weren't so focused on potency. We definitely had a potency bar that we wanted to achieve. And I think you can actually see it in the data that we shared today in the comparison with the same target with a topo ADC compared to our RAS ADC, we actually have no greater potency.

So that is -- there was definitely a bar of potency that we wanted, and we wanted in the context of an ADC to meet a bar that we felt was necessary. But we are also very -- we also feel because it's a payload ADC, there's other attributes that need to be also factored in when we're looking at that. And that includes things like bystander activity that we think can also be important and then also the pharmacokinetic properties and then also just the balance of tolerability as well. And I think what we've done is we've really had a great place where we've got very good potency activity in xenograft models in the 1 mg per kg range, whereas the tolerability in nonhuman primates is at 120 mg per kg. That's just really a very impressive window that we found.

So that taken together is giving us a lot of excitement on this platform. And then the fact that we can then plug and play it and apply it to different targets really opens up scope across different tumor indications where we can really drive the selectivity of the payload to the tumor through our mechanism, which is not what you can do with the small molecules.

Makes sense. Maybe to follow up on that NHP comment that you made on the tolerability -- can you translate those dose levels that you were talking about? I assume those are ADC dose levels. Can you translate that to the relative level of payload compared to some of the non-ADC-based pan-RAS out there?

Yes. NRA Sorry, say that again, Jo, just asking that question again. Sorry.

I think you're citing NHP safety data talking about the full dose of the ADC you're giving, which makes sense. But we're used to looking at tox profiles for other pan-RASs outside of the context of an ADC. Those are just naked molecules. Can you give us a sense of the relative amount of payload you're delivering preclinically, so I can think...

Yes. I mean maybe I don't know if the DAR helps you, but these are all DARA antibodies or ADCs. So that can help you factor that in. And again, I think our focus -- we're very much focused on showing the difference in the distribution and the tolerability profile of our ADC. That's what we've really been focused on. And so those experiments I showed you where we're comparing distribution in the tumor versus normal tissue, we think, is the key here. And that -- we think this allows us to go very high in dose and still maintain tolerability. So that's really been our focus as opposed to trying to compare against relative amount of molds or comparison to the small molecules themselves.

Our next question is from Yigal Nochomovitz, my apologies from Citigroup.

On all the progress. I just had 2 questions. Jazz have commented on their earnings call regarding some MFN pricing headwinds associated with the ex U.S. launch of ZuhRa. I'm just wondering if you could comment on that with respect to your royalty base for your ex U.S. royalty stream for Ziihera and how that factored into your thinking about underwriting the $250 million note with Royalty Pharma. And then with regard to the second interim for overall survival for HorRIizON-GEA, which is coming in the middle of the year, I'm just wondering if that is going to be included in the label or that would be a post-approval update? And if you could comment on what the threshold is for that second interim.

Yes. Thanks, Yigal, for the question. I think, one, I don't think we want to comment further than Jazz's observation about ZahirRa, having maybe some more pricing pressure outside the U.S. than inside the U.S. I don't think that's unexpected for ZahirRa or any pharmaceutical in today's market. Obviously, the way we've modeled out ZahirRa, and I think, obviously, the way that maybe Royalty Pharma has modeled out ZahirRa would have taken into account some of those pricing pressures that may be more significant outside the U.S. market than inside the U.S. market.

So I don't think that's something that was unexpected. And again, we'll have to wait and see with the GA launch on how that goes. Obviously, there's a tremendous clinical benefit that we've seen already with our second-line biliary tract cancer opportunity with ZahirRA when you look at the data, and you've obviously seen the clinical data for GA. So there's no doubt we're providing a tremendous clinical benefit for the patient based on our clinical data compared to the current standard of care. And I think that's reflected in pricing reimbursement mechanism. Secondly, beyond that, other than the fact that Jazz continues to guide that the next interim analysis will be by midyear, I don't think we're able to comment further on the regulatory strategy that might be related to that data set.

Our next question comes from Mayank Mamtani with B. Riley Securities.

This is Paolo on for Mayank. Just to touch on the FR alpha, like what's the specific durability or subpopulation edge that distinguishes it from the competitors enough to drive a deal? And on the RAS, like to expand on the internal versus the partnership balance, can you speak specifically on the partnership funnel post AACR? Has the data driven any incremental inbound interest? And if so, which one of the 3 molecules is leading those discussions?

No, thanks. I'll cover the second part of your question first, and I'll ask Sabine to comment on maybe our thoughts around where we think ZW191 might be differentiated from some of the other ADCs in development and therefore, the positioning of that. But I think it's fair to say we are open to and have active conversations around our R&D portfolio up and down the portfolio from the furthest clinical asset that's advanced like ZW191, right to some of the earliest opportunities that we might be working on inside the company.

I think we're open to having those discussions and looking for ways that we can attract partners to share capital, share risk, move more quickly to keep up the competition and also find a way to manage the breadth of the R&D pipeline that we find ourselves with right now, which is in continues to grow, and we need to make sure that we manage our ongoing investment in that R&D portfolio. So I think we have a range of discussions ongoing.

I don't think we'll talk further or provide guidance about that until we have completed transactions and then happy then to talk about the transactions that have been completed and the rationale for it and what we think it brings to us and what we might do next beyond that. So we'll just have to wait for announcements of transactions around that. And I'll just ask Sabine to answer your -- the second part of your question about ZW191.

In terms of ZW191 being differentiated from other ADCs, we can clearly see that ZW191 activity is much higher than current standard of care in this therapeutic area in platinum-resistant ovarian cancer. We also see that for approved folate receptor alpha ADC mirvetuximab, we're clearly showing a much stronger response rate as well as a very well differentiated and improved safety profile. Comparing to other emerging ADCs that are in development, even there, we are showing -- numerically, we're showing the strongest response rate. And we haven't really seen many others show longer duration like we have from the Phase I trials.

We are dosing our ADC at the higher dose levels as we talked about earlier in my presentation compared to many of the other ADCs in this space. And we believe that these higher dose levels, we're still -- in terms of the safety profile, we still have a very manageable safety profile at higher level of dose that we're delivering to our patients that would ultimately translate into better efficacy at these higher dose levels in larger populations. And that we think would be what's going to be able to differentiate us from our competitors. From a safety profile perspective, we don't have some of the liabilities that some of our competitors have. Our cytopenia rate is pretty low. We do not use prophylactic growth factors. And our agent is -- our drug is pretty well tolerable.

Our next question is from Reni Benjamin with Citizens.

Congratulations on all the progress, great AACR for you guys. Maybe just starting off the first one was for Sabine. The ESMOGIN conference that's coming up, can you give us a sense as to what we should be expecting? Is it just further follow-up from the existing patients? Or might we see some updated or initial data from the cohorts that have been fully enrolled? And just related to that, in the data you presented at AACR, I probably missed this, but can you just talk us through the rates of discontinuation and dose reduction that occurred?

And I'm just trying to look at these data through a lens of maybe Project Optimus. And the second question would be for Paul. Can you walk us through the decision-making process when you determine whether to make a biparatopic antibody versus not? Especially the pan-RAS payload, you have one that does and 2 that don't. I'm kind of curious as to how you guys make that decision.

Okay. No Thanks, Ray. We'll stop you there, too. So maybe, Sabeen, do you want to answer -- raise questions first, then we'll go to Paul.

Yes. So I can talk over -- I think one of your questions was with regards to folate receptor alpha ADC presentation at ESMO. So we will be presenting data with regards to folate receptor alpha expression level from our Phase I dose escalation study. Our data from dose optimization is going to be presented sometime later when the data is mature. We just finished enrollment of that cohort. So with regards to the data that we did present at AACR for our dose reductions and discontinuations.

I mean, I can say that dose reductions are clearly very common with ADCs. And our dose reduction rate was very much expected given the long-term follow-up that we've had. Most of these reductions occurred much later in time while patients were on treatment. And these represent -- so I would say that despite these, we still see a pretty strong efficacy profile, which plays into the fact that many of these patients did have pretty high dose -- high dose intensity in terms of treatment as we went through the dose levels. In terms of discontinuations, I mean, again, this has happened much longer follow-up because our median follow-up was over 7 months, and many of our patients were in follow-up for much longer than that. Thanks, Paul, do you want to take the second part of the question?

Yes, sure. Yes, this is an easier answer for me to answer or easier question. So what we do when we decide what the antibody vehicle is for the payload is we basically screen empirically for what gives us the best delivery and activity with the payload, the best internalization, the best tumor penetration. So if you look at our papers, we show that. And then how -- what we test there is if we have an antibody that we can find a monoclonal antibody that can achieve the optimal level, we go with the antibody. We will test also biparatopics.

So for instance, for 191, when we tested 191, we actually found an antibody that's way better than any other fol receptor antibody that we had at that time and since then has also looks better when we look at other competitor antibodies. making a biparatopic there didn't give us anything. In the case of something like PTK7, there, what we found was that you can get good internalization with looking for antibodies. But based on the structure and the design or the structure of PTK7 is amenable to biparatopic intervention binding has enough kind of binding sites to give you a meaningful biparatopic. And when we looked at those, we found that those could give us activity way beyond what you could achieve with just a monoclonal antibody.

So that's what drove it there. So we're always striving to get the best delivery vehicle, the one that gives us the best penetration. And then another important point that we also bear in mind is actually the pharmacokinetics of those types of molecules. We must make sure we maintain that, and that's something that we also factor into our design of our biparatopics. So hopefully, that gives you an answer for your question.

Yes, it totally does. And just very quickly as a follow-up, the -- you saw a lot of other companies, the competition increasing, especially in PTK7 like when you guys are doing your preclinical evaluations, are you also comparing it to other products that are in development if you can get the structure? Or how do you do your best comparisons?

Yes, we do that actually. And it's actually in that PTK7 poster. There was an original antibody cofetuzumab that was generated that had been in the clinic before. We compared against that. But subsequently, we know the other PTK7 antibodies. So we can make those antibodies and then compare them for their properties. And if you look back at that poster, you'll see that biparatopic also competes those as well.

Our next question is from Stephen Willey with Stifel.

Just curious how you're thinking about the scope of incremental development that you're willing to independently pursue with 191 here. Do you want to generate more data in other tumor types besides ovarian? Do you want to initiate combo trials? I'm just trying to think about the differentiation you've been able to establish to date and then just how you're thinking about the ROI that's associated with additional work on this asset.

Yes. Thanks, Steve. I think it's no different than all the programs we have. I think we've tried to be very thoughtful about staging investments along the way just to make sure we can understand strategic and competitive positioning of that asset, how that might change and how an individual data set might convince us to make additional investment for moving forward. It's very clear with ZW191. -- we're quite encouraged by our dose escalation data initially.

We funded some additional investment in backfill patients to get to the data set we presented at AACR. We think it's a very compelling data set. We moved very quickly to invest in a dose optimization cohort of 30 each as opposed to 20 each of those might have done because we think that will give us an additional data point that's interesting, and we'll let that data mature and go from there. At the same time, we've been very clear that it's a very competitive positioning right now in gynecological tumors, both ovarian in different settings and even endometrial. And so with so many competitors ahead of us, it's hard to see how without a partner, we could move quickly to take advantage of the properties that we see in ZW191.

So at some point, that is going to have to be something that we secure to continue to move forward. And so I think we'll continue to present the dose escalation data next month. We'll let the dose optimization cohort mature. And then we'll have to make a decision then about the extent of how that encourages us to make additional investments versus focusing on a partnering transaction that might allow a partner to take on the further investment to push that forward. So we'll do that. And we do that the same with every program that we have.

Our next question is from Yaron Werber with TD Cowen.

Great. I guess my first question is, as you kind of think about developing the next target, how do you determine between an oncology target or an inflammation target just given the flexibility of the platform? And then secondly, the RAS inhibitor itself, can you maybe give us a little bit more information about was that developed sort of chemistry completely in-house? Is that something that was using kind of a scaffold that's known that you then kind of varied? Where did that agent come from?

Yes. Thanks. Maybe I'll take your first question. I'll leave the second one for Paul. But I think historically, in Zymeworks, all of our initial work starting from zanidatamab were in solid tumor indications. I think when we decided then to also add ADCs to our bispecific antibodies, we focused on solid tumor. I think since then, we've been a little more open to looking at targets that might have some interest in hem/onc as well as in autoimmune inflammatory, and that's why we started working more closely in that area. So I think we do like the breadth -- the additional breadth of opportunity that's provided by having something that goes beyond solid tumors to look for opportunities.

But I think for the most part, we're kind of indifferent as to the therapeutic area as opposed to looking for something that's a real need that we think our technology approach can provide a potential for a superior patient benefit. And so we'll just allow the opportunities that we might have in front of us in our platform to be applied, take it into those therapeutic areas. We don't really predetermine targets in specific areas or quotas or allocations of where we want to spend our time. We're just open to looking at a broader context than maybe we did earlier in Zymeworks history, but we'll just go where the opportunities where we find them. And I'll let Paul answer the second question about the medicinal chemistry for the RAS payload.

Yes. Yes. Thanks, Ken. Yes. So what we did there was we -- to get the proof of concept, we actually did use the RevMed pan-RAS inhibitor. And that gave us indication that we could -- an ADC could work for this type of payload. But what we then did after that was we then generated a whole panel in-house of novel payloads, really more focusing on those payloads for their chemistry properties and their structural properties that, again, were compatible with an ADC. So these are novel structures that we had generated by tweaking certain chains and working off of a structure, but making modifications there that were compatible with ADC and all the properties I just talked about. So these are -- these would be considered novel payloads.

Our next question is from Brian Cheng with JP Morgan.

I'm just curious if you could give us directionally how we should think about your development path or your development strategy for your pan-RAS ADC approaches here. You have different targets attached to a pan-RAS. How should we think about the positioning here? And whether it makes the most sense to go after PDAC first or lung or colorectal, do you have a sense of which is the best target, which one has the best probability of success based on where you are today?

No. Thanks for the question, Brian. I'll let Paul answer that question other than the observation that I just saw at AACR, we don't like to do things one at a time. I think as you saw with our TOPO payload ADCs, we just believe trying to apply the technology to multiple opportunities at the same time, and that's why you saw 3 disclosed at AACR. And I think it gives us some optionality of the ordering and how to pursue prioritization, make sure we pay competitive advantage of what we might be doing versus what others might be. But I'll just let Paul maybe describe a little bit more about our approach and why those 3 and why those indications were selected and what they bring and each of those targets bring something different.

Yes. Thank you, Ken. Yes, that's right. The thinking there, Brian, is we wanted to have ADCs that are really designed with the tumor in mind. So this is a big -- one of our sort of differentiating factors here is that we can target to the tumor. And by having antibodies that can give us coverage across the different tumor types that are mutated by RAS, it just gives us the whole sort of universe of RAS tumors that we can go after. But each one of them will have strength for particular tumor types, as you allude to. But that puts us now in a position where we can think through development strategies and not be restricted by just having one ADC against a particular target.

So regarding where we think we will go, I think that I'm not in a position to discuss that in detail, that's definitely something that we have a lot of option -- the molecules provide a lot of optionality. And again, it could provide optionality through certain partnerships or programs that we take through ourselves. So that's about as best I can answer that. But what I can say is that the design of those, again, the features of those molecules, we thought very much about the antibody and the target because the coverage it can give you within the RAS space. And some of our publications presented showed that. So for instance, the reason we picked PTK7 for lung cancer is that the penetrance of PTK7 expression in lung cancer supports but also in the RAS mutated lung cancer, we see very high penetrance of that tumor marker. So we think we're well positioned.

This does conclude our question-and-answer session. I would now like to turn it back to Ken for closing remarks.

Yes. Thank you very much. So thank you, everyone, for joining us. I know it's been a very busy earnings season this week in particular. So really appreciate you taking the time to listen to our progress. And we very much look forward to reporting progress over the weeks and months ahead. So thank you very much.

Thank you for your participation in today's conference. This does conclude our program. You may now disconnect.

Thank you for standing by. This is the conference operator. Welcome to the Zymeworks Fourth Quarter 2025 Results Conference Call and Webcast. [Operator Instructions] I would now like to turn the conference over to Shrinal Inamdar, Vice President of Investor Relations. Shrinal, please go ahead.

Thank you, operator, and good morning, everyone. Thank you for joining our fourth quarter 2025 results conference call. As usual, I'd like to remind you that we'll be making a number of forward-looking statements during this call, including without limitation, those forward-looking statements identified in our slides and the accompanying oral commentary.

Forward-looking statements are based upon our current expectations and various assumptions and are subject to risks and uncertainties, including those associated with the company in our industry and at our stage of development. A discussion of these risks and uncertainties and uncertainties for you to the latest SEC filings as found on our website and as hard with the SEC.

In a moment, I'll hand over the call to Ken Galbraith, our Chair, CEO and Interim Chief Financial Officer, who will provide an overview of recent business updates. Ken will then hand the call over to [ Bejar Desai, ] our Senior VP of Finance, to discuss our cash position and financial results for the fourth quarter of 2025. Following this, Dr. Sabeen Mekan, our SVP and Chief Medical Officer, we provide progress update on the Phase I clinical trial for 251.

At the end of the call, Ken, Sabeen and Bijal will be joined for Q&A by Paul Moore, our Chief Scientific Officer, Scott Platshon, our Acting Chief Investment Officer; and Adam Schayowitz, our Acting Chief Development Officer. As a reminder, the audio and slides from this call will also be available on the Zymeworks resite later today. I'll now hand the call over to Ken.

Great. Thank you, Shrinal. Good morning, everyone. First, for those on the call, I hope you and your families are all safe and well wherever you are joining the call from today. I'd like to begin by recognizing the results of the Phase Horizon-GA01 trial as presented by ASCO GI by our partner, ASMI, zanidatamab in combination with chemotherapy with or without a checkpoint inhibitor demonstrated a median PFS exceeding one year with a median overall survival exceeding 2 years in the first-line metastatic or locally advanced HER2-positive GEA patients.

This represents a clinically meaningful outcome in a setting where long-term survival has historically been limited and unmet need remains significant. An additional planned interim analysis for median OS for the zanidatamab plus chemo regimen that just missed statistical significance to the initial interim analysis is currently expected by mid-2026.

The benefit was observed consistently across clinically relevant subgroups irrespective of PD-L1 expression, which was studied as an exploratory endpoint in the [ Horizon Go 1 ] rather than a stratification factor, based on these data, we're optimistic to zanidatamab has the potential to redefine the treatment paradigm in first-line HER2-positive metastatic or locally advanced GEA.

We received strong positive feedback from key opinion leaders who recognize both the magnitude and durability of benefit seen in the study against the known and manageable safety profile. Our partners are now preparing for upcoming global regulatory interactions, potential approvals and inclusion in physician guidelines as I'll highlight now.

From a U.S. regulatory perspective, Jazz expects to complete the submission of the supplemental BLA with the FDA in the first quarter of 2026 under the real-time oncology review program in the U.S. zanidatamab has been granted breakthrough therapy designation and for patients with HER2-positive GEA.

We expect these designations will allow for greater speed and regulatory interaction. In addition, the data from HORIZON GO1 study has been submitted for inclusion in the National Comprehensive Cancer Network guidelines, as previously disclosed. We, therefore, share in Jazz' expectations to have zanidatamab approved and launch for the [indiscernible] in the second half of this year, subject to completion of FDA review and approval.

Concurrently, B1 is working towards the supplemental BLA for tisle in the U.S. in the first half of 2026 for a review by the FDA. We believe these steps reflect the clinical relevance of the results and support the path toward broader patient access. Outside of the United States, we believe [indiscernible] will intend to continue working on plans and time lines for regulatory interactions with respect to zanidatamab and Tinsle and GEA, and we look forward to reporting such progress as appropriate.

Our confidence is that map's potential has only increased since we commenced registration studies in 2021 and partnered with Jazz in 2022 as an addition to our existing APAC partnership with day 1. These partnerships allowed us to accelerate the development of zanidatamab and broaden the therapeutic potential in many other HER2-expressing tumors while sharing development risk and transferring cost to our partners.

We believe zanidatamab demonstration of a substantial survival benefit in metastatic or locally advanced GEA, a tumor type where prior HER2-targeted have struggled to material extend outcomes strengthens confidence in zanidatamab's differentiated mechanism of action and meaningfully reduces risk in the broader development program beyond the initial accelerated approval for second-line biliary tract cancer received previously in the U.S., China, Europe and now Canada.

Building on these foundations, zanidatamab is being evaluated by Jazz across multiple mid- and late-stage studies, including breast cancer and other HER2-expressing solid tumors, including in a pan-tumor study. Breast cancer, in particular, represents a setting where additional novel HER2-targeted therapies such as zanidatamab, may provide opportunities to continue improving upon the current standard of care for patients in multiple treatment settings.

In January, Jazz updated enrollment guidance for the EMPOWER 303 trial, in which they expect to complete enrollment in the first half of 2027 with top line data reader expected later in 2027 or in early 2028. Given zanidatamab dual epitope binding and differentiated biology, we're optimistic about its potential performance of the treatment of patients with metastatic HER2-positive breast cancer.

Jazz is also pursuing collaboration with partners to combine zanidatamab with novel therapies. For example, the Phase I trial in combination with [indiscernible] was recently initiated to explore the combination in metastatic HER2-positive breast cancer along with other potential tumor types. Collectively, these ongoing studies are designed to expand the clinical footprint of zanidatamab in indications where meaningful differentiation may translate into durable clinical and patient benefit.

Consensus estimates for peak sales of zanidatamab have doubled over the last few years, indicating a clear potential for zanidatamab to achieve a multibillion dollar peak sales level with progress on our partners towards global regulatory approvals, in first-line GEA and first-line BTC, and accelerated development goals in metastatic breast cancer and other tumor indications, these advances represent significant opportunities to build on the financial value of Zahira for Zymeworks and our shareholders.

This quarter, we reported regulatory approvals for zanidatamab as monotherapy in both Canada and the United Kingdom for the treatment of second-line biliary tract cancer. From a financial perspective, this expansion is expected to translate into regulatory milestone payments for global approvals in GA of up to $440 million as well as further $89 million collectively from JASN B1 upon approval in a third indication as highlighted in our press release. Zymers is also eligible to receive up to $977.5 million in commercial milestone payments tied to the achievement of sales thresholds.

So approximately $1.5 billion in milestone payments remain possible under our collaboration events with JASN B1. As use broadens across indications and geographies, we expect cumulative revenue contributions through both royalties and milestones to scale meaningfully.

As disclosed today under the collaboration with Jazz, Zymer is eligible to receive tiered royalties of 10% to the high teens on global annual sales of Zahira up to $2 billion and 20% on annual net sales above $2 billion. Jazz holds marketing rights globally to Zahira, excluding Asia, but including marketing rights in Japan.

Under the collaboration agent with B1, Zymeworks is eligible to receive tiered royalties of mid-single to mid-double digits on global annual net sales Zahira up to $1 billion and 19.5% on annual net sales above $1 billion. B1 holds marketing rights to Zahira in Asia, excluding Japan.

The strengthening clinical foundation for zanidatamab provides the basis for executing the royalty-backed note financing announced today. We view this as an opportunity to proactively leverage a validated scaling asset to secure efficient non dilutive capital while preserving long-term upside.

Our ability to utilize unique and creative financial structures is important to achieving optimal value for shareholders from our collective assets. I'd like to spend a few minutes talking through the strategic financing with Royalty Pharma and how it fits in within our broader capital strategy using growing visibility into future royalties to fund the next phase of disciplined value-accretive capital deployment.

As announced with our press release today, the agreement with Royalty Pharma provides us with $250 million of low-cost nondilutive capital in the form of a nonrecourse royalty-backed notes. To be clear, this is not a monetization. The full value of the here royalties returns to Zymeworks after the note is fully repaid.

But unlike a traditional royalty back loan, there's no stated interest rate and not all the Zero royalties are needed as security for repayment of the debt. The obligation for repayment of the principal and cost of such capital is serviced from a portion of the Zahira royalty stream itself, 30% rather than 100% with a traditional royalty loan and provides the framework for a longer duration for the debt on attractive terms on a nonrecourse basis.

The structure of the repayment provides an appropriate sharing of duration risk with Royalty Pharma for an appropriate return. We worked very closely with Royalty Pharma to design this unique debt facility which reflects our optimism in achieving approval of zanidatamab in first-line GEA as loans not conditional on FDA or other regulatory approvals, and our hope to zanidatamab becomes the clear HER2-targeted agent of choice for GEA over a long time period.

The agreed structure allows us to securitize the note with only 30% of the Zahira royalty stream until repaid. Therefore, Zymeworks retains 70% of the royalty stream throughout the duration of the term, preserving the majority of ongoing cash flows for reinvestment, unlike in a traditional royalty loan where 100% of the royalties will be utilized to repay the interest in principal and be of a much shorter duration.

As a result, both the net present value and total royalty retained over the life of the asset were superior relative to alternative loan structures we evaluated, and the royalty note incorporates a longer duration profile. From our perspective, this approach allows us to preserve a greater portion of near-term royalty cash flow compared to a conventional structure, thus allowing for accelerated reinvestment.

In addition, all earned regulatory and commercial milestones under agreements with Jason will be retained by Zymeworks, including, as mentioned earlier, $440 million in near-term milestone payments tied to future regulatory approvals of Zahira GEA regulatory analysis for a third indication beyond biliary tract cancer and GEA and up to $977.5 million of potential commercial milestone payments.

Altogether, again, these milestone payments represent $1.5 billion in potential future revenue for Zymeworks. Cestas importantly, Royalty Pharma demonstrated strong conviction in the underlying royalty presented data mab and was highly enthusiastic about including this asset in their portfolio, reinforcing external validation of its long-term commercial potential.

We've been very deliberate about protecting the potential long-term upside of Zahira royalties. Only a defined portion of royalty is subject to this agreement once the cap is reached, the royalty reverts fully to us. We continue to own the long-term upside of additional indications being developed and potentially commercialize by our partners.

In addition, no other future royalty streams that may become available to us like with pasritamig, under our license with J&J or others are encumbered by the royalty note. This transaction ultimately allows us to protect our core as a hero royalties and milestones while accelerating access to attractively priced capital and provides us with the ability to reinvest with a disciplined return framework.

This framework uses both continued share repurchases and potential strategic acquisitions to compound predictable revenues into durable long-term shareholder value. From a use of proceeds standpoint, this capital enhances flexibility across those 2 primary levers in addition to providing capital for our cash runway, which already extends beyond 2028.

First, we retain the flexibility to continue to repurchase shares opportunistically. Our stock continues to trade below what we believe is the future value of underlying assets, the ability to opportunistically reduce our share count at an attractive discount, while the value of future cash flows expand is a very powerful way to drive growth of long-term total shareholder return on a per share basis.

As of today, we've utilized approximately $62.5 million of the $125 million share repurchase program authorized in November 2025. We as we continue to see the ability to drive long-term TSR at a compelling discount given the current market price of our shares. The proceeds of this financing will provide us the flexibility to continue to invest in our own businesses prospects.

Second, we have the ability to deploy capital into the acquisition of high-quality assets and platforms where we see synergy in one of many factors such as strategic fit, royalty potential, differentiated science and favorable cash or tax attributes. Because we have internal research and development expertise, we can attribute value to development stage and partner programs differently than traditional royalty companies or traditional R&D-focused biotechs.

We're not just evaluating assets for an income yield. We're evaluating probability of technical success, regulatory pathways and commercial positioning. We believe this gives us an informational and analytical edge to pursue multi-asset acquisitions where we can attribute value to assets in a different way.

Importantly, as we deploy this capital into additional royalty-bearing assets, we believe scaling and diversifying the portfolio has the effect of reducing the structural discount often applied to smaller or single asset royalty streams.

We intend to deploy the capital dynamically across royalty asset and platform acquisitions as well as our ongoing share repurchase program as a flexible allocation framework that can adjust based on opportunity and market conditions. In addition, we have the continued ability to generate additional royalty milestone streams from our wholly owned R&D portfolio as an alternative to external acquisition.

To summarize, this transaction with Royalty Pharma provides us with additional capital on attractive terms in a unique structure to achieve our strategic and financial objectives with no equity dilution and optimal strategic flexibility. We would expect to continue to utilize creative structures for capital, partnerships and acquisitions where we believe they can be useful to building long-term value for our business.

As part of our strategy, we see acquisitions as a potential way to add to our existing royalty portfolio, where our acquisitions also allow us to feed our R&D engine. Internal discovery will always be important Zyme but having the ability to source high-quality external innovation can enable us to continuously bring differentiated science into a development infrastructure that we know how to operate efficiently.

Our R&D organization is built to advance assets to meaningful value inflection points. whether those assets are internally discovered programs or externally acquired ones, the goal is to focus on assets that have the potential for meaningful patient benefit and future partnerships. Once we reach that stage for either internally or externally acquired assets, partnerships will allow us to translate scientific progress in the long-duration economic participation through royalties and milestones without assuming the full capital burden of late-stage development and commercialization.

Over time, that's what we expect will build and diversify our emerging royalty portfolio. So in practice, we hope that acquisitions will expand, what R&D we work on should help derisk and advance those programs and partnerships have the ability to convert that progress into recurring capital-efficient future cash flows.

That closed loop is central to how we aim to scale innovation into a durable economic engine. We look forward to providing updates against these capital allocation objectives I'll now hand over the call to Bijal to walk through our financial results for the fiscal year 2025, along with our current financial position.

Thanks, Ken. Total revenue was $106 million for 2025 compared to $76.3 million for 2024. The increase for the year was driven mainly by achievement of significant clinical and regulatory milestones an exercise of an option under our collaborations with J&J, B1, GSK, Daiichi Senko and BMS. This growth was partially offset by a decline in development support and drug-related drug supply related revenue from Jazz, reflecting the transition of responsibility for certain zanidatamab clinical activities to Jazz under our collaboration agreement.

Overall, operating expenses were $198.5 million for the year 2025 compared to $213.4 million for 2024. The decrease is primarily due to a nonrecurring impairment charge recognized in 2024 and related to our discontinued program, zanidatamab zovadotin, partially offset by a slight increase in research and development expenses. The increase for research and development expenses for the year was primarily due to an increase in unallocated costs largely related to noncash stock-based compensation expense as well as consulting and rent expenses.

The increase was largely offset by a decrease in R&D program costs as a decrease in expense of late stage and discontinued programs, including zanidatamab, zanidatamab vedotin and ZW220 more than offset the higher investment in early-stage clinical and preclinical programs, including CW209 [indiscernible] ZW-251, ZW-191 and ZW171 until ZW-171 was discontinued.

General and administrative expenses were consistent with prior year as an increase in noncash stock-based compensation was offset by a decrease in salary and benefits due to reduced headcount as well as decrease in consulting, rent and information technology expenses.

Net loss was $81.1 million for the year 2025 compared to a net loss of $122.7 million in 2024. The change for the year was primarily due to an increase in revenue and decrease in total operating expenses and in income tax expense, partially offset by a decrease in interest income.

As of December 31, 2025, we had $270.6 million of cash resources, consisting of cash, cash equivalents and marketable securities, compared to $324.2 million as of December 31, 2024. Based on current operating plans and assuming full execution of the $125 million share repurchase plan, we expect our existing cash resources as of December 31, 2025, when combined with anticipated regulatory milestone payments of $440 million related to the potential approvals of Zahira in GEA in the United States, Europe, Japan and China as well as the net proceeds from our nonrecourse royalty-backed note to fund our planned operations beyond 2028.

This anticipated cash runway does not take into account any contribution from additional future milestone payments or royalties related to Zahira, other current licensed product candidates or contributions from future partnerships and collaborations.

For additional details on our quarterly results, I encourage you to review our earnings release and other SEC filings as available on our website at www.zymeworks.com. In January 2026, the company announced an adjusted gross operating expense framework, non-GAAP reflecting disciplined capital allocation across research and development and general and administrative activities of approximately $300 million over a 3-year period ending December 31, 2028.

Despite the royalty-backed note financing announced today, we expect continued discipline in our approach to general corporate operating expenses with no change in our prior guidance for the 3 years ending 2028. The company currently expects adjusted gross operating expenses in 2026 to be approximately 20% lower than in 2025 excluding the impact of any acquisition-related expenses or new partnerships and collaborations.

A reconciliation of historical non-GAAP adjusted gross operating expenses to the nearest GAAP metrics can be found in our earnings release and on our Investor Relations website. I will now pass the call over to Sabeen, who will provide a brief update on our clinical development program for ZW-251.

Thank you, Bijal. Following my update last quarter, I'm pleased to report that the Phase I study of ZW-251 in glypican-3 expressing tumors, including hepatocellular carcinoma is progressing as planned. The trial is actively enrolling and is expected to ensure approximately 100 patients through dose escalation and optimization with sites currently open across North America, Europe and the Asia Pacific region at ASCO GI in January, we presented a trial in progress poster outlining the study design, including a starting dose of 3.2 milligram per kilogram in the dose escalation portion. .

This starting dose reflects a data-driven decision informed by our prior experience with 191. In that program, which utilizes the same link of halo technology and a drug-to-antibody ratio of 8, we began to observe early signs of activity milligram per kilogram dose level after starting at 1.6 milligram per kilogram. ZW-251 incorporates a lower drug-to-antibody ratio 4, which supported our confidence in initiating dose escalation at 3.2 milligram per kilogram. We look forward to providing further updates on ZW-251 as dose escalation advances. In parallel, we expect to share additional clinical data from ZW-191 as the data set from our dose escalation study matures as the program progresses through dose optimization. I will now hand the call back to Ken to provide for closing remarks.

Thank you, Sabeen. As you can see on this slide, we have an eventful year ahead of us with multiple value-generating catalysts, this year, we hope to execute across each element of our novel strategy and illustrate the integration of the various development and strategic initiatives. This means delivering clinical progress on our wholly owned R&D portfolio, continued progress on development and commercialization of Zahira and pasritamig by our partners, expanding new partnerships and collaborations and demonstrating tangible outcomes, including the potential for strategically aligned acquisitions by year-end. .

In January 2026, we announced our R&D priorities for 2026 and beyond, including our intention to continue conducting Phase I clinical studies for ZW-191 and [indiscernible] in 2026. In addition, we announced that beyond 2026, we expect to advance our advanced research efforts on multi-civic antibody and engineered cytokine platforms, funded partially with early-stage partnerships and collaborations.

INDs for our currently wholly owned multispecific programs, [indiscernible] remain on track for submission in 2026. As usual, we expect to have representation of our platform and pipeline throughout scientific conferences in 2026, including at AACR in San Diego in April.

A significant priority for Zymeworks in 2026 is to integrate new partnerships and collaborations into our existing wholly owned portfolio to share funding and risk with partners. Look forward to providing progress updates throughout the year on these expected catalysts on the continued execution of our evolving strategy.

I'd like to end the call with this thought. One of the clearest illustrations of our model today is the journey of a single drug zanidatamab during my tenure as CEO since 2022. Zani was designed to develop in-house by our team. We advanced it through rigorous science and validate our asymmetric platform. Early in my tenure, we made the decision to partner strategically rather than sell it outright generating meaningful upfront payments structured with milestones and royalties to ensure we capture potential upside as the hero for our shareholders.

The upfront proceeds funded the expansion of our wholly owned R&D portfolio over the past 3 years, strengthen our balance sheet and contributed to the value creation reflected in our share price over time. Now we find that zanidatamab may be a more successful new medicine than we anticipated back in 2022 with the ability to generate a much higher level of peak sales. and the structure of our partnership provides a meaningful value of future cash flows over a long time period.

Today, that same asset is again serving as a catalyst. This time, through the royalty note financing announced today to unlock additional nondilutive capital. We're able to accelerate the reinvestment of that capital into new value-generating assets, including potentially externally sourced innovations that meet our strategic and return thresholds.

In many ways, it's a full circle moment. One internally generated medicine, helped build the portfolio we have today is now providing the capital to expand our business further with the ability to generate additional sources of royalties and milestones, both internally and externally. What's more, so we may have the ability to do this again with pasritamig, which continues to demonstrate a highly encouraging safety and efficacy profile in Phase I combination regimen, including docetaxel, as presented last week at ASCO GU as well as assets from our existing platform partnerships or other royalty-generating assets that we may choose to bring in or that result from new partnerships from our wholly owned pipeline.

This transaction with Royalty Pharma underscores something fundamental about our model. We understand how to develop differentiated medicines. We also understand how to underwrite cash producing assets. Very few bits at companies can do both well over the long term.

The ability to originate innovation internally and allocate capital externally allows us to compound value in a disciplined way, using science to create high-quality assets partnerships that generate capital and utilize that capital to acquire and scale the next wave of royalty generating opportunities for long-term shareholder returns.

With that closing comment, I'd like to thank everyone for listening, and I'll turn the call over to the operator to begin the question-and-answer session. Operator?

[Operator Instructions] Our first question will come from the line of Charles Zhu of Life Capital. Charles.

Hello. Good morning, everybody. And congratulations on all the progress and the updates that you presented to today. My question here is regarding your [ GPC3, ADCZW251. ] It sounds like you'll have about 100 patients through dose escalation and optimization. Any qualitative comments around how the enrollment data collection is going? And also, at what point might to make an internal decision whether or not to bring this forward in-house and how far versus partnering development for this particular asset?

Yes. Thanks. I'll start with that, and I'll see if Sabine has anything to add later. But I would expect this would follow along very similar fashion to our Phase I program for ZW191, which is still obviously playing out.

So I think, obviously, one, we had a very quick operational execution on the clinical study, we went from first patient in to first data presentation in about 10.5 months, which I think is related to the structure of how we think about clinical execution in early-stage studies and the geographic footprint we have.

If you look on clinical trials, you see we've got a very similar clinical trial footprint for ZB-251. It is a different tumor type, different treating physician group. It's a little early to make predictions about that. But I think you'll see the same cadence of -- we're not going to give guidance about when an initial data disclosure we made. It will probably be exactly like it was last year for when we think we have something interesting to provide, we'll do that in a peer-reviewed setting, and we'll likely not give guidance around that until right before it's necessary to in terms of a public abstract or a public oral presentation.

I think once we get through an initial presentation, it's a little bit easier with the cadence. So we've indicated we're going to have some ZW191 data update coming soon from the full dose escalation data for that. But I think for the initial data presentation for ZW251, will let our clinical folks do their work. I think it's recruiting nicely the way that we expected.

And I think once we have something that we want to say, we'll submit an abstract to a peer-reviewed medical meeting and happy to present the data there for all to see. And I'll just see if to be her anything else he wants to add on that in terms of guidance.

I think the only thing I would say is that the enrollment for ZW-20251 is enrolling there -- is proceeding very nicely according to our plan. As Ken mentioned, it is a different patient population but we are very excited with this molecule. As you know, in dose escalation, the time frame often depends upon the number of dose escalation cycles and follow-up and how quickly you see responses.

I mean, the ADC that's generally very quick. But with a Phase I program, we generally want to wait until we have a wholesome data set to present. And as Ken mentioned, we will do so at a peer review conference when we get to that point. And congrats again on the progress.

Our next question will be coming from Brian Chen of JPMorgan.

First, just curious on the timing of the royalty backed financing. Is that driven by something that you already found on the BD side, the accelerated that need to secure a royalty-based deal? Can you help us define the accelerated time frame on an acquisition here? And then I have a quick follow-up.

Yes. Thanks, Brian. Thanks for the question. I think the timing for the royalty note completion with Royalty Pharma has much to do with the current commercialization cycle of Zani and the cost of capital that's available to us right now as much as it does to where we see near-term use of proceeds. So I wouldn't read too much into that.

We obviously see a compelling opportunity to continue to buy our own shares and reduce share count over a period of time. We think it's a really good investment for our current shareholders, and we're halfway through the current authorized plan, and we'll continue on that at the current share price. So this prod a little bit more balance sheet to do that.

We did want to add to the balance sheet also just to make sure that we were able to take advantage of opportunities for acquisitions we see in the marketplace and whether that's licensed assets that bear royalties, whether it's development assets or whether that's other platforms that are available to us. So we do want to have some capital available for that.

We're active, obviously, in looking at those opportunities and assessing them, but we have a very disciplined approach, a very high standard for using that capital to bring other assets inside the company. And we'll just let that play out without getting too far in front of ourselves with respect to guiding around time frame or anything else.

But I think it's just as much about looking at where Zani is a development cycle, the cost of capital is available to us right now. And so we decided that we would complete that exercise now. And we'll just let the transactions that follow, whether it's additional share repurchases or potential acquisitions, just let that follow and then explain those as they're completed.

Got it. And looking ahead into April, can you give us a take of what to expect at AACR from your internal R&D side? What could really move the needle there for the entire portfolio?

Yes. I think on the scientific side, I'll just let Paul maybe give you a little bit of foreshadowing. Obviously, none of the aspects are public yet, so we'll have to wait until that standpoint. But maybe Paul can talk a little bit about what we've been working on that we're excited about to talk about in April without getting too definitive.

Yes. Thanks, Ken. Yes, Brian, as you know, we have both multi-specifics and EDC capability in-house. We've been applying that to oncology. So that's the AACR. That's where we've been traditionally over the last few years, having a pretty high presence, and we intend to have a high presence again this year on the ADC front, we did allude to a new payload technology that we've been developing.

So speak specifically too much about that, but that technology is built on a similar philosophy and design that we use to develop the top payload that was a clinical validation with the 19 the fold receptor and what the 251 program is built on. So you can expect to see progress and updates on that technology. Again, we're also pushing forward on our multispecifics. So you can also anticipate potential news on those on that front as well. Other than that, I can't really say too much on the specifics .

And our next question will be coming from Yigal Nochomovitz of Citigroup.

[indiscernible] is an asset you've been talking about more frequently recently. I would just love to get your thoughts on the recent data and wondering whether the profile that's emerging in the Phase I is exceeding your expectations?

And then on PTK7, the biparatopic ADC, just broadly, could you talk about the learnings from Zane and how much of that was translated into the design of PTK7, please?

Thanks very much, I think I'll let Paul answer the second question on PTK7 and then maybe let Adam answer the question on a ready made because he was at asked over this past week. So maybe Paul, can you the second question first, and then Adam a follow-up.

Yes. Thanks, Ygal. Yes. No, so PTK7 is a target that we've been very interested in. We see it peering nicely with both [ Topo ] and also with the [indiscernible] technology. Their PTK7 has an attractive tumor expression profile. Lung cancer, in particular, is attractive, but there are other indications as well. .

So our effort on that, though, has been really to -- as part of our philosophy on ADCs, we think about the [indiscernible] also think about the front end of the antibody. And so really, how do you best deliver payload with an antibody-based modality.

And for PTK7, here, what we thought or what we felt from our data was that a biparatopic actually gives better delivery than just a mono-specific antibody.

So there, we did deploy the same technology that's used in zanidatamab. Our [ azametric ] technology, which allows us to pair different binding specificities, different epitopes that are targeting PTK7 and what's very important is that when you do build those you screen multiple different specificities to get the right pair that actually gives you the biparatopic effect that you want, which is the enhancement of internalization.

But you also have to think about other features as well, such as the CMC properties, the PK properties of that payer. And that learning that we got from an did put us in good position to understand then how to develop that for PTK7 biparatopic. So that's an overview of that, Yigal.

And then maybe on the past Certainly, lots of enthusiasm and excitement coming from ASCO this past weekend from J&J, physicians largely agree that very well-tolerated drug that has a lot of potential.

J&J's enthusiasm is obviously clear with multiple registration trials that they've publicly stated and disclosed at least some of the details around them. So we're certainly enthusiastic about it. We think that the safety is a key aspect of the differentiation. Of course, the efficacy is very impressive so far, but obviously still early days. So a lot of enthusiasm on that front, both from us from J&J and the physicians in the space.

Our next question will be coming from Eva Fortea of Wells Fargo.

Congrats on the progress. Thank you for Stepping back to your brother strategy, what types of assets are you looking to bring in through acquisitions, new specific therapeutic areas or development states you're looking for -- and how should we be thinking about the cadence of these deals? And just as a follow-up, you mentioned cash run where it extends beyond 2028. Any potential acquisitions accounted for in the past run rate?

Yes, I'll just answer your second part of your question first, and I'll pass it over to Scott to talk a little bit but the first part is and wants to do that. So there's no acquisitions included in our cash runway forecast. There's also no new partnerships or collaborations which could be inflows as a part of that.

So as we complete transactions, whether they're acquisition related or partnership or collaboration related or if this progress of existing collaborations, we'll update that cash runway. Obviously, we're well beyond 2028 when you look at the milestones coming in from just GEA and the reduction we've taken in R&D spend this year over last year, which will continue.

So I think we feel very comfortable with the runway that we have and the proceeds that we have available to allocate, whether it's continuing share repurchases or exploring some of the acquisitions that we'll talk about. And I'll let Scott provide some more guidance around that, if you'd like.

Yes. Thanks. Look, I think there's 2 questions embedded in that, which is sort of therapeutic areas for dealmaking and sort of the timing and cadence of deals. We think a lot about the world class port engineering team we have in Vancouver. It's a team that made Zani developed as a metric that led [indiscernible] and has an amazing ADC platform and innovative immunology assets. .

So we really have an incredibly high conviction that, that team will be developing the Nexus Ani. And what I mean by that is an innovative medicine that drives really dramatic patient benefit. So given that expertise in-house, we think a lot about that as a resource and how it impacts our right to win when we're looking at deal making.

So we feel like we have an advantage in there, but we're certainly not going to restrict ourselves to the areas of that oncology and immunology, but it does factor into sort of the hurdle rate on return that we might expect when looking at deal making.

Your second question was sort of when will we do deals, and we're just not in a position to give explicit guidance on deal timing. I think I can tell you sort of our core values around deal making, which is, one, as I mentioned earlier, opportunities that we understand well. I would say number 2 is that we have a real clear reason to be the right buyer and a right to win that deal.

And then we overlay that with a very strict return threshold the deal-making externally is always done and weighed against the opportunity to own more of our existing portfolio, which we have a very, very good sense of its value at all times, and any capital deployment externally is going to be weighed against the IRR achieved from those share repurchases.

And obviously, the arrangement that we can put at Royalty Pharma today is a part of that strategy. It's a longer-term duration, which I think lets us have a little bit more strategic flexibility about the types of assets we might look at and the payback we need to have from those assets.

And obviously, accessing this capital from multi firm in this structure gives us something that's low, low, low, low, low double-digit cost of capital, which I think just allows us to think about target returns in a different way than maybe traditional biotechs might think about.

And our next question will come from Yaron Werber of TD Securities.

This is Stephen on for Yaron. One question about the 20% plan for lower OpEx, maybe a little bit more color on how that's going to look. And then in terms of fulfilling that 25 million share repurchases, any sense of a cadence on that?

Yes. I'll take those 2 questions. Second, on the cadence of share repurchases. Obviously, we did a $60 million share repurchase starting in 2024, which took about 12 months and that was really funded entirely by milestones that were received from Jazz and B1 for the BTC indication approval. Right now, we authorize another $125 million in November.

We're obviously halfway through that pretty quickly. And in addition to the balance sheet we have now and the Royalty Pharma financing of $250 million, we obviously have expectations of another $250 million in capital being available to us upon GA approval in the U.S. based on our next Jazz milestone.

So we're fully feel fully resourced to move as quickly as opportunities allow ourselves to move on the remainder of that $62.5 million as well as consider authorizing further before then. Right now, given the underlying value we see in our assets in the future, it's a very compelling discount for us to think about reducing share count for our shareholders through investing in our business and returning capital through share acquisitions.

So we'll continue to pursue that as long as that compelling discount continues to be available to us. I think if you look on the spending side, if you look over the last 3 years, we took the upfront payment from Jazz, which is about $375 million back in the end of 2022, and we put that to work over a 3-year time period to build the current wholly owned portfolio that we have right now.

I think given that we've now established a pretty reasonable portfolio, the cadence of continuing to do that is going to slow down a little bit, and that will result in some reduction from last year to this year's spending.

In addition, we've said we think now is the time to start to integrate partnerships and collaborations into that wholly owned unencumbered portfolio that we've built, both clinical and preclinical assets, which is quite broad, obviously, between the multi-specifics the dual engine cytokines and the -- and our next-generation ADCs.

So I feel quite comfortable that we still have a robust R&D operation inside the company even at a slightly reduced spend level. And as we manage that ourselves, and bring in partnerships and collaborations, which will bring in funding towards that, that the direction of R&D spending will be downward, but we'll still have a very viable R&D operation and we'll continue to build unencumbered assets in combination with potentially earlier-stage partnerships, unlike what we've done in the past 3 years in building a wholly owned portfolio.

So a different strategy, different purpose, but we still think we have a very robust an innovative R&D operation that integrates well with the thoughts around the royalty assets that we have in Zahira and eventually pastime and things that we can add from outside the company inside, whether they're unpartnered assets, additional novel platforms like Azymetric or assets that are already licensed, which will carry some royalty or milestones in the future.

And our next question will be coming from the line of Stephen Willey of Stifel.

Just a couple on the IND submissions for this year. So I know the development of DLL3 targeting therapies has grown increasingly crowded. There's a number of different modalities out there the target is only really relevant to a couple of indications.

So can you just speak to the target product profile you're hoping to see with 209 and Phase 1 and just how you're currently thinking about strategic interest here? And then also just curious why you're targeting an ex U.S. regulatory submission for ZW1528. Just wondering if that's predicated on enrollment kinetics? Or is that due to the ability to move faster through dose escalation.

Yes, I can answer the second question, and maybe I'll pass it over to Paul to talk a little bit more about DLL3 and what we're trying to accomplish, not just with 2019, but on the broader sense in the [indiscernible] platform. But no, I think both these assets are quite interesting from our standpoint. We're obviously interested in considering strategic interest and potential partners who want to move along with us into the clinic at this stage.

That's something that we're continuing to have discussions about 1528, we just see the ability to move much more quickly in early clinical studies in an ex U.S. environment. I think if you -- it's not unusual if you look at respiratory expertise in clinical studies, there's quite a bit of it in both the EU and the U.K. separate lake is not in the EU, but there is a lot of respirator expertise in Europe and in some cases, abilities to go faster than the U.S. in our clinical study.

So the same way we've gone faster with [indiscernible] by having integrated sites in Asia Pacific and Europe to go along with the U.S. and we're doing the same thing with 251 with a pretty big ex U.S. footprint. I think may have the ability to access the expertise that's necessary and go quickly in early clinical studies outside the U.S. rather than U.S. And that's what we're looking at doing for that. And I'll pass the deal all 3 questions on to Paul.

Yes. Thanks, Ken. Thanks, Stephen, for the question. Yes, I mean, just as a reminder, the way we've designed 209 is that it incorporates co-stimulation directly in the trispecific. So it's a trispecific binding DLL3, CD3 and CD28. So although the DLL-3 space has gained a lot of attraction because it is a very viable target. We feel that we have a truly differentiated molecule and we'll be the first with that type of design all-in-one molecule.

And the thinking and the design of that molecule took a lot of work to get that balance of CD3/CD28 so that we only engage CD28 after we've targeted CD3. So we think that will then drive the benefit of that is that it then drives a deeper T cell response. T cells are more sustained in their ability to maintain activity over a period of dosing.

And you can even see that reflected that desire to have that component reflected in other people's T cell engager designs where they add in CD20 as a separate molecule, we think by putting it into a single molecule it can really give you a lot of benefit out of the gate. So there, we've pushed that forward with DLL3. There was also a lot of learnings that we made from our 171 program in the delivery, the subcu the step-up so we think we can accelerate quite quickly based on those learnings.

And we have Sabeen's team well positioned to execute on that based on the efficient execution of the 171. So we're well positioned. So we think we can execute and get to inflection data quite quickly overall. Behind that, of course, that same mechanism design. We also are very excited about applying it to other targets.

We did have a nice presentation at SITC, where we talked about how we can expand the target base, both in solid tumors hemo [indiscernible] as well as sort of more gated strategies as well. So there's a lot behind that platform on other molecules that we're also developing.

But we're very excited about 209 is a proof-of-concept molecule as well as really providing benefit that we think you can get beyond existing T cell engagers by having that beneficial co-stimulation and design.

Maybe just a follow-up. So if the advantage of Costin then is to improve durability of response, at least that's what I'm intimating from your comments, does that then inherently require you to take that through a later stage of development to be able to prove out that durability beyond the Phase I all-comers trial?

Yes. Yes. I think I should state durability of response, but also the breadth of response. So we also feel like there are certain patients with T cells and solid tumors that maybe don't have enough punch from just a CD3 engagement. So we think both the bread and the Geberit of response we hope to enhance. So we think we should see signals during the dose escalation, if our projections are in line with what we actually execute and see. But you're right, there may also then take time for longer benefit to see the duration of response, I should say, as we get into expansion phases of that part of the study

I would like to add in the setting that -- as Paul mentioned, we are -- given the additional mechanism of action, we are expecting an improvement in response rate as well as the duration of response which would translate into a progression-free survival in this setting and then may be additional patients who respond that typically don't respond to [indiscernible] or other DLL3 agents that are in development.

Our goal is -- I mean, given the fact that we already have agents approved in this setting, we could easily compare our efficacy based on existing molecules, which may help us in evaluating our efficacy and our safety at an earlier stage. Without even taking it into a later stage of development.

I mean, we could choose to take it later as we would like, if we wanted to.

And our next question will be coming from the line of Mayank Mamtani of B. Riley Securities.

Congrats on progress on several fronts, including the royalty pharma node and the continued repurchase -- if I may ask Horizon question quickly, clarification of this next OS analysis that's coming up. Are you aware that, that data could constitute as a major BLA amendment once you have that available. And also I was curious if you could touch on the rationale of the combination with zani study looks like a multi-indication study that could also have head-to-head data versus TDX or DDN. And then I have a quick follow-up.

Yes. I think on the question related to the median OS readout. I don't think we want to comment about any regulatory strategy related to that. Obviously, Jazz has stated very clearly on their call last week that they believe that they have sufficient data from the current Horizon GO1 study to file in the U.S. and obviously, they've initiated that process. The timing of the outcome from the second analysis of median OS and the ability to add that to an existing filing versus file that later to add to an approved label is something I think Jazz will talk about at the time when that data is available and not ahead of that from a regulatory strategy perspective, if that's okay. .

Sorry, can you repeat your second question again, or I didn't hear quite early.

Yes, the Zoom the study of the how do [indiscernible], it looks like a multi-indication study, not just breast cancer and some head-to-head data versus 3DX1 might be generated there. So just curious on the vision there of that study.

Yes. So said, I don't think you want to go much beyond what's available on clinical trials, but obviously, that's an approved TKI now. And Zani as well, so the ability to to look at combinations of 2 approved agents and indications that they've not yet been labeled for is a pretty standard practice.

And I think we've always known that the combination of Zani and TKI could be very interesting in multiple indications. I think we're just waiting for the next -- I think Jonas waiting for the next generation of TKIs to be approved. This one is pretty interesting from our perspective, having followed all of them for some time period. So it wouldn't be surprising to look at a range of indications in that combination. And then after understanding the data that come out of the combination studies and deciding what the next steps are from there.

In most up to let Jazz and BI and data drive those future decisions.

Okay. And on the GBCI liver cancer program, could you just confirm if patients are on it for high GPC3 expression or not? And if you are able to comment on how much validation and even differentiation we could show versus the GPC3 CAR T data that you've seen.

Yes. I'll let Sabeen answer that first part of the question and the second part, maybe Paul can comment if he feels the need.

For 251 GPC 3 programs, we are enrolling all levels of GPC3 expression. The target tumor types that we're enrolling in this patient population is hepatocellular carcinoma in lease has very high levels of patient with GPC3 expression. According to the literature available, more than 90% of patients have some level of expression. So we're fairly confident that most of the patients we enrolled are going to have expression levels.

The other thing is we will be evaluating GPC3 levels during the course of our study for all of our patients. And in the end, do a comparison for the efficacy with regards to a compression level once we have enough data.

Yes. And I would just -- I think your second part of your question was how does it compare to other modalities. And I think certainly, GPC3 has been a target of high interest in liver cancer. There has been some success with CAR-Ts, but they have their own challenges, CAR-Ts.

But certainly, that does bode well for the value of the target. We think we are really quite competitive and really 1 of the first to really think about using ADCs and the data that we have from the 191 program using the same top of payload really gives us a lot of conviction that we're on the right track with the tolerability and the efficacy profile that showed there. But of course, we'll wait for the data.

And our next question will be coming from the line of Jon Miller of Evercore ISI.

Speaking me in here and congrats on the financing. One on the -- one more on the strategy side and the financing side? Obviously, between this financing and the expected royalty -- expect milestone that's coming from Jazz this year, you've got a lot more flexibility. Ken, I know you spoke about balancing capital allocation across a number of different things.

But is it fair to assume that this -- that today's financing opens up larger potential BD opportunities to you guys? And can you give a little bit of commentary on maybe what's size of targets you're looking at, given the cash position, the expected cash position once all of this is cleared out?

And then sort of relatedly, you talked a lot about keeping OpEx discipline even though you've gotten the new capital. Is it fair to assume that if you do bring in development stage assets as part of your BD activity, that's going to come with additional OpEx liability and you're going to have to spend against those assets to generate value off of them? Can you give me a little bit of a bookends about how I should be thinking about what that liability could be?

Yes. No, great questions, as always, Jon. I think the way we feel about the current financing is, again, we've got the right amount of R&D spend that we want to have right now. I think we've made a really great investment in the last 3 years in the wholly owned portfolio, and that cadence is slowing down a little bit.

And I think integrating the partnership's Collaboration is the right thing to do with how all of those programs have deserved to go forward will get funded. I think that's great. We've obviously been able to continue to invest in ourselves by continuing our share repurchase and even a much more accelerated rate than we did when we started this in 2024.

And it's allowing us to return capital to shareholders from milestones and commercial revenue from Zahira, usually as we started in 2024, a little bit in advance of maybe receiving all of those milestones. So those are all great. I think obviously, a part of this financing strategy now is defined an appropriate cost of capital with a long-term duration that allows us to think about the types of things that we'll invest in.

I don't think it makes us think about larger transactions necessarily. It does expand the amount of capital that might be available so that as we find those that achieve our target hurdles for IRR, we can hopefully, you're able to finance those and do those quickly, which is a part of having that capital be.

But I don't think it really makes us think about expanding necessarily to larger transactions, it could be more transactions that could be able to get them done more quickly because the capital is available right now. And I think from our standpoint, we're also trying to match the types of assets we're looking at and when those might appreciate in value versus the duration of liability that we now have to be paid back out of royalties.

So we chose intentionally to pick a long-term duration liability and that was created by only securitizing 30% of the royalty against the loan makes it a longer-term duration liability. Just give us a little bit more thought that we can look at assets that don't have to have an immediate payback or income associated with them immediately to cover the financing cost. I think we feel comfortable where we've done that.

So I think we've used the liability side of our balance sheet to give us a little bit more strategic optionality and flexibility in the type of assets that we're looking at. We're obviously anxious to execute against this part of the element of our strategy so we can show our shareholders what we meant by our strategy and what types of things we should expect that might take you multiple transactions to understand how we're trying to accumulate assets externally inside the company.

One aspect of that with respect to capital discipline is if we are to bring in an asset which has some R&D investment required as a part of that, that's going to have to come from the same capital allocation pool as the acquisition. So that will be one of the defining factors is looking at what additional R&D investment is required to move something forward to get appreciation versus acquiring something that is already licensed and someone else is covering the development costs.

That's a part of it. But I would expect the capital allocation to acquisitions would also have to cover any incremental spend in R&D over and above the current base that we're establishing this year versus last year, if that makes sense.

It does make sense. And then, I guess, if I can sneak in one more. To dovetail with that. I know you discussed the potential to do more with the internal pipeline, the wholly owned pipeline as it reaches the appropriate stage of development.

And I acknowledge that you're not going to give guidance on any particular asset. Can you talk about broadly across the wholly owned portfolio at stage of development, what are the key data readouts that you think unlock the ability to do partnerships with them or monetize those assets in the sort of way that you've been up pioneering.

Yes. Well, I mean it's always -- when you talk about this, it's always most obvious to look at the asset that's in the lead or has the most clinical data around it, but that's not necessarily where you might see the first collaboration or as much -- the interest on our side on the collaboration.

We have as much interest in understanding how we can move some of the early-stage programs forward. We have a really interesting construct in ZB-209, looking at the all 3 in a trispecific format. We have an incredible portfolio of targets behind that, that are really interesting in other solid tumors.

In hemoc, even thinking about autoimmune. So trying to move those earlier programs forward with partnerships is as relevant for us in discussions as getting clinical data and trying to spec our partnership post clinical data or trying to bring in a partner to start funding at IND because it reduces our risk or shares costs.

So we're test in all aspects of that. So it would be fair to say that we're open now maybe that we weren't in the past 3 years, but open now to looking up and down the portfolio in different therapeutic categories in different product formats, whether it's AC tri-specifics, our dual engineering chemokine or silicon program, which we have more than ZW1528 available to us.

So it might be the early collaborations are things that get done before looking at later-stage partnerships based on clinical data. And we're just being open to understand how we integrated in with our wholly owned portfolio right now and still have some unencumbered independent assets of our own as a result of looking at different types of partnerships and collaborations, we can integrate into that portfolio.

Our next question will be coming from Asthika Goonewardene of Truist.

I got 2 quick ones for you and then a big picture one. I'll start with the 2 quick ones. Just quickly on ZW191 but if then you present the data, can you tell us how much of that 6 and 9-milligram dose levels will be backfilled to about 10 to 12 patients?

And about what amount of follow-up you anticipate having on hand when you present that data? And then the other quick question was just building on Stephen's previous question. Given the toxicities, and this is for specifically to 209, given the toxicities that we've seen with CD28 engagement wouldn't improve safety of ZW209 that the near-term signal that the [indiscernible] mechanism is working and but perhaps be an inflection point for you to consider strategic optionality I'll give you my longer question afterwards.

You have a longer question than that. Okay. Maybe I'll let Paul answer the second part of your question about all 3. And then I'll give being a little bit of chance to think about how much of that First part of your question we want to talk about because hopefully it's some going abstract coming up, so I may not want to get too far ahead of that. But I'll let Paul answer your DLL3 or CD28 [indiscernible] question first.

Yes, that's a great question. I'm glad you brought that point up because I think that is very but that could well be a very important inflection point is understanding the profile of the molecule. We've again, I've emphasized that the CD28 should only engage point CDC engagement and trigger signaling, and that all is still contingent on engagement on DLL3. So it has the same classic pattern or design as a T cell engager.

And we think that careful design should be reflecting the tolerability of the molecule maintaining that localized activity in the tumor microenvironment or DLLT is very selectively expressed in tumors. So it's such an attractive target for this approach.

So I completely agree with your sentiment, and I think that was an important point to bring up.

SSabeen?

Yes. So I will start with ZW191, when we presented the data at the triple meeting. We had mentioned that we completed dose 1 escalation at that point in time, and we're planning to start dose optimization. Dose optimization is proceeding very well. And so we are very clear with the number of patients that we have in PARP1 of our study since this all already completed.

And since we completed that in Q4 of last year, we think that by the time we present the updated data, we're going to have reasonable follow-up to present both the safety and efficacy of those patients.

I would also say that the part dose optimization enrollment is proceeding very well as well. And it's according to our plan. We will we are hoping that we will provide an update to you about the completion of enrollment sometime in the near future.

All right. Ken brace yourself for the longer one. No, no. It's -- okay. It's just a long one. So payload resistance continues to emerge as an issue for ADCs. So big picture, how are you guys thinking about this very real problem that the field is going to have as ADCs become even more commonplace and how are you planning on deploying capital to bring in new assets and build your own capabilities to address it?

Yes. I just -- I'll start tragically and then let Paul comment because we've been thinking about this a lot. I really like the 519 payload that we developed back in 2022, 2023, that we now have on ZB-191 and 251 and also ZBA220, which is IND-ready. So I think we really selected a great payload in the [indiscernible] analog class, and we're very proud of the data we're seeing right now because I think it's showing that there's some benefit from the work that we did to select a proprietary payload with very specific characteristics.

And is providing some differentiation from clinical data you're seeing from [indiscernible] or other generic payloads, that's great. There's obviously been a tremendous amount of overcrowding in that class in multiple multiple targets, especially in some of the therapeutic areas when we started out, we were looking at gynecological cancers, thoracic, both non-small cell, small cell and head and neck as well as GI indications for our ADCs and T cell engagers.

And it's safe to say that in the -- on the gynecological cancer side, some of the initial indications, especially P-rock are quite crowded with different targets and different payloads approaching. There's still opportunities, I think, in some earlier settings. So we've been thinking really about the next payload. We have been working for some time period to try and find another class of toxins that might be interesting.

I know it's been reported that Daiichi Sank has been in the same thing. It is hard to find a payload that's as effective that comes from that cap disease analog class. And that drove some of our efforts to think more about small molecule approaches that might be better targeted with ADC constructs or a dual payload strategy to maybe do something a little bit differently.

And I think Paul can talk a little bit about our work and that will be the focus of some of our presentations at AACR coming up in April. Paul, do you want to add to that?

Yes.totally, Ken. I think the challenge about the space and the business in the total space, I think there, we really thought carefully about how we designed ours. So as Ken alluded to and as been reported in the 191 data. We feel like our care and design and tolerability as well as efficacy does put us in a good position so that we can get out front with those molecules.

We can combine, hopefully, in the future and sort of differentiate on the clinical strategy. Behind that, though, I think we for sure are looking at next-generation payloads, where else do you go to broaden out the opportunity for ADCs.

We are really empowered with the success we've seen in our ability to deliver payloads in small molecules, and we want to then just translate that into other loads. So for what 1 as we talked about, will be the Pan-RaS. We think we can do it also for other small molecules as well or toxins and pantoxins. So that work is also proceeding. I think, really thinking about the tolerability profile, the linker stability, the potency of the payload, the balance there.

And how -- also when you start thinking about dual payloads, how those toxicities interplay. And again, thinking about the combination and the bystander and the overlap of toxicities is very important. And we are thinking about that. So I think there's a lot of opportunities still in the ADC space through -- but it really depends on careful design and really balancing pragmatically what should work.

Thinking about PK, thinking about bystander activity as well as very importantly, is also how you deliver the modality that you use to deliver. Is it a monoclonal antibody? Is it a bispecific? Is it a biparatopic and at Zymeworks, we're really well positioned to also think about that in of the ADC as well with our proton engineering capability.

So thanks for the question.

And our next question will be coming from Reni Benjamin of Citizens Perfect.

Congratulations on all the progress. Ken, maybe I'd love to kind of get an idea as to -- as you think about future buybacks, can you maybe take us through the criteria of these future buybacks? And your thoughts on kind of when enough is enough as we're thinking about modeling this out, to the future?

And then maybe one for Sabeen. As you think about the HCC indication, what other additional indications may show promise given GPC3 expression? And what kind of efficacy criteria would you want to see that would guide you into either expansion cohorts or expanding into these other indications?

No, that's great. Sabeen, do you want to take the GPC3 question first.

Yes, I can take that. As is the tumor that they highlighted for GPC3 expression. Also there are other tumors that express at high levels of GPC3 expression, we have evaluated the most pretty well and are going to be including some of those patients into our study.

And as we move forward from species signal, we may potentially include others into our development plans. Some of these tumors included some gem cell -- rare germ cell tumors -- there are certain lung cancer patients who express those patients. We're evaluating them very carefully with regards to including them into our development plan.

There are certain pediatric tumors and sarcomas. So we have our eye on that. We just wanted to start our development plan with the tumors that have highest expression which is ADC and also ADC is an area of very high unmet medical need, particularly after first-line patients relapsed after first line.

And we think that given the wide therapeutic window that we observed with RZW191, we wanted to apply that in the ADC population as well. As you know, there is evidence to indicate that [indiscernible] working ADC, the main concern there is having the therapeutic window and what we've seen with 191 gives us a lot of confidence that we should be able to have that both in terms of safety, which is critical in this patient population because, as you know, a lot of the HCC population have abnormalities in the liver function and cytopenias.

But given the fact that we serve with BW 191, we are fairly confident that the ADC should be well tolerated in this patient population. And also from an efficacy perspective, the current standard of care treatment in all really treated HCC population, the response rate that would be a little bit lower than 15%.

And we're expecting that we should be doing much better than from our standard of care and with patient population.

That's great. Great mean. And Reni, just coming back to your question about shareholder repurchases, which we really see as a return of capital. So I think we started this back in 2024 with the idea that we were going to start to see commercial revenues from our investment in Shiran that started with approval milestones in 2024 in the U.S. and another 1 in 2025 in China.

And we were very clear that we felt it was important to return that capital to shareholders, and we've chosen to done that through repurchasing shares just because it does provide a -- there's a compelling discount for us right now between the underlying share price and what we see as the future cash flows that can be derived just from Zahira on its own, not counting pasritamig or other parts of the business.

And that compelling discount shows us reacquiring those shares at those prices and retiring them can really be an effective way to boost total shareholder return over the long term. That always has to go along with continued investments in the numerator part of that equation, which is continue to build value in the business, which we have been doing through our significant R&D investment in our portfolio behind Zahira, so we're doing both of those at the same time reflect, and I think it will always be the case, I think, in November last year when we saw the Top line data from Horizon GO1.

We felt very comfortable this was going to be something that should be approved based on the current data set and approved in a time frame that would bring in the additional milestone that we expect later this year. From Jazz for GEA, the royalty transaction we did with Royalty Pharma today is a way of just bringing forward some of the commercial royalties from further in the future to today just give us optionality to continue to buy back shares.

So we're halfway through the current $125 million authorized share program. We think that's a compelling discount, which we think provides a good investment for our shareholders to buy back the number of shares. And over time, as the business continues to build and become more valuable, that will be valuable on a per share basis.

So we've done that more aggressively starting this November. I think a part of that was just what we felt was a disconnect between a great outcome for [indiscernible] and getting more optimism and confidence of our next randomized study, the EMPOWR 303 in metastatic breast cancer. I know it's a different study. It's a different tumor type. We've got a lot of confidence out of the large randomized Horizon GL1 study outcome to understand that zanidatamab could be a more powerful HER2-targeted agents.

Is that a data map in combination GA and that could read over into metastatic breast cancer and other indications eventually. So we probably had a higher confidence level on the cash flows related to the outcome of that study then maybe we felt it was embedded in the market price. And so it just gave us an even more compelling discount to acquire shares, which is why we've been doing it very aggressively.

We'll continue to do that. And when we reach the end of the $125 million authorized plan, then we'll speak to our board decide again the size and cadence of the next share buyback. But as of right now, I think it's a very compelling investment in the years to come. I think our investors will benefit by this aggressive share purchasing by looking at the compelling discount against what we view as the future cash flows from not just the here and as we add additional assets, whether royalties or partnerships, run the portfolio, that's going to drive that even further and reducing that share count is just a way that's been proven to generate outsized returns.

We obviously have capital imitations. We need to make sure we fund our R&D efforts. We need to make sure we have a strong balance sheet, which we do right now. But as more royalties and milestones come in, that's just generating additional free cash flow for us that we need to figure out how to allocate.

And right now, allocating it to share repurchases has been pretty hopefully thoughtful capital allocation, but a pretty compelling thing to do. And if we can add some strategic acquisition to the internal R&D refunding, I think the mix of all 3 of those will evolve over time.

And right now, we'll just continue to return that capital from commercialization of Zahira back to shareholders through those share repurchases.

And I would now like to hand the call back to Ken for closing remarks.

That's great. Yes, thank you, everyone. I appreciate your time and listening to us today. We obviously had a very eventful 2025 at Zymeworks here. At the end of last year, finally reading out the Horizon GO1 study after 4 years from starting that study back in 2021, we were so pleased with the results for patients, and it really -- we felt energized our business. .

We've had a great start to 2026 right now, and I'm expecting a very eventful and full year for us. I think the Royalty Pharma transaction we've announced today with the $250 million in note financing is a very unique and creative financing structure, which I think can be a catalyst for us for additional strategic change, and we look forward to reporting on our progress against that.

And the other events we lay out today in the weeks and months ahead and look forward to giving those updates to you along the way. So thank you very much for your time, and please be safe, wherever you are in the world. Thank you.

And this concludes today's conference. Thank you for participating. You may now disconnect.

Good afternoon. Thanks for joining us for another session at the 44th JPMorgan Healthcare Conference. I'm Brian Cheng. I'm the senior biotech analyst here at the firm. On stage, we have Zymeworks. I will now pass the mic to their CEO, Kenneth Galbraith, for a short presentation, followed by a live audience Q&A. Ken, welcome back. The stage is yours.

Great. Thanks very much, Brian. Good afternoon, everyone. I'm really pleased to be back here at JPMorgan this year on a Wednesday afternoon. We really had an amazing transformative year for Zymeworks, including the readout of the HERIZON-GEA-01 study for zanidatamab that happened last week. So from Thursday of last JPMorgan to Wednesday of this JPMorgan, we've really just transformed the company and also thought about very carefully how we need to evolve the strategy of the company going forward to build on the success we have so far for just continued success in the company. So I have a very thin slide deck that I'd like to highlight some of the transformations that happened during the past year and maybe some of the highlights of how we're evolving the strategy to make sure we continue to build shareholder value from this point forward in the company and then open it up to questions from Brian or the crowd. So let's do that as quickly as I can for you all this afternoon.

Here's our forward-looking statement, I advise you to take a look at that. I will try to make forward-looking statements where I can. So please read our SEC filings related to that. Again, just to think a little bit about Zymeworks about where we find ourselves right now. We definitely, with the value of Ziihera underneath us now as an approved agent, -- and now with the HERIZON-GEA-01 data that came out last week, clearly looking like it's going to be the new standard of care in HER2 overexpressing GA population and replace Herceptin after a dozen years as a standard of care. That's amazing. And we're evolving our strategy to understand how we use that value to our advantage to create even more value for our shareholders in maybe different ways than just going back and trying to discover and invent amazing medicines like zanidatamab in our labs, which we did 10 years ago and bring that to market with partners. We have different ideas about how our future success might be a pathway that's different than what we've done to date. From a people perspective, all the success we've had to date is from the people. So we're really focused on making sure that we have a good group of folks who are really aligned on the strategy that we have with the evolving strategy. We've made some changes recently in the leadership of the company from the Board through the management team over the course of evolving that strategy that started last year and has continued this week. So I'll highlight some of those.

For our approach, we have a really interesting thought around the way to create value for our shareholders, which sits somewhere between continuing to be an innovative R&D company, but at least recognizing knowledging the value of the royalties and milestone streams we expect in the future from Ziihera, but also other agents like pasritamig from J&J, which is now in Phase III trials and how that value can be utilized to our advantage at the same time as continuing to be an innovative R&D company. And we think the combination of those 2 things together is a pretty unique framework in biotech, and we think can create a lot of optionality for us in how we think about the future business, the ways we can create value for our shareholders and the long-term nature of what we can now focus on with a strong financial foundation built off the back of an amazing drug, zanidatamab, as you saw last week in the HERIZON-GEA-01 study. Happy to answer questions about that as we move forward. I have to have some numbers in the presentation. Again, we've been at this for quite a while. zanidatamab was a 10-year success story, not overnight, of a great invention made in our labs in Vancouver, which has moved forward now to approvals in second-line biliary tract cancer, but more excitingly, a larger patient population as shown by the data last week, which now Jazz and BeOne will put in front of regulators on a global basis. So really excited. We're not new at this. We have an amazing proficiency in technology platforms to design complex biologics, whether it's antibody drug conjugates or multi-specific antibody therapeutics. And when we think about that, we think about something that's more than a bispecific. So we're not new at this. We've shown our ability as protein engineers to build amazing medicines like zanidatamab. I think pasritamig is going to be another one of those. We're excited to do that. We do this on a global basis. And we do this in conjunction with strategic partners who have the ability to move these innovations forward to market in a way that maybe we can't do on our own, but we're still able to capture a lot of that financial value from that success for our own shareholders.

We think right now, we've proven kind of the execution of how to conduct partnering in the context of a very important molecule. We brought Jazz Pharmaceuticals on as a partner back in 2022 to go along with BeOne, our partner in Asia Pacific. I think that was very important to bring along somebody who had deeper pockets financially than we did to provide capital at lower cost of capital, had some development capabilities that were even beyond our own approach and the ability to tackle something that was probably a much higher peak sales potential product than maybe we realized when we invented it. At the same time, we're able to capture not only just capital upfront to run our business, but keep a nice share of the success in zanidatamab along the way. So we feel we're actually really sharing financial and success that Jazz and BeOne as our partners are experiencing. And this value has grown significantly from 2022 to today because of advancement of the product closer to the market, but also the realization this might be a higher peak sales potential opportunity that maybe we realized back in 2022 when we started this. So that value appreciation has finally started to come through in our listed stock price. It doesn't come all at once. And we're going to continue to look at the value that's going to appreciate from zanidatamab continuing to be successful and other agents coming along behind that. So we think its financial foundation gives us just a different way to think about our business that might be longer term in nature than a traditional biotech, a little bit less worried about having a cash flow issue than maybe having an excess cash flow issue, and that's really what we think is why we think about evolving the strategy further from there. Just an example, we don't give our own guidance around sales estimates. That's not what we do. We'll leave that to Jazz and BeOne to do that. But if you just look at Wall Street consensus, analyst estimates from back at kind of close to the end of 2022, when we completed the Jazz partnership to today, you can see that not only we're much closer to the market with zanidatamab, but the potential of that due to the clinical studies that we're conducting and looking at the competitive environment is getting much better. And we do expect and hope that this will continue not just with the HERIZON-GEA-01 data and the potential to help patients in GEA. There's obviously a number of other clinical studies being undertaken by Jazz and BeOne, which we hope will find other settings for zanidatamab to be useful for patients and provide a clinically meaningful benefit to them. And we think this is only going to get better and better over time. And we're sharing that success with every increased dollar in peak sales, where every time we get closer to that peak sales potential, we see that value run through our business, and hopefully, it does run through our stock price every once in a while in this marketplace.

Beyond that, we're just not a one potential cash flow stream from zanidatamab. We have a number of other legacy deals that are moving forward. The most significant one is pasritamig, which is the KLK2 T-cell engager that J&J made on our Azymetric platform. We have a financial stake in that because of that. That's advanced really rapidly from not knowing anything about that target to seeing great Phase I data at ASCO to be now putting right into Phase III and having J&J I think that could be a $1 billion to $5 billion peak sales opportunity for them in their prostate cancer franchise. I hope that's not the last one to come out of these legacy partnership deals. A number of other these are really right at the stage where KLK2 was 18 months ago. So we think it just adds to the future cash flow stream of milestones and royalties we expect to have in the company. We're not afraid to hold those longer term. There's a lot of value in holding those through key development events to get to peak sales. So we're going to hold on to those and get that value attributed back to our shareholders and run the business realizing. We start to look like a big royalty portfolio inside an innovative biotech. That's okay because that could be a very valuable construct for the way we think about running the business.

Different ways and pathways to return and compound value for our shareholders. So I think we found ourselves last week exactly where every biotech wants to be, presentation of a large randomized global study where it looks like the agent you invented 10 years ago is going to be the standard of care in a meaningful population with a peak sales potential that's very significant for us. It's where we all want to be, but very few biotechs get to that point. Sometimes on biotech, that's the only success you might have. From our perspective, we think we can compound this one success in the multiple successes, but we need to do it in a slightly altered strategy. So not trying to do it in exactly the same way by handing capital back to the same scientists, the same lab bench with the same platforms, hoping to do it exactly the same way. So replicating that success is not always proven to be something you could depend upon. So giving ourselves more opportunities to be successful in the future by developing agents that maybe we didn't invent. We've never done that before. So maybe accessing a product outside our organization, bringing it in using our development capabilities, using our BD capabilities to bring it at a certain price, develop it and move forward. Everything we've done so far, we've invented, we've developed, we've partnered. It doesn't always have to be that way in the future strategy. We're still investing in internal R&D. We'll supplement that with working on products we can access outside the company. In addition to that, we have a really valuable royalty stream from zanidatamab. We hope we have that from pasritamig. Those royalty streams can become much more valuable if they're surrounded by something that looks like a royalty portfolio. That's what additional royalty company would do. So not only can we access products that are unpartnered that we can work on that we didn't invent. We can access products that we didn't invent or didn't partnered, but from a business development standpoint, maybe attribute value to that over time beyond the person who holds that right now. So we have multiple pathways to compound the success we have right now to more success in value and eventually always return that to shareholders over time.

Partnering is a big part of it. Always has been. It always has been in biotech since I've been here for 38 years. It's how we get value out of scientific innovation sometimes. And if you structure those partnerships at the right time in the right way, you can get your fair share of value without having to go from being an R&D company to then be a commercial entity. So we have a very valuable construct right now without requiring a sales force to commercialize our innovations that we make inside the company. That can be a valuable construct. It doesn't mean we won't ever do it. But right now, the most valuable way for us to build the company is to focus on using partners to move scientists forward sometimes with their capital, with their development capabilities, with their commercial forces and make sure we share that success in a fair way. So partnering will always be a part of what we do. Zanidetumab is partnered. We have legacy assets the last 3 years, we built a wholly-owned portfolio of really exciting clinical and preclinical assets across a broad spectrum of antibody drug conjugates and multispecific antibodies. That's wholly-owned by us right now, gives us a lot of optionality about how we integrate partnerships in that to get value. We'll always keep unencumbered assets in our R&D portfolio, but we have the time frame to go from being 100% wholly-owned to being maybe a little bit less than 100% wholly-owned and that's what we're starting to execute on this year.

Operating from a very strong financial position. Obviously, with the cash we have now and the financing availability for us, especially the milestones that will come in from Jazz and BeOne on eventual GA approval, which we do have to wait for to receive. We think our cash runway runs beyond 2028 at least. And from our standpoint, cash runway may become irrelevant very soon for us as we'll have an excess cash flow problem as opposed to worrying about cash flow, which is traditionally how we run biotech company. So a very privileged position, got to use that strong financial position to our advantage.

R&D outlook, we are at the heart, scientific innovators, that will never change. Having a good business strategy, financial plan is really relevant. But without innovations like making zenadatimab, having a Azymetric platform to make things like pasritamig, plus other things we have in our wholly-owned portfolio. It's everything to us, surround it with the right business and financial construct is important to get the value out of it. But we are, at our heart, innovators. We think we're great [ protein ] engineers. We think we've shown that so far with the agents that are now advancing and that will never stop. That will always continue. Generally continues some on our own, some with partners, that will continue as a strategy as well. So we end up with this differentiated pipeline of assets that we have right now, different stages, again, all wholly-owned right now, except for zanidatamab on the legacy programs, really excited. We're already adding to this. So I think you'll see some scientific presentations this year which you'll clearly indicate, we're continuing to innovate, hopefully, at the front edge. I mean don't forget, zanidatamab is really the only biparatopic or bispecific HER2 antibody in the HER2 space. No one else has been able to duplicate our efforts. It's clearly differentiated. And for this past 10 years, we've been working on it. We haven't seen people try to do exactly the same thing, maybe it's too complicated, maybe Azymetric is really special and only our platform can design something that provides the meaningful clinical benefit you saw last week at the Moscone Center when comparing zanidatamab to Herceptin, the standard of care. We'll continue to search for differentiated areas using our own platforms and our own way of thinking about discovery and drug development. So really transformative last year, for the company. I tend to, hopefully, Brian, be back here next year presenting maybe on a Tuesday and talk about the scope and scale of how we're going to transform the company this year. So we have an evolving strategy, a great financial position. We do not intend to waste that. It's very important for us to compound one success in biotech with multiple successes. So you will hopefully see when I come back here next year, execution in every element of the strategy, so you understand the scope and shape of what we're trying to accomplish, that's different than maybe what we had last year as a strategy, really looking forward to reporting that and hopefully exceeding doing what we did last week with zanidatamab results, just exceed expectations. And that's really important to us. I have the team to do that. I have the capital to do that. I have the substrative R&D efforts to do that and the partnerships to do that, and we look forward to reporting that next year. Thank you. Happy to take questions.

Great. Let's start with the Q&A. For those who are in the audience, if you have any questions, feel free to raise your hand for those joining us virtually, you can also submit questions on the portal.

So I want to start off with more of the broader strategy question. When you think about directionally moving forward with a royalty-driven model, how do you balance self-sustainability and also building out the pipeline? Is being self-sustainable important? And also just how do you really think about risk tolerance?

Yes. And again, I would -- like I wouldn't describe this as royalty driven, although that probably comes from our communications. So probably [indiscernible]. But there's nothing wrong with a large royalty and a successful product, which grows over time, provides a great amount of financial independence from equity capital markets or partnering other sources that we usually build biotech companies with. I think what we're trying to get to with the evolving strategy is, everyone is so focused on making one success in a biotech company over their career lifetime. We're at that point. Making that first success is really difficult. We know that 1% probability of discovering a compound and having it get to market. So we've been able to fortunately do that some way, somehow over time, do that. Now when we think about what do you do next in combining -- compounding success, doing it exactly the same way is no guarantee that those odds are going to improve for you. So we've decided to take a different path than maybe thinking about monetizing the royalty and selling that off and not wanting to hold those and just focus back on the core business of being great scientific innovators. We think by holding those royalty streams and milestone entitlements for a long term, that's the best way to get the value out of them for our shareholders. It can be a source of capital to either return to shareholders or fund something. It's the lowest cost of capital we can get to run a biotech. So why would we split it apart? Why we monetize this point for a much bigger discount? So we'll be scientific innovators, and we'll focus on holding those royalty streams in longer term and trying to enhance both parts of that business. We don't need to choose between being an R&D company or having a commercial interest. And that's really the way we think about the royalties and milestones. I think combining those 2 opens up all sorts of possibilities of how you build value for shareholders. And it's more limiting to think about just being nothing against being a royalty company, but a royalty company or being an innovative biotech. We think they work together really well in constructs. And I think we found a strategy where we can make that work for our shareholders and ourselves and how we build this business and have multiple chances to be successful in the future. Could be innovation, could be from business development practice when we think about the royalty or accessing external products.

Any questions from the audience?

Quick question. So how do you see the competition from trastuzumab deruxtecan or the opportunity, for example, you see trial -- head-to-head trial in HER2 breast cancer versus trastuzumab deruxtecan?

Yes. Good question. This is the 4-year anniversary of me becoming the CEO of Zymeworks I can't believe it. But it's 4 years in. I think 4 years ago, when I assessed zanidatamab, I was probably much more concerned about competition back 4 years ago. What we were facing there in the GA population itself was Merck adding pembro to tras chemo potentially being the standard of care in this patient population in a way that we couldn't beat. And at that point, T-DXd looked like it was going to be the first-line treatment for every patient who had HER2 expression, whether it was HER2 high or HER2 lower HER2 nulls. And that was something that we probably worried a lot about in 2022. We weren't really ahead of those people. We were kind of at the same place as T-DXd and behind Merck. If you fast forward to today, the outcome of Merck study and pembro tras chemo and KEYNOTE-811 did not satisfy all the needs of replacing Herceptin was something that would push innovation. Yes, it would label for some part of the population, improved care, but not in a way that we couldn't get there with zanidatamab, we thought. T-DXd is approved in second line GEA, if you think about that indication. So it's very useful second-line treatment. They have struggled to find combinations in first line to move ahead with that took longer. So now their Phase IIIs are reading out much later maybe than ours are. They have 2 Phase IIIs going with different combinations. One is still projected to read out to 2028. And the other one last week at ACCO GI move back from 2028 to 2030. So still competitive threats. Unfortunately, for patients with GEA, they are not a host of innovations on the HERIZON to do what I think we did last week with the zanidatamab results where we just provided a new benchmark for the standard of care in that patient population. If it lasts for 12 years, the way that Herceptin was a standard of care that no one could beat that, that would be great. So I think in GEA, the competitive environment is a lot more in favor of zanidatamab now, partly because of the data we generated because we need to be providing the best numbers for PFS and OS, which we saw last week. And our competitors haven't been as successful as we may have thought, even though we're ahead of us. And everywhere we go, we see Merck and AZ and wonder how you can meet them. I think looking at other indications in the HER2 space for zanidatamab. Obviously, T-DXd plus PERJETA is the first-line standard of care in metastatic breast cancer. I'm not sure who beats that with anything, but we don't have to be the first-line agent to do -- to find a setting there that's really attractive. And so obviously, Jazz started the EmpowHER-303 study looking at utilizing zani plus chemo versus tras plus chemo in [indiscernible] HER2 patient population, that's really interesting for us. We think we now have a randomized study result in a large population where zani shown to be a superior HER2-targeted agent to tras. Hopefully, we can repeat that in other tumor types. We have some thoughts that we may be able to, a little bit more confidence given the fact we have one positive clinical trial, but we'll have to wait for that trial reads out. Fortunately, that study, as Jazz indicated this week, is going to read out sooner than we had originally intended. So I think from a competitive standpoint, we're actually in a much better position than maybe we got credit for back in 2022 and maybe that's why the peak sales potential was lower, as I indicated consensus. Maybe it's why we're trading at $5 a share because we were trying to out maneuver, Merck and AstraZeneca first by ourselves with just BeOne, but then with Jazz's help, we've been able to transform and get a much better competitive position 4 years later. I always worry about Merck and AZ and others. But I think our position with the power of zanidatamab as illustrated by the clinical data last week, puts us in a really strong position, not just in GA, but I think overall with HER2-expressing -- other HER2-expressing tumor types.

I think I saw a question on this side. So maybe just while we're on zani. I'm curious, what's your take on the performance of the triplet compared to doublets? Are you surprised by the PFS difference. And just any explanation that you see that could attribute to the difference that we saw?

Yes. I mean, I mean obviously, the data was presented, there's lots of KOLs who provided that advice. I mean, from our perspective, when you unblind a large randomized study like that, you're always going to find things that are surprising based on the evidence that you had in preclinical and clinical data. Sometimes, unfortunately, those differences turn out to be better for patients. And that's certainly what we thought when we saw that data, I mean I think the clarity in the data set and how we designed that study was pretty evident. I certainly believe that we support the statement that zanidatamab is a better HER2-targeted agent than trastuzumab in that patient population and PD-1 expression does not change that. It's not relevant for making that statement. Certainly felt that if you look at the comparison of the triplet to the doublet. And again, this was a 3-arm study where the purpose was not to compare the doublet to the triplet, but you can certainly see the evidence of contribution of tisle makes to the doublet. You may not see the median PFS, certainly see it in median OS because the triplet was [indiscernible] already and the doublet is not yet. So it's obviously a more powerful result. The median DOR, you definitely saw that in the doublet, the median DOR was 14 months. KEYNOTE-811 regimen was 11 months or certainly better than that. The triplet median DOR was almost 21 months. That's unheard of in this patient population, never seen before. That's an extra 7 months between the doublet and triplet if we were allowed to compare them, which is not -- we don't do statistically, but we can't ignore that. If you look at the 24-month PFS, there's a benefit of tisle in that over the doublet. Look at the 30-month OS, there's a benefit of adding tisle on top of that zani chemo regardless of PD-1 expression all the way through. So there's certainly something about zani that seems to be superior to trastuzumab in this patient population. There's certainly something about the combination of tisley and zani that gets you an extra benefit over just using zani with chemo. Sometimes that benefits beyond the median or beyond the regulatory endpoint, but it's there and it's very evident physicians who will be looking at that and how they apply zani to their patient population. So I think the data clearly shows the benefit. And again, it's up to regulators to decide what that means for labeled indication around the world, and it's up to physician groups, including NCCN in the U.S. to decide what advice they're going to give to physicians about how to incorporate zani into the current algorithm for treating first-line GEA.

I guess just to kind of -- I don't know if you can comment on how we think about patients who are PD-1 positive versus negative in this GA setting where -- do you think that physicians will pick doublet or triplet in dose who are PD-L1 expressing, what is the consideration here since they've been using KEYNOTE-811 tripled for some time?

Yes. Good question. I mean, I think the data clearly shows that zani is a superior HER2-targeted agent in GA population over trastuzumab. That's what we think the data supports. Obviously, there's a regulatory process underway and physicians have to make their decisions, too. But it clearly supports that, whether it's in the doublet or the triplet, that's what you should be using in a regimen. The contribution of components of tisle is very clear in the data and I think very significant increments. I think physicians can use that to make their information. On the PD-1 expression, we always believed, and this was true before the KEYNOTE-811 result, that PD-1 expression wasn't relevant for a HER2-targeted agent like zani to get a positive result in a patient that you could do that regardless of PD-1 expression. It was always our belief. That's why we designed the study the way we did. We didn't stratify for PD-1 expression. That's the way it was when Herceptin was approved and used. It's used across the levels of PD-1 expression. If you look at first-line biliary tract cancer treatment, it's PD-1 plus GemCis regardless of PD-1 expression. It was the labeling of KEYNOTE-811 regimen of pembro tras chemo that caused this thought that there had to be 2 different populations. We felt that didn't matter to get a benefit for zani. The data certainly confirms that. What it also confirms is that the combination of zani plus tisle gets you a benefit regardless of PD-1 expression as well. And that was certainly evident in the median OS, where the median OS was consistent regardless of PD-1 expression, whether you're positive or negative. So we had a belief about that. We ran the study that way. I know that's contrary to the last thing that got labeled. It doesn't mean that's the way the population exists. So maybe with a tras regimen, there's a difference in PD-1 expression, you need to treat it differently. Maybe with the combination of tisle and zani or zani on its own, it doesn't matter because it is a different mechanism. It's a unique molecule. So I think it's going to cause some rethinking around physicians and regulators about interpreting the results of zani, tisle and the HERIZON-GEA-01 study and understanding how that should be supported. The data supports the labeling that I know Jazz and BeOne are going to claim. And so maybe we're right, maybe PD-1 doesn't matter, but only matters with the regimen tested in KEYNOTE-811. But shouldn't matter to -- didn't matter to tras, it doesn't matter as zani. So we just have to wait out the regulatory processes and those physician recommendations.

Maybe just going back to the royalty question. You spoke about potentially finding other royalty stream as well. Just kind of layering on top of this royalty stream that can come from zani. And also, hopefully, your J&J partnership works out, you also layer on top and another royalty stream, right? So how urgent do you see yourself in identifying another royalty transaction. And monetizing royalty has been one of the go-to vehicle for a lot of the biotech in -- specifically in the recent years. So maybe just can you also talk about how your approach is different compared to what others have done and perhaps also the difficulty in finding a transaction in these days.

Yes. No, good question. And again, we're not adverse to monetizing a royalty eventually. It's just as of today, I don't believe we can get a fair value from a monetization traction where we see the fair value of Zani. And our forecast of what we think the fair value of Zani, is to us and the risk-adjusted NPV of future milestone royalties is higher today than it was a week ago. not only for GEA, but increased confidence that maybe there's other HER2-expressing tumors that zani could become the standard of care or a great second-line choice. And so we think that's higher. So I'm quite happy to sell the royalty milestones for zani to someone if I get paid more than fair value. I just don't think I'll get that. So we're always open to it. So until that time exists, we want to hold on to it. If we want to hold on to, we want to manage it. So that zani royalty is a really high-quality license that I know royalty monetization players like to have. It doesn't mean I can't hold it and get that value for my shareholders. If pasritamig can go from Phase III studies now through approval, and be the agent that J&J thinks it can be, that's another high-quality royalty. If I can find other situations like that, where I can bring those high-quality royalties in, I'll do that. I'll do it in a different way. I mean, it's not that holding the royalty of zani was not without risk. I mean we just lived through the unblinding of a fairly significant global study in HERIZON-GEA-01, which unlocked a lot of value for us from the future royalties and milestones. I didn't pass that risk off to my partners. I held that risk. I mean we did not sell zani outright in 2022 to any party. We held onto it and held on to royalties and milestones to earn future success. But we had to live through completing a Phase III study and looking at the result and realizing why this worked out. This is worth a lot more. So the appreciation and value that we got from zani was because we're willing to hold it through a key development risk. That's what we do is biotech. It's not uncomfortable for us. And as long as we have a good upside in those royalties and milestones, that's worthwhile. I'm going to do the same thing with pasritamig. I'm going to hold that through the promise of, hopefully, multiple Phase IIIs reading out and the promise that, that delivers something to J&J's prostate cancer franchise that maybe is at the high end of their level or maybe is above their peak sales potential. And I'll get that appreciation and value eventually once I get through those events. So we're quite happy with that. We're quite happy finding quality development stage assets, getting them at a good price, holding them through a key inflection risk and getting the benefit on the other side. We've already done it. So what we do in biotech, it's not uncomfortable. It's very uncomfortable for traditional royalty monetization players who think more from a financial perspective and are interested in paying for something where there's commercial risk, but maybe not development risk. So very few of those players will look at those development stage assets. So we think the types of things we're interested in will be things that there's not the same ready market as there might be for something like a zani, it just has to be a high-quality asset that looks like it has the potential of Zani and pasritamig. And so we need to find those. And they're out there. And they might have more value for us in our portfolio construct than they are sitting in a biotech company who can't use it to finance anything. It's just sitting there waiting for it to mature. It's probably not a part of their strategy. I'm going to hold on to my royalty streams longer term, so I can hold on to others. Pay a fair price but hold on and get that value attributed to me. So I think there's a way that we can unlock some of the value of those things that are sitting maybe in biotechs or other institutions and I can put them on my balance sheet because that's what I'm willing to do.

So in other words, you're willing to take the developmental risk, yes, then -- the more so than the more old-fashioned royalty companies. And yes, let's say leave it at that. So maybe just turning to folate receptor alpha ADC. What's the next step there? And what do you want to see?

Yes. Well, I mean, our first clinical data announcement we made at ENA last October showed that's potentially best in class. So we've collected more data since then. We're continuing to collect data. The full dose escalations is done. We're in dose optimization. I'd love to have that data confirm to me that we're still potentially best-in-class or I'd like to be probably best-in-class from potentially. So we need to wait to see that data just to make sure that we properly characterize tolerability and that the activity that we saw early on can be confirmed with more patients and more mature data. We're really excited about that aspect. We did guide that you'll likely see more data on that program in 2026. We didn't say when, we didn't say what conference because that's just the way we operate. But I think you'll see more data, hopefully confirming the promise that, that could be the best one. It's not the first one, but it could be the best one. And then from our standpoint, that sounds great. But we're behind 5 or 6 other people and we need to catch up, and that's hard to do as a biotech yourself. It's not just a question of capital, but it's a question of also having resources to move quickly to catch up. And catching up will create more value from that product. So I think we're interested to see that data, confirm the potential. If there's somebody would like to join us as a partner and pay us fair value and give us upside because we do cherish royalties and milestones in the future not just upfront cash because I have an excess cash flow problem already. So happy to look at those opportunities where a partner could help us move something forward and faster in a broader way ourselves. Zani is a much more valuable construct to us in royalties and milestones because of our partnership with Jazz. So there's nothing wrong with that, but we'll look at that. I think if we were ahead, so maybe ZW251 was our GPC3 ADC, where we just started in Phase 1, there's no one ahead of us. So you think about mirvetuximab being the first ADC put into gynecological cancer treatment, we could be the first 1 that could be applicable to patients with HCC. That's a little different in terms of thinking about that. But again, we need data need to understand if what we saw with 191 translates in a different tumor type and a different target antigen [indiscernible] GPC3, but that might be a different situation. But also if you have best-in-class you'd be first-in-class, you get paid a lot more for those if you do partners. I'm sure we have optionality over deciding if we take value for that or if we think we keep that for us all as longer.

And maybe just turning to maybe 2-part question. One is just how do we think about the first potentially for GPC3 ADC? And then for the IL-4 receptor alpha and also the IL-33 bispecific. Also the same question. When and what could we see from the first Phase I?

Yes. I think with 251, we already know that our payload is very active. We already know from ZW191 that we're able to achieve very high doses of ADCs well beyond what others have been able to achieve in a [indiscernible] format. So I think we'll learn in 251 that hopefully, the payload activity is very similar. But I think we know that already. So I think what we're hoping to find from 251 that's different is that, that payload in a different tumor type can be effective and no ADC has been effective in HCC so far. So that's important for us. We obviously think first-line setting is the best way to help patients. So obviously, future combinations with A+B as standard of care is what we look to do is, add the ability for a TOPO payload to be applied in those patient populations. So Hopefully, we'll see that data. Whether we see it this year or not, we won't guide. If we see it, we'll share it.

Certainly, I think for the IL-4 receptor, IL-33, This, again, is a first-in-class opportunity for us to find something that builds on what Dupixent has already brought to things like COPD and asthma by being approved. So that's a really interesting thing for us to think about whether you see in the power of a bispecific something more than the additive nature of putting those 2 things together. Certainly, what we saw in zani, it's not tras and and PERJETA in a single instrument. It's a unique biology, unique mechanism. We'd like to try to prove that in another indication, another setting. And so that that's really interesting for us to think that, that could be another opportunity for maybe the first bispecific in that space now that we have biologics available in COPD and asthma. see any data for that in 2026, and we just have to wait to see what the time line is to guide that. Again, that's a quicker Phase I using an oncology, too. So that's something where being an autoimmune has some advantages.

Great. Any questions from the audience?

Do you see any ADC development from zani?

Yes. The Question was, will we see an ADC format of zani? We did have 1 in development a few years ago. Unfortunately, we were using an older payload, an auristatin payload and that really held us back. So we've never constructed a TOPO payload version of zani. It's something that we can talk and think about with our partners, obviously, if we wanted to do that. I think one of the things that led us back to zanidatamab even back then was that we felt that being different by being the only bispecific antibody in the space had some uniqueness rather than doing whatever else did, which was -- and we tried to do, which is build an ADC to try to compete with in HER2 or be the second ADC of choice. Being quite different and unique as a product modality in this space where everything looks like an ADC in development but we don't, and there's not any others of us, that's a really interesting proposition for us. So we do look for those opportunities. It's like in HCC, where there aren't any ADCs used. So we think maybe developing ADCC might be more beneficial than CAR-T, radioligand, T cell engager because I think in combination with A+B or PD-1 VEGF, that's really interesting, and that's what's needed. So if we're the only ADC being developed in that space, that's different and you have to have the idea that maybe you're right and hold on to be right. We certainly feel like we're right with developing zani as a bispecific antibody rather than turning it into a payload and an ADC.

Well, that's all the time we have. Thank you so much for your time and looking forward to hopefully seeing you on Tuesday next year.

Thank you, everyone.

So it's my pleasure to have with me the CEO of Zymeworks, Ken Galbraith. Welcome. Thank you so much.

Thank you.

So welcome to those in the room and those listening online. I'm Yigal Nochomovitz. I'm covering Zymeworks since the beginning, at least since the beginning as a public company, which goes back quite a number of years. And so there's been a lot of advances with your pipeline. You had some, of course, excellent data recently with your partner, Jazz, which we can briefly talk about.

But before we get to that, let's talk about the big news, which is the change in strategy or evolution in strategy, maybe is a better word, to move to this royalty-based model. So kind of talk about the evolution of that, why you decided to do that now? What are the advantages both from a financial perspective as well as from just a pipeline and a portfolio prioritization perspective as to why you decided to do that now? And we'd love to hear how you're thinking about it.

That's great. No, thanks for that. Now I know how we're going to fill up 40 minutes of time. No, yes. I mean I wouldn't call it really a pivot or something drastic. I think we always thought back in 2022 when we started to make decisions about what we need to do at Zymeworks to turn it from a great science company into a great biotech company.

We always had in mind once we did the partnership with Jazz, which I think allowed us to do a lot of different things inside Zymeworks, what we would do once we turn the corner from being a biotech that kind of needs capital to fund itself to being something that looks like it has excess capital and what that means to a biotech.

Obviously, the HERIZON-GEA-01 data gave us the thought there's a lot more visibility and confirmation that we will be in an excess capital situation in our company for a substantial time period. And therefore, you need to think thoughtfully about how you're going to run the company that might be different than you did before that.

So I think if you look at what we did in the last 3.5 years at Zymeworks, we took a company that had, I think, good IP, good platforms, good capabilities but an unpartnered asset in zani that needed help to get to the market. And obviously, when I joined, we were -- started 2 registration studies, including the HERIZON-GEA-01 study, but we were 7 months from Chapter 11. So obviously, we didn't have the financing strategy right. And we certainly had an asset like Ziihera that we felt had applicability in the HER2 space, especially in GEA, which is a meaningful population, and we just felt that, that could be the standard of care. And I think the data we received recently 3.5 years later shows that that's the case. It's practice changing that I think the data support that's going to be the standard of care, and it's very meaningful for patients.

So when we did the Jazz partnership in 2022, we were very deliberate. We obviously got a nice upfront payment of $375 million. We got a nice structure of milestones and royalties, which we would share in the success of zanidatamab going forward. We didn't try to sell it outright. We thought there was a lot more value by holding that through development, clinical outcomes, regulatory, getting to commercialization.

At the same time, we took the $375 million and decided we didn't want to be a one-product company. So we decided we would build a portfolio of novel ADCs and T cell engagers within the context of having a really valuable licensed product. And so we've been working on that for the last 3 years. It's a pretty big portfolio. It's wholly owned, lots of diverse things in there, some in the clinic, some ready to go in the clinic, some still preclinical. We love what we've created.

So from 2022 onward, we kind of created a construct where you had a really valuable licensed product that was going to appreciate significantly in value if we held on to it through the commercialization and even more upside from there. And we created an R&D organization that I think is pretty productive in creating really unique agents, which gives us a balance of a licensed product with an unencumbered R&D portfolio right now.

At the same time, all those capabilities were there. We just didn't have the right capital allocation. We probably should have partnered zani sooner. I think that partnership really unlocked our ability to get value. And at the same time, like 3.5 years later, the company is worth 5x what it was, and there's still lots of upside in zanidatamab and the other assets beyond that. The share price is up 5x, too, because we didn't dilute our shareholders during the course of doing that. We actually reduced share count recently.

So I think the construct of how we took something that was good IP, good assets, good capabilities, but in the wrong strategy for a biotech, the wrong capital allocation, the wrong financial discipline and found a way to put those assets in a great position. Now we see the return on value so far. The outlook is very promising in the way we did that.

So I think in looking at how we transform Zymeworks over that time period, we start to think, right now, all of our R&D agents are all things we did ourselves. I've got 2 licensed products that are pretty -- have pretty good potential, both Ziihera and now pasritamig, the KLK2 T-cell engager that we work with J&J on. Those are both really interesting. There's lots of upside in our valuation as those get to see the potential peak sales.

We found a way for those things to live together, but they're all internal. They're all things we invented. They're all things that we licensed ourselves to get licensed products. And we started to think about if we had excess capital, which we think we will have, we can fund R&D. We funded all of it to date in the last 3 years. More of that will probably be funded by partners in the future because we do need to integrate partnerships and collaboration to keep that whole portfolio moving forward. So we'll be doing that. So R&D is pretty well funded.

We can buy back shares, which we have done over the past year. So we reduced the share count by 6% the past year on the basis that we felt there were good events that were happening that justified doing that. We obviously bought it back at a weighted average cost that's half the current price, which is great short term. But on a longer-term basis, reducing share count drives total shareholder return.

And finally, if you can find a way to continue to grow value inside Zymeworks while reducing share count, that's even -- the outlook for greater outsized returns in later years is phenomenal. We certainly do that with the R&D context. We think we can also do that with the idea of bringing in external R&D assets and external licensed products that we can add to our portfolio in a way that it doesn't have to be something we invented, doesn't be something we licensed. Maybe it's something that we -- somebody else invented, but we did the licensing of it.

We think that can drive a really great appreciation and value for the licensed product portfolio we have, much greater than thinking about it as a royalty return rate. I mean the appreciation of the value of zanidatamab from 2022 to 2025 now has driven phenomenal returns for our shareholders. And the outlook is that, that can continue for some time period.

pasritamig is now at the same stage, just starting Phase III studies. If I can hold that through hopefully successful Phase III programs that J&J is conducting through approval, commercialization, if it is the high end of their guidance at $5 billion peak sales instead of $1 billion low end, that's tremendous. And all we need to do is to hold that. I've already invented it. We've already licensed it. I don't need to do anything else other than be patient and hold that for the benefit of my shareholders. Those rates of returns are pretty great, and they're long term. We'd like to hold those assets for continued value appreciation. So I'm going to hold them though.

We think maybe actively managing that as a portfolio approach of licensed products could generate returns, which means I need to have the capabilities and strategy to access things externally that I can bring inside the company, both R&D assets I can work on and then partner appropriately and things I might bring in that also include licensed products.

So I think all we're trying to do is just looking at what we did with Zymeworks and the transformation that we've had in the past 3 years, the value we created for that, the upside we still have left and think can I do that with maybe assets that didn't originate with me as opposed to just focusing on the assets that originate to me. If I can do that, there's a bigger universe of the potential for us to transform those assets for the benefit of my shareholders. And so that's what we're trying to accomplish.

It's hard to say all that in a really short press release and have people interpret it effectively. But I think we've shown the skills to transform our own company, and I think there's a bundle of assets whether it's IP together some assets, another platform that we can take inside Zymeworks, apply the same skills and strategy we did at Zymeworks and transform that and unlock that value by being patient, making the right decisions. And if I can do that, I can continue to maybe compound the returns that we've gotten for our shareholders so far. And that's something that we can certainly strive to do.

So what can we sort of expect in terms of when will this all start? I mean now the cash is going to start coming in even more. There's a lot of steps there to get -- to realize all the value out of the commercial value out of Ziihera and then the J&J one potentially. So you have -- you mentioned the platform acquisitions and the in-licensing of assets. I mean how broad is your aperture going to be? Are you going to go beyond oncology in terms of what you're looking for? And when does it all start? When do we start to see some transactions? What's the expectation?

I think we've been thinking a lot about this since 2022 about what life might be like if the GEA study reads out positively, and that was really a target for us in our mind. We did look at other models of running the business after that, that might be attractive. We did look at maybe you just monetize all of it and give some money back to shareholders and maybe just go back to being an R&D company.

We did look at the option of separating them into 2 different entities on the basis that licensed products that drive passive income can't coexist with an active R&D program. We just don't think that was the optimal way with the assets that we have and the outlook we have to drive shareholder value. So we decided the best strategy was to hold on to these licensed products for the benefit of my current shareholders while they appreciate in value significantly and continue to conduct an active R&D program and have those two things integrated together. There certainly synergies between how those things work together, and we'll show how that happens in transactions. So I think understanding where we wanted to get to was helpful.

I think we have a very strict criteria for how we're going to operate this other element of our strategy, the same way we've done internally. I think we've been very disciplined around investing our shareholder money in this wholly owned R&D portfolio, how we decide what to invest in, when to stop it, when to accelerate, how broad to make it, how big of an exposure we want to unpartnered assets before you think about integrating partnerships into it to share risk and capital and monetize some of the value. We've really been disciplined about that.

I think you'll see the same discipline being applied because even more so now, these licensed products in Ziihera and pasritamig have a substantial value in the future for my shareholders. We need to be very careful and disciplined about making sure that whatever we do enhances that value. So we have very strict criteria around the cost of capital that we will apply to this. Not surprisingly, we've had that for the past 3.5 years. We haven't done a marketed offering since January 2022. We bought back shares over the past 3 years to reduce share count. I think we're disciplined about the cost of equity being too high, won't utilize it. So I think we have a very strict cost of capital, and we have a very strict return criteria for the rates of return we would expect to get in external assets, the same way we do with our internal programs that we work on in R&D. So I think you'll see the same disciplined approach.

For us, looking at what we do with Zymeworks, finding something that's similar to that would be good. That's not be so similar with therapeutic area, product format. Obviously, something closer to what you've done gives you thought you could be more successful with that. But if you want some more diversity in the licensed product portfolio and approach, you can go maybe into different therapeutic areas without worrying about commercializing those assets because you might want to eventually convert them to partnerships and license products to add to the portfolio.

So I think we have a lot of optionality -- but we'll be very cautious about making sure what we do now enhances shareholder value because we've got a great appreciation track going ahead of us. So we need to make sure we're very careful about what we do there. So the cadence and size will all be within the magnitude of making sure whatever we're doing gives us more value in the licensed product portfolio, maybe a higher peak, a longer tail, more diversity around the -- where royalties and milestones come from.

On the R&D assets, it's got to be something that we feel comfortable working on as if it was internal. It gives us access to externally, gives us a little bit more breadth and diversity of what we can work on rather than be constrained by only working on internal assets. I think as we find things that fit that parameters and we add them to what we're doing, then I think people will see that.

There's no determined cadence of size. There's no determined cadence of timing. Given no guidance around that, we won't. You'll see the cadence in the rearview mirror when we've done that just because the current business is really strong and the outlook is very strong. And even then, we still think at today's market price, buying back our own shares is attractive. That's why we have another repurchase plan.

But just because it's really strong, it doesn't mean you don't try to see if you can do even better than that. And that's what we're trying to do with this kind of new approach, which is really what we were doing from 2022 when I started with our own assets, just trying to see if we can be additive with other assets that we didn't invent.

I mean I haven't calculated -- I should probably do this. I haven't calculated the IRR on zani directly, but we can do it. But nonetheless, I know it's a high number. So that sets a high bar in terms of what you would want to do as far as, as you say, bringing in other assets with comparable return profiles that sort of does that shrink the universe in terms of what you would look at? Or you just search for those assets that are going to produce a similar return?

Yes. I think -- I mean the standards are high and appropriately so. I mean we're -- we've been able to generate, at least in the last 3 years, some outsized returns. But just by having a different strategy and different capital allocation, different discipline around what was always a great scientific team, a great platform, it was obvious to me that Ziihera would be a meaningful product in HER2. We just had to focus on the right indications, find a partner to help us along the way. And there's still a lot of upside. There's more upside now in Ziihera than there maybe was evident in 2022. It does set a high bar, but that's what we need to do.

The goal right now is to see if we can just not just scale, but to replicate on a long-term basis, the returns we've been able to generate from zani so far and pasritamig in the past few years at Zymeworks. And the outlook going forward is very promising as well. There's a lot more appreciation in both the assets that are licensed and in the wholly owned R&D assets.

So can I find a mechanism to show that I can replicate that on a long-term basis? And if I can get those returns over and over again, that's a really interesting biotech construct. I don't care if you can't figure out if it's a royalty company or a normal biotech or a mix of the two. Those returns are substantial.

And so being a little different and having the synergies between the two, creating optionality for yourself, making sure that the excess capital is used wisely and not waste, those are all things that we've been trying to do the last 3 years, showing evidence we can. We'll try to replicate.

But we're trying to improve upon what's already a really strong outlook. So you have to find things that make that even stronger and not dilute your outlook. And so we'll be very careful and cognizant of the need to find things that we think we can really execute on with the skill set we already have to generate returns that will be substantial.

So does this mean you're going to apply sort of even more scrutiny and a higher bar to your proprietary ADC, TCE platform? I know there were some programs that you decided not to pursue like mesothelin, given it didn't meet your internal standards. But now given what you've said and described this approach with the cash that you're generating, is that going to change the internal strategy for being more -- even more selective about what gets promoted into later-stage studies?

No, I think the standards we've had for internal programs have always been really high, and I think that's appropriate. What you find Ziihera and pasritamig so things that are really differentiated and really potentially practice changing. So we need to keep searching for those.

And so internally, we've always had those high standards. And when our standards aren't met, either with initial clinical data, not performing the way we thought it would or with something strategically not being as aligned as where we thought it would be, we've already shown our ability to do that. So I think we'll apply the same strong standards we do to our internal portfolio to anything we might look at externally. And whether that's performance of an R&D asset that we bring in that we think has partnerability if we work on it or whether it's looking at our licensed product portfolio and saying those returns are really great, if I'm going to add something to it, it better be giving me the same types of returns or higher.

So we'll have the same high standards applied to that. I think our shareholders would expect us to do that. We work really hard to put ourselves in a really good situation. Now we're trying to make it even better. We have to be careful not to make it worse.

So the incremental dollar may go to an external program or it may go to an internal program. You will make that decision sort of in real time depending on how you foresee the returns that you would expect from the investment.

Yes. And over the past year, we invested $60 million in our own business by reducing share count for the benefit of our other shareholders who didn't sell their shares into that. That's a really high return.

And that buyback is continuing.

Yes. And if we look at it, even short term, that's a really great return. If you look at 5-year TSRs based on where the value of the business can go to, it's even better. And that's why we renewed the plan to have $125 million share purchase program to allow us to continue to do that.

So I've always got the ability to think some of the best investment I can make is in my own business, and I know what those returns are. It provides a pretty good hurdle rate to thinking about funding another R&D asset that we bring externally or bringing another licensed product to add to the portfolio we have.

There's a pretty high hurdle rate just related to -- I've always got the ability to do that until I run out of shares, I guess, but I always got the ability to do that. It's just that reduced share count that goes along with some capital growth in both the R&D side and the licensed product portfolio side can really generate some outsized returns, much more than just thinking about distributing money that comes in from Ziihera.

If I can find a way to reinvest and compound those rates of returns that have already gotten in the last 3 years and continue to do that going forward while reducing share count at the same time, that's the secret. So I think the mix of allocation will always be we want to be an R&D company. That's why we put the upfront payment from Jazz in 2022 into our wholly owned portfolio. That's how we got in this position by creating Ziihera and helping create pasritamig. So we'll always do that. Might be in a more partnered way because you do want to share capital and risk and upside in that portfolio.

I think if we can find a way to enhance our licensed product portfolio, we'll do that. Reducing share count at the same time and having the right mix between those three is really the way we think you can build a really successful biotech company with long-term returns that are outsized with maybe a different risk profile because the licensed products give you something different than unencumbered R&D assets.

Would you ever consider a dividend yield or that's going too far for where you are right now?

Well, I mean, I think you always have different mechanisms to return capital to shareholders. Right now, we've been focused on reducing share count while value builds in the business. So we think about the value of Ziihera the past 12 months now with it being approved in BTC while studying GEA, the value of that to us has grown dramatically. Reducing share count underneath that has just driven TSR for my shareholders. So that's really the approach we've been taking. That's why we've been renewed a share repurchase plan, not some other mechanism to return capital to shareholders.

Okay. Can we focus a little bit on the proprietary pipeline?

Sure.

Maybe just educate us as far as or educate the audience as far as what are the key assets that are in your proprietary pipeline. How do you see them in terms of probability of success and market size and opportunity?

Yes. I think back in 2022, when we decided we would take the upfront money from the Jazz deal and build a wholly owned portfolio because we didn't really want to be just a company that had just a licensed product, I think there was a lot more to Zymeworks beyond that. We really had 3 research themes that we wanted to focus on. So we stopped doing some of the stuff we were doing before I got there and focused on these 3 themes, and these are all in progress.

So we did develop our own ADC portfolio around our own thoughts around a proprietary payload, a '519 payload, a linker strategy and some really interesting antibody and optimized antibodies around properties we thought were effective. So we have 4 of those we've kind of declared to date between the folate receptor alpha ADC, the GPC3 ADC, the NaPi ADC, which is NaPi2b ADC, which is still IND ready and the Ly6E, which is fourth, but really interesting. So we have a platform that all contain the same payload, the same linker strategy, just different antibody targets, which give you different access to different tumor types. So those are the portfolio are really interesting.

Obviously, 191 is the most advanced of that. And obviously, the early data gave us some real encouragement that our design implications around that whole portfolio might have been as good as we hope they would be. So we're still studying that one. But that's a really interesting context and looking at what that ADC portfolio could be as a meaningful portfolio, both for ourselves and for potential partners.

The second theme is we wanted to go beyond bispecific T cell engagers. So we decided we would make them more complicated by making them trispecific but by building in the functionality of the third arm, the first case, CD28. That's really interesting. I know everybody is focused on kind of DLL3, ZW209 that's going into the clinic next year. But there's a whole platform behind that of thinking about where a TriTCE might be more effective and more durable than a bispecific T cell engager. And so other solid tumor indications, but hem/onc and even autoimmune. So that's a really interesting platform. It's still based on Azymetric, our underlying platform of the company. That's really interesting.

There's other trispecific formats beyond incorporating CD28 Co-Stim factor that we can do. We do dual targeting T cell engagers, et cetera. So this whole idea of a trispecific platform giving you more functionality and maybe better clinical outcomes than a bispecific is something that's really interesting for us, and we're still pursuing. It's pretty broad.

And then third, we decided to take our bispecific engineering skills that we use from Azymetric outside of oncology into autoimmune. And the first one of that is ZW1528 scheduled to go in the clinic next year, which builds in known biology around IL-4 receptor and IL-33 into unique biology of a bispecific structure. And that bispecific structure, we hope gives you something unique in combination that you don't get with the combination of 2 known targets based on the clinical data.

That's what happened with zani. When putting that biparatopic together, it's different than [ tras and pert's ] unique biology that became meaningful. You can see that with the GEA outcome and other studies we've done. Hopefully, that's the same thing. It just opens up another way for us to use our bispecific skills. Now there's biologics in COPD and asthma and other areas. Using a bispecific approach in some of those areas could be really interesting.

So we focus on those 3 research teams in the past couple of years. I don't know if I know enough data now to tell you where the next Ziihera sits in there. I hope it's in one of those 3 themes. I think once it shows itself, we'll be able to figure out how to circle around that as another interesting product. But I think we've got a pretty broad research focus. Again, that's all wholly owned, all our own capital, all our own selection in the last 3 years.

I think we're at the stage now where we can transition that to thinking about integrating partnerships into that, maybe working on some targets that we didn't have access to that partners do on some of those platforms, maybe bring in partners to help us move forward on some of those things when they get to a certain clinical proof-of-concept space, and we've talked about that for ZW191 or folate receptor alpha ADC. And maybe we'll bring in some partners that can maybe allow us to broaden out the focus of what we're trying to do that we can't do alone and share some of that with partners.

The TriTCE platform is pretty broad between solid tumors, hem/onc and autoimmune. It's hard for us to see how we can exploit all of the potential indications with that platform. So I think bring a partner to maybe share some of that where we keep some and they take on some might be interesting. So I think we're at the time period now where we have what we want in the wholly owned portfolio, and we'd like to bring in some partnered capital.

As we bring it in, we'll always have some unencumbered independent research we're doing. When we partnered zani back in 2022, it was really important for us to then have some other products that were our own that we can keep unencumbered. So we'll never be in a position where we look like a fully partnered company or look like everything is a licensed product because I think we just eliminate the chance for upside that you'll get independent research.

But it's always got to be measured. It's always got to be -- meet all the standards. You do have to pay attention to how much exposure you have financially to unpartnered assets, helping you get partners and trying to stay relevant in a fast-moving sector. So we always pay attention to those aspects. But we love the research capabilities that we have. We love the assets we developed. Got to pay really close attention to how you generate value from those and the next moves that you make. And we showed how to do that with zanidatamab and hopefully, we'll show that with the rest of the portfolio.

You must have a sense for -- or maybe you don't, I don't know because you're very data-driven, which of these you enumerated you kind of want to keep for longer versus earlier partnering. I mean you mentioned proof of concept for like 191, but which are the ones that you have a sense now? I know this is one I want to hold longer versus maybe partner off.

Yes. I think it's always -- I think these are all differentiated. They all have good potential. I think strategically, we all think they can have a place to help patients. So I think we feel very clearly about everything we work on. We've got high standards for target product profile, high standards for executing these quickly to get to a data decision.

Sometimes the partnering is just not all data driven. I think sometimes it's understanding the breadth of the opportunity. I think if you look at zani, we're quite happy with the Jazz deal we did in 2022, and that really certainly allowed us to pursue a broader set of applications than we could do ourselves. We probably had partnering opportunities before that back in 2021 that might have gotten us to a potential breast cancer indication sooner by having a Phase III started sooner.

I mean we have one underway now. That's great. But I think the data even then was telling you that zanidatamab had a greater peak sales potential and broader use in multiple applications within the HER2 space and maybe a partner would have allowed us to explore all of that and maximize or optimize the value of that brand by sharing some of it with a partner sooner. We didn't do that. We got close to Chapter 11 as a part of that but ended up in a really good spot. I think we have to be really happy with where we ended up.

So sometimes these decisions about when to partner, just not data-driven is trying to look at optimizing the value of what you can get. And sometimes that means bringing someone in to share the upside with you, but they also share the risk and share the capital and maybe get you to a broader set of indications more quickly. And so we always evaluate things with that mindset.

We can't work on everything ourselves. We do need partners for this. So we just need to figure out when and how we integrate partnerships and collaborations and do really interesting wholly owned portfolio right now.

So does the R&D budget sort of stay level? Or you -- is it growing? I mean what -- just talk a little bit more about just operationally, what's happening there?

Yes. I mean you have optionality to manage it yourself. So you can determine the growth spend. And I think some companies don't think they can, but we do actively manage it. So we do decide how much exposure do we have, want to have unpartnered assets to different technology platforms, different clinical indications. So we do manage it effectively that way.

The new element for us now is that we can integrate partnerships and collaborations into the portfolio. So I think not only can you manage the gross operating spend in R&D, you can also manage the net by deciding what types of partnerships and the structure of them that you bring in and when you bring them in.

We've talked about wanting to do that. So we would expect in the future that net investment in R&D is going to go down. How much it goes down depends on the partnerships, depends on how much we want to continue to invest in unpartnered assets over time.

Look back in 2022, we partnered zani with Jazz, we had no unencumbered assets. We took the upfront money from Jazz of $375 million decided to build the portfolio. Nobody spent it all. But obviously, as that's grown over the past 3 years, we have a much higher investment in assets that are wholly owned and not partnered. And obviously, sharing risk and monetizing some of that value are things that we'd like to do as we move forward.

So I wouldn't expect that R&D investment is going to go up on a gross basis. And I expect on a net basis, it will go down over time as partners provide more funding for things we want to do, realizing that we always want to have some element of independent R&D that's unencumbered because that gives us upside to go along with the licensed products.

Back in the older days, before you took the leadership of the company, there was this sort of legacy license -- you licensed the platform Azymetric to several pharma partners. There used to be a slide in the deck at one point, I believe, which added all. Is there anything in there that you'd like to rehighlight as interesting or there could be upside that people have sort of somehow forgotten about?

Yes, I think there is. I think this Azymetric platform that we developed has been an amazing tool for designing bispecific antibodies. I think we've had numerous pharmaceutical companies partner with us to access Azymetric to build bispecifics that they think are very unique.

We decided to do that broadly. So we made that platform available to a whole range of partners. We also used it for ourselves for things like zanidatamab and other things that are currently in the wholly owned R&D portfolio. All of those legacy programs still exist. We obviously don't control the timing of development of those. So you have to be a little patient to see which one of those might be interesting for us.

If you'd asked me 2 years ago, I couldn't spell pasritamig. I don't think they named it yet, but it wasn't obvious to me that, that one would be so interesting. KLK2 is a very unique biology that J&J was pursuing. No one else really was from what we saw. So when they brought that to us and wanted to use Azymetric to make an interesting bispecific T cell engager, it could have been like other ones that were worked on and deprioritized for whatever reason.

That one went pretty quickly from Phase I data that showed that's a really interesting target and a really interesting type of T cell engager for prostate cancer to moving into Phase III studies pretty quickly with guidance from J&J that, that could be a $1 billion to $5 billion peak sales opportunity.

Do we have other ones that are in clinical studies that would look like that? I would hope so. Fortunately, you just got to be patient and hold on to those financial interest to see which ones might develop into something meaningful as they advance. We've got a whole lot -- a number of them that are in Phase I studies that could develop the same way, but they could also be deprioritized along the way, which pharma companies like to do. But I like the approach we took of taking a viable, a great platform, using it with a whole range of partners to try and get a whole stream of potential opportunities for licensed products that might grow in value in addition to using it for our own portfolio, which is where Ziihera came from.

I mean I know you're -- it's much more than just sort of like your typical royalty play, but are you going to do those traditional like buying royalty deals, too? Or that's -- how much of that figures into this approach, just to own the royalty with an upfront? Is that part of it or not necessarily?

I think if you look in a traditional royalty sense, I don't think we're going to compete with people who've got better advantage than weighted average cost of capital, et cetera. So it's unlikely we're going to do that. But I think if you look at sometimes what happens is that those licensed products sit in companies that don't want to part with them or can't. They're just kind of stuck inside the company. The way we think about trapped cash and companies, they're just trapped and they don't know what to do with it and they can't access it. So sometimes there might be things that we can take advantage of that they can't.

I think on the biotech side, there's always people in biotech looking for external assets to bring inside their company, but sometimes those also come with licensed products that have no value to them. I think what we're trying to exploit with having both elements integrated together is there's situations where maybe there's something that comes with both a licensed product opportunity, an asset that probably should be partnered, but the company doesn't do it and maybe another asset that we want to work on and develop further and then potentially partner overall.

Those are things that we could see participating in, spending the time, being patient to realize the value. It's what we did in Zymeworks in the last 3 years. Those are not things that traditional royalty monetization players or even other biotechs really want to get involved in. And I think we've shown that if we get involved in the situation, at least internally, we were able to make something really great out of that. So maybe we can do that again.

So we're probably looking at things that are not typically screened or looked at by others because it's just not something they can execute on. It doesn't mean we can't work with some traditional players on the royalty side to do something together, where there's something of value to us and something of value to them or we share the value because we can be complementary to them.

On the biotech side, there might be areas where a licensed product doesn't have any value to them, but it might have value to me because I've got a long-term interest in having a portfolio of these things. And so I think there's ways for us to work that will be a little like traditional. And maybe in that sense, we get better input prices. We're working in areas that aren't as competitive. Working in unique situations as long as we're willing to do the work and we see the outcome that can be achieved, then those are probably the situations that we'll be interested in, but it may not be obvious on the outside. So I think we have a very differentiated view of how we can be successful, and we'll stick to those areas.

You stick to biologics, or would you be willing to look beyond small molecules or oral drugs or that's TBD depending on what you see out there?

Yes. Well, I mean, obviously, you want to do things that are within your capabilities. So obviously, doing something that you're closer to gives you a sense that you can be more confident about being successful with execution of it. But there's lots of skills and experience inside Zymeworks for people who have worked on things outside of oncology and autoimmune, they've worked in different product formats.

We also have a strong biologics experience, but we've modified that a little bit to bring in people who might be able to help us look at things that are different product formats.

Different therapeutic areas. If your thought is to think about working on something that's more going to end up as a licensed product in your portfolio after some work versus something you take to market yourself, you get a little bit more flexibility to think about those things.

pasritamig an example. We never would have gone into prostate cancer on our own. It's not a therapeutic area of interest for us. But we're happy to work on Azymetric with J&J and they can create something that brings a financial return to us in an area where we don't really have expertise in that therapeutic category. But if a partner does, then we can still find a way to execute.

So I think we want to be open to diversity of what ends up inside the licensed product portfolio, what ends up in the R&D assets. For the R&D assets, if you want a little bit more diverse, you can take a more hub-and-spoke model that others have done. So you have other examples of people who have got a strong interest in gene therapy and a strong interest in oncology, and they find a way to make that work together because they take this hub-and-spoke approach.

We kind of have that already if you look at our ADCs versus our multispecific antibodies. Those are 2 separate research groups who really work on their own to compete for capital to generate molecules that we'll put in our R&D portfolio. So we kind of already use that. They tend to coexist in the same lab in the same city in Vancouver, but it's still really a hub-and-spoke model of having these independent research groups competing. And you can find people who know ADCs on one side and something else on another side.

So we want to be open. But I think obviously, there's some comfort in being closer to things you've done before, closer to experience and skills that you've got. But I've got people working in multiple therapeutic areas, multiple product formats who can bring those skills and experience to us. And if we don't have it, we can find a way to do that. So I wouldn't expect us to go too far astray, but we have some optionality to at least examine those things.

That one, the J&J one, is that the only asset in late-stage development in prostate with that target? I just -- I don't know the details on that. How much competitive is there on that target?

Yes. I mean so far, it's pretty unique to J&J. I mean I think they were really the only company that we've seen until really recently exploring KLK2 as a novel target in prostate cancer. I think when they brought us that target, we didn't know what it was. And we thought if it's interesting, why isn't everybody doing the same biology around? That's what happens in our business. But I think they saw something that others didn't, and they had the biological approach to really unlock that target.

And if you look at the early data that they've put out so far, there's no question that that's the most interesting target in prostate cancer right now. And that T cell engager they created is the most interesting thing, I think, you can think about as being used in combination with other agents. So that's really unique to them. But like with everything, I'm sure there's others working on that target now. But it's a pretty unique space they have right now being in Phase III and multiple studies now moving towards the market with Phase I data that's pretty compelling.

All right. Well, we're down to 30 seconds, but thank you so much, Ken. Very good. I look forward to all the opportunities coming down the road.

Yes. We're obviously really excited about the HERIZON-GEA-01. And obviously, the data is going to be presented on January 8 at ASCO GI. So looking forward to put numbers with the words in the press release that you saw already.

That's helpful.

And hopefully, people see why we're so excited to then go to the next stage and pursue strategic options that are just a little bit different than what we've done but really comparable to what we have in the past few years and how we built value in ZYME.

Thank you very much.

Thank you.

Thank you for standing by, and welcome to Zymeworks Strategy Update Conference Call and Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the conference over to Shrinal Inamdar, Senior Director of Investor Relations. Please go ahead.

Thank you, operator. Good morning or good afternoon, everyone, to those of you joining from London. Thank you for joining our business strategy conference call. Before we begin, I'd like to remind you that we'll be making a number of forward-looking statements during this call, including, without limitation, those forward-looking statements identified in these slides and the accompanying oral commentary.

Forward-looking statements are based upon our current expectations and various assumptions and are subject to risks and uncertainties, including those associated with companies in our industry and at our stage of development. For a discussion of these risks and uncertainties, we refer you to our latest SEC filings as found on our website and as filed with the SEC. In a moment, I will hand the call over to Ken Galbraith, our Chair and CEO, who will provide an overview of our strategic business update.

At the end of the call, Ken will be joined for Q&A by Leone Patterson, our Executive Vice President, Chief Business Officer and Chief Financial Officer; as well as Adam Schayowitz, our Acting Chief Development Officer; and Scott Platshon, our newly appointed Acting Chief Investment Officer. Please note that we will not be taking questions on the HERIZON-GEA-01 topline data announced yesterday. As a reminder, the audio and slides from this call will also be available on Zymeworks' website later today. I will now hand the call over to Ken.

Thank you, Shrinal, and thank you, everyone, for joining us today on the call. Today is a milestone moment for Zymeworks, not just because of the positive data announced in the pivotal HERIZON-GEA-01 clinical trial of zanidatamab, but because of what this development represents for the future we're building here at Zyme. Yesterday, our partner, Jazz and BeOne announced positive topline data for zanidatamab, which, as you know, was designed in advance in a registration study by our team here at Zymeworks and importantly, was built using our proprietary Azymetric platform.

We believe these results mark a major scientific and strategic validation of our scientific approach to multifunctional therapeutics. Before we speak to the strategic implication of today's news, I want to take a moment to recognize the patients and caregivers impacted by gastroesophageal adenocarcinoma, in particular, those who participated in the HERIZON-GEA-01 clinical trial. We're grateful for the patients for their courage to participate in our clinical research, which made this progress possible.

For the families, clinicians and partners, thank you for your unwavering support, compassionate care and dedication. I'm especially proud of the work conducted by our team at Zymeworks. We designed and developed zanidatamab through to late-stage development. Your commitment fuels progress and innovation to expand the options available for those living with this aggressive disease. This positive result is not just a clinical milestone, it's a shared achievement with everyone [indiscernible] study possible.

Now with the positive topline data announced from HERIZON-GEA-01 for ZIIHERA and pasritamig advancing into registration studies by J&J in September of this year, which I'll discuss shortly, we believe we have a unique opportunity as a biotechnology company. We have an emerging licensed product portfolio with potential long-term cash flows driven by late-stage development and commercialization by our partners. These potential cash flows provide us with an opportunity to be intentional about the natural evolution of our strategy.

We built this company on disciplined capital deployment, a strong network of partnerships and the ability to identify and invest in high value differentiated platforms and products. Today, I'll walk through how this integrated model positions us for what we believe to be scalable, provide durable growth in revenues and eventual profitable operations and how our leadership and governance refresh supports that next phase. Here, you can see the potential value embedded in the collaboration with our partners, Jazz and BeOne for ZIIHERA.

The partnership structure for ZIIHERA expansion, further development obligations and risk in exchange for a series of payments based on continued development and commercialization by our partner, Jazz. Our net investment in ZIIHERA through late-stage development prior to converting to our Jazz partnership was approximately USD 350 million. To date, we've already achieved a combined total of around $500 million in upfront and development milestones from BeOne and Jazz collectively, a strong validation of both the underlying science and quality of these partnerships.

The $375 million upfront payment from Jazz in 2022 has been primarily utilized to build our current wholly owned R&D pipeline of clinical and preclinical product candidates. Milestone payments from the initial regulatory approvals in [indiscernible] and royalties on sales by Jazz and BeOne to date have been primarily used to fund the return of stockholder capital through stock repurchases totaling $60 million during 2024 and 2025.

Looking ahead, there's approximately an additional $1.5 billion in potential development and sales milestones from Jazz and BeOne related to ZIIHERA with about $440 million of this expected in the near term based on the anticipated global regulatory approvals for GEA. We also expect royalty revenue to grow following potential near-term approvals to GEA based on the positive outcome of HERIZON-GEA-01 study announced yesterday with the U.S. supplemental BLA submission expected by Jazz in the first half of 2026.

In addition, there's significant ongoing development plan for zanidatamab, including in HER2-positive breast cancer funded by our partners, which could provide the basis for further approvals, additional milestone payments and higher royalty income. As a reminder, we're eligible for a 10% to 20% tiered royalty from sales of ZIIHERA from Jazz, we previously guided to a $2 billion-plus peak sales opportunity for ZIIHERA. These milestones and royalties are meaningful, not only in quantum, but because they'll provide visibility to the possible defined future non-dilutive cash inflows.

Importantly, our philosophy is not to deploy this capital automatically into higher risk late-stage internal development or immediate return of capital. Instead, these potential milestone payments and royalties may be used to fund our ability to pursue [indiscernible] initiative of compounding growth opportunities through selective royalty acquisitions, strategic partnerships and portfolio expansion to enhance what we believe can be recurring high-margin revenue.

We also have opportunities for significant royalties stemming from additional late stage partnered assets such as pasritamig, which has advanced to now 2 Phase III clinical study. Pasritamig is a unique and differentiated T cell engager for prostate cancer that arose from our collaboration with J&J, utilizing our Azymetric platform. All development costs were incurred by our partner, J&J, who has also paid for access to our platform. Pasritamig now advancing into registration studies in prostate cancer, thus providing visibility into potential future milestones and if approved, royalty of those designed by J&J.

We continue to have the potential to earn $434 million in future development and commercial milestones as well as a mid-single-digit royalty on sales. Currently, J&J has guided to potential peak annual sales of pasritamig between $1 billion and $5 billion, making the potential opportunity for this asset as valuable as ZIIHERA for future royalties. In addition, Zymeworks continues to have a number of platform collaborations with other pharmaceutical companies, several of which are advancing in clinical studies.

Our royalty base is expected to grow as partnered assets advance into later-stage development, reach commercialization and progress in new indications, which should in turn increase the visibility of future royalties. With a strong financial interest in 2 differentiated licensed products, each with multibillion-dollar annual peak sales potential, we have a unique position to protect and manage expected revenues from these licensed products and reinvest cash flow receipts back into a significant revenue-generating portfolio to drive outside returns with a unique risk profile different than traditional biotech R&D investments.

Following a comprehensive strategic review with independent advisers, it became clear that the significant future cash flows expected from our partnered assets gave us a unique opportunity. The ability to seek to reinvest in and compound existing valuable royalty streams, enable internal R&D to focus on strength and deploy capital with a focus on what we believe provides the best possible risk-adjusted return to shareholders in ways that are far less dependent on high-risk, cost-intensive late-stage development.

Simply put, we're transforming from a more traditional high-risk biotech to a revenue-generating organization differentiated by in-house R&D capabilities. We believe this strategy allows us to be more selective, more capital efficient and more impactful by channeling our resources into opportunities that can expand our royalty base and ultimately deliver meaningful returns to shareholders. With that in mind, our business model announced today is anchored in 3 connected growth engines: our R&D innovation, our strategic partnerships and our royalty aggregation platform.

First, on pipeline innovation, we will continue to invest selectively in R&D programs where we see differentiated biology, validated targets and clear clinical paths, whether accessed internally or externally. This keeps our internal R&D risk profile disciplined. While we may prioritize partnerships for the later stages of our R&D portfolio, we remain committed to internal innovation. We plan to continue to allocate capital to early-stage R&D where our team can create meaningful value and where our capabilities truly differentiate us.

Second, strategic partnerships have the potential to extend our reach and reduce our capital intensity. By sharing development costs and leveraging our partners' capabilities, we can advance multiple programs simultaneously while securing upfront and milestone payments to fund future innovation. Formation of partnerships can occur in an early stage utilizing one of our technology platforms or preclinical products or through clinical stage products validated with clinical data generated by Zyme.

For example, we're exploring partnership opportunities for ZW191 to ensure this potential best-in-class program has the resources required to achieve its full potential in a highly competitive market. An ideal partner will be able to bring the scale, capital infrastructure to fully unlock the potential of ZW191 in a competitive space. Third, royalties. This is what we view as our compounding engine. The royalty and milestone income expected from our current partnered assets creates recurring high-margin revenue.

This gives us the flexibility to reinvest back into our asset portfolio through pursuing a differentiated health care aggregation strategy. We believe we're well positioned to pursue targeted company and royalty acquisitions that complement our portfolio with opportunities that allow us to compound value without adding disproportionate risk. Our focus on these efforts will be broader than relying on royalty streams generated by patented medicines that are already subject to existing partnerships.

In order to add diversity to returns and risk in our long-term portfolio, we may consider other opportunities in the broader health care universe, which we anticipate can generate passive income or positive and predictable cash flows. This approach includes potential single asset acquisitions, company acquisitions or pipeline partnerships where we co-develop or out-license assets selectively.

We also see opportunities for royalty acquisitions and other structured equity investments that can leverage our financial and scientific insights to potentially generate high-quality recurring returns. And where appropriate, we may pursue spin-offs to unlock hidden value in our own R&D programs while maintaining long-term participation through equity and/or royalties.

And we intend to continue evaluating opportunistic share repurchases as appropriate uses of excess cash flow in order to reduce share count and provide opportunities to generate TSR through this mechanism. Over the course of 2024 and 2025, we used $60 million of capital from ZIIHERA commercialization to reduce our share count by approximately 6%, while our licensed product portfolio appreciated in value through advancement of commercialization.

As mentioned previously, our capital allocation decisions, whether investing in R&D, advancing partnerships, supporting growth in royalties or other health care assets or returning capital through share repurchases, all serve one purpose to help build sustainable long-term value. Together, we believe with these 3 strategic levers make us more resilient, more capital efficient and well positioned for consistent value creation.

I'd like to spend a moment on our R&D strategy, which is designed to maximize value creation while minimizing risk and operating expense. First, our goal is to manage our growth investment in our R&D portfolio carefully through the size and scope of our portfolio. We will also look to integrate partnerships and collaborations into our R&D portfolio as a critical source of external funding. We aim to take assets through preclinical validation or early clinical proof of concept that points to our science can create the most value.

We're focused on maintaining a lean and highly capital-efficient operating model. We aim to generate high-value assets and not building a large development infrastructure or increasing fixed operational cash burn. We aim to continue operating with discipline, and we'll look to discontinue programs that seek to be relevant or attractive to potential partners. The program doesn't have clear external demand or a differentiated profile, we intend to redeploy those resources quickly as we've already demonstrated.

This discipline is essential to keep the portfolio focused. We tend to structure our in-house discovery work to be tightly scoped to produce assets with strong biology, robust preclinical data or early proof of concept, assets that naturally attract high-quality partners. In parallel, we retain the ability to execute on selective platform collaboration deals that allow us to apply our discovery capabilities more broadly through partnerships as we did with J&J for pasritamig.

These types of collaborations can expand our reach, create additional opportunities to generate long-term royalty value without increasing internal R&D spend. We continue to advance 2 differentiated TOPO1 payload ADC, ZW191 and ZW251 in early Phase I studies, and we have a diverse and extensive preclinical R&D pipeline for future development independently or through collaborations.

And with a productive internal R&D organization, we can always retain the optionality to continue development on our own beyond clinical proof of concept when justified by a product candidate with a clear regulatory path, exceptional potential and maintaining our financial discipline around gross R&D investment in wholly owned product candidates. And finally, we intend to continue building our pipeline for both internal discovery and external business development.

This balanced approach allows us to source the best ideas where they originate inside our labs or from external innovators. Together, these pillars create an R&D strategy that's focused, efficient, partner-ready and align with our overarching goal, generate high-value assets that ultimately may expand our royalty base. We believe that what can set us apart in the royalty aggregation space is our ability not only to simply acquire commercial royalties like traditional players, but to create them in ways that most others simply cannot.

Traditional royalty companies compete over a relatively small pool of market of late-stage assets. We believe that our model opens up a much broader landscape of opportunity, which gives us an opportunity to generate high-quality royalty streams through science, through partnerships and through strategic transactions. We have all the tools of the traditional royalty model and that we can acquire existing royalty streams structured through synthetic royalty deals and acquire companies we believe have trapped or undervalued royalties.

However, we also have the ability to create royalties through discovery collaborations, leveraging our R&D expertise to partner early where value creation is high. We can also generate royalties from internally discovered assets, advancing programs to preclinical or early proof of concept to create attractive partner-ready assets that can convert innovation directly into long-term royalty income and transfer development risk and cost for our partners.

We can also make capital allocation decisions for products with exceptional potential to fund increased development on our own with our internal R&D capabilities. Lastly, we can selectively bring in external programs where our team can add scientific development value and turn them into new royalty positions through partnerships.

We believe that this combination, the ability to both create and acquire royalties gives us significant strategic flexibility, broadens our opportunity set, potentially reduces competition for deals and potentially positions us to build a more diversified, more durable and ultimately more valuable royalty portfolio than traditional players. This is how we expect to unlock royalty value beyond traditional models and create compounding growth for the long term.

To help position us for success during the last quarter, we continue to evolve the structure of our Board and management team to bring in deeper expertise in strategic capital allocation and external acquisitions, ensuring we have the right mix of scientific, financial and partnering expertise to execute on this next phase of growth. We believe that these recent governance and leadership enhancements, including the appointment of Scott Platshon as the acting Chief Investment Officer today, position us well to execute our novel strategy.

These strategic appointments bring additional expertise to complement our existing scientific and clinical leadership and build even stronger foundation to drive this novel asset and royalty aggregation strategy for value creation. To complement our internal analysis, we have and will continue to engage independent financial and legal advisers to assist in evaluating a full range of strategic alternatives and provide objective guidance on the company's strategy to build long-term value for shareholders.

We believe that these changes position us to execute with precision and agility while maintaining the strong scientific and financial discipline that's always defined our company. In closing, I want to emphasize the essence of our model, discipline, flexibility and sustainable value creation. With a refreshed leadership team, a growing royalty base and a portfolio of high-value opportunities, we're executing from a position of strength.

With almost $300 million in cash resources and up to $440 million in potential near-term milestones related to the potential approvals of the HERIZON-GEA, we believe that our strong financial position allows us to move at the right pace with potential acquisitions, partner wholly owned assets on the right terms at the right time and compound long-term value deliberately rather than reactively. We've already reported $103 million in revenues for 2025 as of September 30, allowing us to operate from a very strong financial position.

And finally, our $125 million share buyback authorization announced today reflects our commitment to disciplined capital allocation and our confidence in the long-term value of the company based on our chosen strategy. Should the right opportunity arise, we have access to a number of low-cost financing options, but importantly, we do not believe we need to access the capital markets in the near term to deliver on our current plan.

We still see the opportunity to buy back shares as an attractive option even at today's price. That's a meaningful differentiator in this environment. Our hybrid model gives us flexibility to adapt as markets change and the discipline to stay focused on long-term growth. We believe we built a business that can perform across cycles, scale sustainably and deliver attractive returns near term and in the years ahead.

We're extremely confident in our path forward and the long-term value this strategy can deliver for all of our shareholders. With those remarks, I'd like to thank everyone for listening, and I'd like to turn the call over to the operator to begin the question-and-answer session. Operator?

[Operator Instructions] And our first question is going to come from Charles Zhu with LifeSci Capital.

This is Sue Won for Charles. Congrats on the data and progress. So on potential royalty deals, do you have any specific therapeutic areas or methodologies you want to prioritize based on Zyme's expertise on protein engineering? And how would you weigh incremental buybacks versus pipeline acceleration or asset purchases?

Yes. No, thanks for the question. I mean, obviously, we have a strong internal scientific capability around our own therapeutic areas we operate in and obviously, in our biologics approach inside the company. Obviously, using that expertise to access the right opportunities would be something we could do. But I wouldn't feel restricted by the range of what we practice the science inside the company.

I think we do have the ability to reach out externally to find expertise elsewhere beyond the company to look at things that might be more diverse from what we do today in Zyme or the therapeutic areas we concentrate in. One of the objectives of the portfolio will be to seek some diversity of revenue sources and that might be therapeutically product modality, et cetera, as we've explained. So I don't feel constrained by what we do today.

But obviously, we'd like to explore the synergies of the scientific capabilities we have in thinking about external assets or external opportunities that are existing as royalties that we can bring inside the company. For the second question, obviously, we have practiced capital allocation for share repurchase over the past year. So we've used $60 million to reduce our share count by 6% at a time period when value of the business has been increasing.

I think we will continue to have the same type of approach, build long-term value in the underlying assets that we have, whether they're royalty assets or R&D assets. And while that growth strategy is being undertaken, reduce the share count on a consistent basis. And we think with the combination of capital applied in both of those ways, that's where we hope to find significant outsized returns in the long term from that approach.

And the next question comes from Andrew Berens with Leerink Partners.

Congrats on the results announced yesterday. We haven't seen the data, but I think that they will be impressive based on the press release. I was going to ask about the assets that you mentioned in the press release that are not traditionally risky biotech assets, but I think you clarified that. I just wanted to ask about the strategy. Are there any assets that you may consider taking across the finish line by yourself?

Are you going to commit to out-licensing programs in early stages and turning them into royalty milestone investments? And -- the reason I'm asking is I recall Array BioPharma had a similar strategy and investors in that company were frustrated about the amount of value that was out-licensed. It wasn't until they committed to late-stage development that the stock broke out of its trading range but eventually unlock strategic value. And then just one additional question about how China may fit into the strategy.

Yes. Thanks for all the questions, Andy. And again, we're really anxious to work with Jazz and BeOne to present the full HERIZON-GEA-01 data. And obviously, they're giving guidance on when that will occur. So we really look forward to that conversation post data. I guess with respect to the multitude of question you have there, I think we have optionality to take R&D assets as far as we would like.

I think when we look inside the company and see ourselves with a pretty -- what we think is a pretty substantial emerging royalty portfolio, we may value partnerships that drive more royalties and milestones in a way that might be different than other biotechs. That's one point to make. I think when you think about traditional biotech risk investment, I think one of the things we recognize is just looking at the story of ZIIHERA inside the company.

We took that ourselves into 2022 into early stages of registration studies before partnering with Jazz and turning that into a fully licensed asset with an upfront payment, but a really interesting structure of royalties and milestones going forward. If you look at the value of that inside the company from 2022 and we just starting registration studies, to now when we're commercialized on the breakthrough expansion indications in the larger market, that has appreciated that stream of royalty and milestones we're entitled to has appreciated value a considerable amount and the annualized rate of return reflected in that appreciated value is really considerable.

And for that, we had to simply believe in the product, not monetize the asset and let our partners do the work to get through development and commercialization. So that type of risk, I think we see is a little bit more predictable than maybe starting from a very early biologic target and trying to work all the way through the spectrum. So we look at those rates of increase and think about how we can do things, access external assets to try to get those same returns.

We're obviously at the same stage now with pasritamig, which has just gone into registration studies in Phase III with our partner, J&J. We have an interesting financial interest in that royalties and milestone if you go forward a couple of years and think about the conclusion of those registration studies and if successful commercialization, the rate of growth of that financial stream for us is significant and can be put into terms in terms of annualized rate of returns that are very significant.

And again, the only thing we have to do is let our partner do the work of developing personalization, not monetize that and hold on to it and adjust the risk appropriately at a late-stage development opportunity. That's a different thing than what we also do, which is again, start with novel biology in early stage and try to work our way into the clinic either alone or with partners. So I think that's the thing we think about in terms of risk.

I think continuing to operate not just a royalty portfolio, but an active R&D operation inside the company gives us optionality of how far we take specific assets in the case of pasritamig that was built off a technology platform, paid for completely by our partner, and they've moved it through the development stages.

For ZIIHERA, we took that ourselves as a much larger investment right in the early Phase III studies and they recognize that we need a partner to kind of explore the continued full value and peak sales opportunity of zanidatamab and partnering in a transaction, which I think gave us a really good return analysis and the investment that we took in early Phase III trials. So I think we have a lot of optionality from that basis.

But I think with an emerging royalty portfolio that we think is growing at a really great rate, we probably have a different value, intrinsic value inside the company of converting things from unpartnered investments to partnered opportunities, which then become more royalties and milestones inside our royalty portfolio.

So having the optionality to build that externally or internally is important, but we will value partnerships where appropriate, probably a little bit differently than other biotechs do, but it does not take away the ability for us to pursue our own programs further as we use to hear right in the registration study and create a lot more value before having to partner or deciding to partner on a commercial basis. Obviously, there's a tremendous number of licenses currently held by companies based in China due to all the partnering activity with pharma companies outside of China.

And I know there's been a number of royalty players looking to think about how you might access the value of those royalties and license agreements. So we'll obviously consider that and try to see if it does fit into the strategy that we have, which is not a straightforward buying royalties for commercial products. So a differentiated strategy, whether that can operate within that license held in China or not, we'll just have to wait and explore that further to see if that's something we can ask for ourselves.

Okay. I don't want to get lost, but I appreciate what you've done to turn the company around. It's impressive, but I do think the company is in a vastly different place than it was when you took over the helm.

No, that's great. And I think this is just another natural evolution of where we see the ability to drive long-term shareholder value by still doing R&D, but recognizing we have substantial emerging royalty portfolio that's going to be here for the long term, and we can actively manage that in a way that we think about it from an asset perspective, we can drive significant long-term returns from both the royalty portfolio and the R&D assets we have and we can reduce share count effectively, we continue to do that as we have done. And I think that really sets up for what we think are some optimal shareholder returns in the future.

And our next question will come from Stephen Willey with Stifel.

Congrats on the topline release yesterday. Ken, I kind of think you spoke to some of the increased interest in these external royalty acquisitions. But just wondering how you're thinking about the competitiveness of Zymeworks just from a cost of capital perspective? And then should we assume that the overall risk profile of these external royalties that you'll be seeking will be kind of similarly derisked and nonbinary in nature?

Yes. No, thanks for the 2 questions, I think, Steve. Yes, I think from our perspective, we just looked at what we've already done with respect to ZIIHERA from probably 2022 to where we are now. And I think we saw that stage over the last 3 years being kind of predictable risk, late-stage development, looking at the strength of the counterparties, our partners to deliver on development and commercialization goals. And so we like the idea.

If you look at the rates of return that are implied by the value of our stream of royalty and milestones from 2022 to today, it's a pretty substantial annualized return. And I think we understand the risk profile that we went through with that, including a pretty binary Phase III risk readout yesterday, which was in our favor, which is great. I think we like that risk return relationship. So finding opportunities where we can get that would be great.

We also have opportunities to look at maybe something that doesn't really subject us to that substantial risk now based on going to Phase III and looking at going to commercialization with a partner. So we like that opportunity. So we would look to find things that have the same flavor of potential annualized returns from holding on to those strips of royalties and milestones and not trying to deviate too much from the risk profile associated with those.

At the same time, we do have innovative R&D, which has a different risk profile, and we think about investing in the programs that we have, whether they're preclinical or early clinical. So we do like the mix of those 2 within a portfolio basis. And so that should be the type of things that we're looking towards. I think as we access some targets externally.

I think we'll start to show how we think about executing what that looks like with specific assets or specific royalty streams that we're able to access externally and also how we think about integrating partnerships and collaborations and what's right now a wholly owned portfolio and how that also creates some internally generated royalties and milestone streams through partnerships on things that we currently own. I think the combination of those 2 and the right mix could be quite interesting.

And so we're looking forward to executing on both of those, the reasons that Adam and Scott joined us to help us execute on those and get that going quickly. And I think once we look at how that profile changes for Zymeworks going forward, we hope that with the potential to have even greater returns than we might think of from what we look at the company right now without really adjusting the risk profile.

And our next question will come from Yigal Nochomovitz with Citi.

This is Joohwan Kim on for Yigal. Congrats on the progress. Maybe just 2 quick ones from us. How far along are you in the process of conducting your first deal? And can you provide any color on when or what pace we might start seeing deals being announced?

No. No, we won't give any guidance until we complete transactions. Obviously, we've been thinking about this for most of 2025 and just had this expectation that with a positive topline result from HERIZON-GEA-01, it would just lead to increased expectations of substantial cash flows from ZIIHERA flowing into the company and making sure that we understood how we would thoughtfully allocate that capital to different parts of the business to drive long-term returns.

And so we've been thinking about this considerably, working a way at how we would have a differentiated strategy from more traditional royalty modernization players and other folks that might be also looking at these assets for different reasons. And so I think we understand completely how we can be differentiated and how we can compete and how we can get access to external assets at really attractive prices and be able to drive value from there.

Just won't guide on more details of that strategy because it's competitive, and I don't want to set up expectations for completion of deals but very high hurdle rates for what is necessary to not just allocate capital back to reducing share count in trying to build that royalty portfolio. So provided we can find opportunities that meet our financial requirements to add to the royalty portfolio, then we'll be doing transactions. We also have the ability to focus on internally generated partnerships as we integrate into a pretty sizable wholly owned portfolio and also looking externally at what might be available and where we would place capital.

So I think as transactions occur, we can get a good sense of the cadence and shape of what we're trying to accomplish and then hopefully it becomes more clear why this is the optimal strategy because of the situation we find ourselves in with ZIIHERA and pasritamig potentially joining that later on. I think it was a pretty interesting license portfolio already and looking at the wholly owned R&D portfolio we currently have in the company and where that can be built as well.

Got it. And just to double-click on that, on your thought process that led you to the shift in your value proposition, I guess, specifically, what is always the plan with the Jazz and J&J cash?

Let me ask again, sorry, I didn't hear. Can you ask again.

Sorry. just to double-click on that in terms of your thought process that led you to the shift in your value proposition, specifically, was this always the plan for the J&J and Jazz cash?

Yes. I think we've always -- as an evolution of the strategy, we obviously considered a range of strategic options to drive shareholder value when we might find ourselves with the HERIZON-GEA-01 data positive and as we did look at moving into the Phase III study. So we did look at it a different model. Again, we aligned around this particular concept because we felt it would drive the optimal shareholder returns that would be long-term and durable. And we felt it was differentiated enough in the way that we would approach it that we didn't have the ability to see through being able to generate those returns. So it's clearly a differentiated strategy.

We think we have all the capabilities to execute it effectively, and it's better than the other options that we looked at for a company that might find itself in a position of having an emerging and sizable substantial cash flow coming from initial assets that are licensed and commercialized by others and its own traditional biotech innovative R&D. And so we've been working for some time thinking -- trying to find the right strategy that suits Zymeworks in the situation we find ourselves in, and we've landed on evolving the strategy to what we're presenting today as one that drives optimal stockholder returns.

And the next question will come from Jon Miller with Evercore.

I guess I'll start on how much you plan on spending on internal assets before a partnership. How do you determine what the right time for a partnership is? And I ask that knowing that different indications in different spaces require vastly different amounts of clinical development spend to get to a derisked place where a partnership or an out-license makes more sense it can deliver value for the company.

So can I get a sense of how far you take some of the existing programs that you have internally [indiscernible] and then maybe in the reverse direction, you mentioned, Ken, that the pool of external options is limited in terms of late stage derisked assets. But you also said that you have a broader pool maybe than others in the royalty acquisition space might have. And I'm wondering what you're looking for, what you might be okay with looking at an external pool that's materially different from what other loyalty -- royalty players would clear or what extent?

Yes. Two good questions, Jon. I think if you look internally, not that we have any of that format for how we think about investing in R&D and at what stage it might make sense to monetize some of that with a partner or bring in a partner and continue to share success. And if you look at ZIIHERA and pasritamig are probably the end of those 2 things when you think about ZIIHERA, we took right into registration studies with a $350 million investment on a single product before partnering it and looking at it then from a return of capital.

Pasritamig came from a technology platform where there was 0 investment on our part [indiscernible] ROIC. So those are probably 2 ends of that. I think over the past 3 years; we've tried to build a portfolio and maintain its wholly owned just because then we have enough control over the shape and structure and targets and product modalities in that portfolio. And now that we've made a couple of hundred million dollar investment in that since 2022, we like the idea of integrating the right partnerships into that.

That could be looking at earlier-stage collaborations that we haven't really done in the last couple of years are focused on. It could be looking at a certain stage of development for any of the assets that are in the clinic or moving in the clinic, could be a combination of those 2 things in a collaboration, could be a broader collaboration with a single party rather than multiple collaborations with different parties.

So I think we're open to investing in R&D where it makes sense based on criteria we laid out and understanding how integration of partnerships can get the most value of that R&D, but also thinking about how it adds to the royalty portfolio that we already have and have a desire to expand and grow and actively manage.

So the way we look at those things might be a little bit different, but I don't think there's any format kind of between -- there's no set format to decide we'll do exactly this all the time. We have a pretty good wholly owned portfolio that should allow us to integrate partnerships and collaborations in a variety of ways to drive that R&D forward and be competitive and also add to the future royalties and milestones we might receive in our portfolio.

And then on external?

Yes. I think on external, we thought a lot about differentiated. I mean a lot of these royalties that might be attractive to us are sitting within potential companies, which might also have other assets or platforms that they're working on, which may not be a value to somebody looking to acquire them just for capital or life. I also think holding on to ZIIHERA and not monetizing and holding out a position not monetizing it through development to commercialization generates substantial returns.

So we might have the ability to hold on to these royalties and milestone streams until they mature and become more valuable rather than some of the monetization activity we see in the marketplace today, which is a pretty high cost of capital and the capital is put back into R&D assets, so we think that we might have the ability when you see a collection of assets together, some licenses, some unpartnered assets, some platform and be able to get access to all of that at the same time and then figure out how to curate that between the royalty portfolio, our R&D assets.

And again, it's something we did a skill set in Zyme back in 2022, where we kind of took over the company and rationalize the burn rate, really refocus the R&D around certain things, turn the key assets from partnered to -- unpartnered to partnered. We've kind of already curated our own company in that way from 2022 onwards, and we see the benefit now that we have for what that looks like.

We might get the opportunity to do that, and most financially oriented royalty players don't have the capabilities or interest in doing that. So we might find opportunities that are better able for us to assign value or ascribe value and maybe do a little bit more work around getting that value by the work that having R&D organization would allow us to do.

And our next question is going to come from Mayank Mamtani with B. Riley Securities.

Congrats also on the HERIZON-GEA topline results yesterday. So on the royalty aggregation platform, Ken, is there a certain component of biotech space that you feel there's most return potential when you apply this ZIIHERA learning from 2022 of resisting monetizing royalty streams through the last 3 years?

Your focus is obviously very broad but also looks opportunistic. So any insight on the funnel process of narrowing opportunities? If you can't commit to timing of execution, if you are able to comment on the sort of upfronts that you could be targeting? And would that be tied to how cash flows in from Jazz and J&J? And then I have a follow-up.

Yes. I mean part of it is, again, trying to use the synergies or value of having internal R&D organization alongside you as you think about accessing the external assets or external royalties. It's something that no other royalty monetization players have. So finding ways where we can use that capability is great. But we would also be looking for things that fit into our existing portfolio.

So the way we look at the future cash flows we might receive from first here and eventually pasritamig and eventually potentially other internally generated royalties, we're looking to understand what that cash flow looks like and how we can bring in things that would enhance it. It might enhance it in terms of accelerating some of the cash flows, it might do that in terms of getting to a higher fee cash flow. It might be increasing another tail.

It might be trading one royalty for another to get a little bit of diversity from the products they relate to the platform, the therapeutic areas, the stage of development. So we really look at the portfolio approach and our focus are to try to make that portfolio more valuable than it is today with just what's in it today in terms of ZIIHERA, pasritamig, maybe some other things.

So what we'll look for will be specific to our own portfolio and looking for ways to make that more valuable in the context of our own portfolio. So if we need diversity, we can go and gather money in the synergy of R&D group. We can stay close to things that we know. I think we have a range of optionality in the way that we look at it.

And we might have more optionality or flexibility in how we build that portfolio than others who might be interested in similar types of assets. So hopefully, that's a different approach and the way we might have find value differently based on our own circumstances might be able to find attractive assets that we can get for a better input price or we can make more value out of those assets than others might be able to.

And at what point, Ken, a spin-off could make sense? Would it be an asset internally that requires an extensive R&D capital, late-stage development and you have exhausted extracting optimal value from potential larger pharma transaction. Is there anything obvious in your portfolio that might be trending towards that direction?

No. I mean we have a pretty broad internal R&D portfolio right now with multiple research teams in it. So obviously, we would still consider the opportunity that may be a bundle of assets or opportunities, or late stage and early stage would be more effectively capitalized moving forward in a spin-out situation. And quite frankly, if we're able to receive a share of that through royalties, milestones, equity participation, that would be fine.

We could also see ourselves accessing external assets to us that might bundle very nicely with things that we're doing internally and might catalyze a situation where something might look like it could be sustainable on its own with its own future moving forward. And again, taking our share of that in royalties, milestones and equity participation might be okay.

So I think the idea of bringing external assets and understanding what -- how it affects our R&D portfolio and being open to the kind of idea of spin-offs that we have seen other biotechs consider and do might be interesting and because one of our priorities is enhancing the value of our current royalty portfolio over the long term, we could ascribe more value maybe to some of what we see in that spin-off than others might who don't have that same priority around the emerging royalty portfolio.

And our next question will come from Yaron Werber with TD Cowen.

Congrats again on the data yesterday. I second that. I think that data should look really good. Hopefully, at ASCO GI, we'll see when it comes out. Maybe, Ken, a couple of questions sort of interrelated, #1, you have substantial royalties coming to you from ZIIHERA and also then from J&J. Would you consider monetizing those royalties ahead of time, royalties are obviously at a premium?

Or do you want to hold on to those as a way to then fund your own effort. And then secondly, you're obviously about to return cash to shareholders to kind of help boost your own stock price. So I imagine a lot of the activities from now onwards are going to be financed with proceeds from future milestones that are coming to you?

Or would you even be willing to access cash in sort of different ways? And then maybe finally, I mean, just so we understand, it sounds like you're thinking about going out and buying royalty streams that are mis-monetized or not appropriately valued? Or are you thinking actually bringing in additional programs from the outside, developing them and then monetizing them in a partnership or a royalty stream?

Yes. I think on your last question, I think we see ourselves having the option to do both and maybe in a way where we can access both of those things in one biotech company, let's say, or in accessing assets we can split off of one biotech company. That might differentiate the way we might be able to ascribe value of the transaction as different and preferred than just a royalty monetization player.

I think the way we think about ZIIHERA and pasritamig is the net present value of those future royalty streams are much higher than they were 3 years ago because they advanced in development, at least getting in commercialization and looking to broaden the label and pasritamig obviously moving into Phase III. The way we got value from that was holding on to them and having belief in them and then being able to -- eventually, we're going to realize more value from those, so I think we like that approach.

So I think we would intend to hold on to those as a core piece of our portfolio. They obviously will throw off capital. We announced today the milestones that will come to us on ZIIHERA from the FDA approval. And so we will get capital that comes from the royalty portfolio and turns into cash. And the question is how do we allocate that capital and try to explain today how we might think about it differently than yesterday.

But I think we would like to hold on to the core of those royalty pieces. Again, they can always be monetized if you have a specific use. I think you can look at example of BeOne monetizing all the DLL3 royalties that they were entitled to their involvement with tarlatamab to do more R&D. So there are reasons why you might do that. But at the core, this long-term sustainable growing base of royalties and milestones on at least hear about pasritamig coming into the forefront, the ability to have more of them.

I think holding on to those has generated substantial appreciation and value and eventually realization when we receive milestones and royalties. So I think we like that, obviously, it's a very valuable asset. You can always borrow against that if you want to access capital sooner than it comes in. But I think at the core, we like to keep ZIIHERA and pasritamig royalty streams inside the company. They are always that we -- the core of the strategy. And again, we've talked about this.

We've got a pretty reasonable portfolio on the R&D side that's all wholly owned with multiple teams and assets at various stages, and we've committed a couple of hundred million dollars to building that, and we'd like to integrate partnerships and collaborations into that to move the promising ones forward in a way that maybe not be all of our capital.

So if we're successful at continuing to manage R&D with discipline, if we're able to integrate partnerships into this to turn it from a wholly owned portfolio into something that has partners and collaborators working alongside of us, the cash needs on R&D will be more modest over time and won't require us to monetize as a requirement ZIIHERA and pasritamig royalties and milestones to fund that R&D.

So I think there's a number of things going on here at the same time that just utilize our current situation where we find ourselves with 2 great licensed products that look really promising, a wholly owned portfolio and this idea of thoughtful capital allocation to build the royalty portfolio, still fund innovative R&D and reduce share count at the same time and a mixture of the capital allocation of those 3 components could really drive some interesting outsized returns for that total business.

And our next question will come from Eva Fortea with Wells Fargo.

Eva from Wells Fargo. Congrats on the recent data. So quick one from us. Can you provide a little bit more color on what today's announcement means for 191 and 251 development? And specifically for 191, you mentioned partnership discussions are underway. So how would you balance combination strategies in earlier line opportunities with partnership deals? Like would you wait to secure a partnership before moving to late stages of development in early line?

Yes. Thanks. I mean we obviously have a goal of integrating partnerships and collaborations in the wholly owned portfolio, but we have time to do that effectively and properly. And so I think we want to make sure that we protect the value of the assets we're generating and integrate partnerships and collaboration at the right time in the right way into this wholly owned portfolio that we've built the last couple of years.

Obviously, for ZW191, the early data we disclosed, we think supports that it could be the potential best-in-class and obviously, the point of continuing to study it in the next stage of Phase I is to get some better characterization around tolerability, better characterization of activity and get some more confirmation that this could be the best-in-class asset.

I think recognizing the indications of interest in ZW191, having a potential best-in-class when you're behind a number of others and when you're thinking more about combination strategies to compete [indiscernible] then convincing someone else who maybe has more resources to come on board to move that forward to explore the full potential of it. So that's a specific situation around when it might make sense and how we catch up with folks who are ahead of us in gynecological cancer.

And so that's a partnership-driven model related to enhancing competitiveness, still sharing upside success, but trying to find someone who can help us make the most out of what hopefully continues to be next year a potential best-in-class opportunity in ADC. So that's driven. But I think we have the ability to integrate partnerships in the right way and the right structure and the right timing because we have the strength in this financial position. And so we're going to continue to stay in a strong financial position.

But integrating partnerships and collaborations, someone else help us fund that portfolio going forward that we've worked the last couple of years to fund entirely on our own and retain it as wholly owned. It now is time to change that proposition. So we'll have to wait and see what those partnerships look like when they're indicated, how broad they are in the R&D structure and how they go along with not only moving R&D forward, but also adding additional valuable royalties and licenses from development stage that we can hold in our portfolio until they mature.

And our next question will come from Brian Cheng with JPMorgan.

As you think about the couple of directions that you have laid out, like seeking additional royalties, building out internal pipeline, returning cash to shareholders, how do you quantify the resources allocated to each of these buckets going forward? And on the royalty front of the business, is there a certain return benchmark at a certain time horizon that you and the team need to achieve?

No. Thanks for the question, Brian. Yes, we have very strict financial criteria related to adding additional royalties in the royalty portfolio. That we have to complement what we have there in a way that makes them more valuable. But we have a very specific criteria to allocate capital there. And so you'll see us be very financially disciplined and how we might invest in accessing external royalties or external royalties and assets together.

The same way we have very strict criteria for how we decide what R&D investments to make and what programs and when to continue. So I think you'll see the same financial rigor as a part of that. I think what we're trying to do inside Zymeworks is to allow some optionality and flexibility about where we see capital allocation driving shareholder returns from time to time. So we obviously wanted to take advantage of what we thought was a valuable growing business that was mispriced the last year.

So we decided that buying back 6% of the stock count was a good move to try and boost total shareholder return. If you look at the average price of buyback and the value that's been created, I think that was a good allocation of capital. At the same time, we were funding R&D that made sense to us, and we continue to do that.

We're just adding -- evolving our strategy to add another option for capital allocation for ourselves that we can -- liking the returns that we're seeing from our licensed products with ZIIHERA and pasritamig so far in the way they mature is finding a way to reallocate capital back into that type of royalty or income-based asset.

And so having the flexibility to decide how and when to allocate capital amongst those 3 different options for us and having a strict financial criteria over accessing the royalty portfolio or making additional R&D investments will keep us disciplined and we can have the optionality and flexibility to move capital where we think it can on its own or in combination with a mix of capital allocation, drive the right shareholder return over the long term, given the circumstances we find ourselves in.

We've obviously renewed the share repurchase plan with another $125 million potential because we still see at this current price, an attractive opportunity to continue to reduce share count as our entire business gets more valuable as it advances. And so we want to be prepared to do that. At the same time, we're still funding R&D. And at the same time, we're still looking for opportunities to allocate capital back into our emerging royalty portfolio.

Having the ability to do all 3 and change as circumstances allow themselves is the optionality and flexibility we think will drive optimal shareholder returns over the long term, and that's what we're focused on as a strategic element, that's what we tried to describe today as a strategic outcome of a positive HERIZON-GEA-01 study, which enables us to think about this as a strategy.

I show no further questions in the queue. I will now turn the call back over to Ken for closing remarks.

That's great. Well, thank you for everyone, for joining us today. I realize back-to-back press releases during a conference week might be difficult to take everything in, but we're happy to follow up with questions. You'll hear us talk obviously more about HERIZON-GEA-01 when that data is ready to be presented. We really look forward to doing that.

I think it really hopefully confirms the potential of zanidatamab to be a really meaningful medicine in the HER2-positive space, not just in GEA where we completed Phase III, but in a much broader way, and we're looking forward to being able to explain the GEA data to you, but also we think there's much more potential of zanidatamab than maybe is realized today and explain how we'll get there. Secondly, we hope that the evolution of strategy that we've announced today clearly delineate what we're working on from here that the HERIZON-GEA-01 data allows us to think about.

And we'll be looking forward to executing on the strategy, continue to communicate it and hopefully, you can look at the progress of the different elements of the strategy and get a better understanding of why we think this is the optimal way to drive shareholder returns in the context of the circumstances that Zymeworks finds itself in, which are very unique and differentiated. And we look forward to executing on this strategy in an excellent way and be able to report success around the strategy of execution in the weeks and months ahead. So thank you again for your time.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Thank you, operator. Good afternoon, everyone. Thank you for joining our third quarter 2025 results conference call.

As usual, before we begin, I would like to remind you that we'll be making a number of forward-looking statements during this call, including, without limitation, those forward-looking statements identified in our slides and the accompanying oral commentary. Forward-looking statements are based upon our current expectations and various assumptions and are subject to the usual risks and uncertainties associated with companies in our industry and at our stage of development. For a discussion of these risks and uncertainties, we refer you to our latest SEC filings as found on our website and as filed with the SEC.

In a moment, I will hand over to Leon Patterson, our Executive Vice President and Chief Business and Financial Officer, who will provide an overview of our recent business and partnership updates, along with financial results for our third quarter 2025. Following this, Dr. Sabine Mikan, our Senior Vice President of Clinical Development, will provide progress updates on our Phase I programs ZW191 and ZW251. We will then pass the call over to Dr. Paul Moore, our Chief Scientific Officer, who will provide a brief overview of recent R&D developments. At the end of the call, Leoni, Sabeen, Paul and Ken Galbraith, our Chair and CEO, will be available for Q&A. As a reminder, the audio and slides from this call will also be available on the Zymeworks website later today.

I will now turn the call over to Leon.

Thank you, Shrinal, and good afternoon, everyone. I'd like to start the call by walking you through recent progress on both clinical and preclinical programs within our wholly owned product pipeline. As you know, our team was pleased to present initial clinical data from the Phase I trial of ZW191, an antibody drug conjugate targeting folate receptor alpha at the ENA conference in October. Sabeen will provide a recap of the data we presented during our poster presentation later on today's call.

We are encouraged by the preliminary Phase I data for ZW191, which provides early clinical validation of our ADC approach. And we are pleased to announce that we have dosed the first patient in the Phase I clinical trial of ZW251, a DAR4 ADC targeting GPC3 in hepatocellular carcinoma. Again, Sabeen will talk more about the trial design later on today's call.

We also continue to present preclinical data of ZW1528, a bispecific inhibitor of IL-4 and IL-31 to address respiratory inflammation at the European Respiratory Society Annual Congress. Additional information can be found on the ERS Congress website, and a copy of the poster is available on the Publications page of Zymeworks website. Meanwhile, our partnered programs also continue to provide encouraging data at ESMO. Our partner, Jazz, presented a trial in progress poster on the DiscovHER PAN-206 Phase II study of zanidatamab in HER2 overexpressing solid tumors as well as a 2-year follow-up in first-line metastatic colorectal cancer showing durable responses and a favorable safety profile.

In addition, yesterday, Jazz announced that the ITT population for the primary PFS and interim OS analysis of the HERIZON-GEA-01 trial will include the full patient population enrolled in the study of 920 patients. Also at ESMO, J&J presented translational findings from the first-in-human study of pasritamig in metastatic prostate cancer, linking T-cell phenotypes with clinical activity. These updates highlight the strong momentum in our partnered portfolio and the long-term value these collaborations continue to build.

With this in mind, I'm pleased to announce that this quarter, we recognized a $25 million development milestone as revenue from our collaboration partner, J&J, in association with clinical progress of pasritamig, a first-in-class bispecific T-cell engager targeting KLK2 in Phase III studies in metastatic castration-resistant prostate cancer, which was an engineering -- engineered using Zymeworks Azymetric platform.

As a reminder, we remain eligible to receive up to a further $434 million in development and commercial milestones from the J&J collaboration in addition to potential mid-single-digit royalties on global product sales. In addition, this quarter, we earned royalties of $1 million based on Ziihera net product sales by Jazz and BeOne Medicines. And we look forward to pivotal data from the HERIZON-GEA-01 study expected in the fourth quarter.

I'd also like to highlight that as of November 4, 2025, we have completed share repurchases of $22.7 million of the remaining $30 million under our previously authorized share repurchase program. which reflects the leadership team's confidence in the company's outlook, the strength of our pipeline and our long-term commitment to shareholder value.

This program was primarily funded from Ziihera development milestones and cumulative royalties received from Jazz and BeOne related to initial regulatory approvals in biliary tract cancer in both the U.S. and China, allowing us to efficiently deploy excess capital while maintaining full flexibility to fund operations and growth initiatives. This action reinforces our view that the stock remains undervalued, and it aligns with our disciplined, balanced approach to capital allocation designed to drive sustainable long-term returns.

Turning now to our financial results. Total revenue was $27.6 million in the third quarter of 2025 compared to $16 million for the third quarter of 2024. The increase was primarily due to a $25 million nonrefundable milestone recognized from J&J in relation to clinical progress on pasritamig in Phase III studies in metastatic castration-resistant prostate cancer and $1 million of royalty revenues from Jazz and BeOne medicines. These increases were partially offset by a reduction in development support and drug supply revenue from Jazz and due to a nonrecurring milestone from GSK that was achieved in the third quarter of 2024.

Overall, operating expenses were $49.7 million for the 3 months ended September 30, 2025, compared to $50.2 million for the same period in 2024, representing a decrease of 1%. The decrease was primarily due to a reduction in expenses from ZW220 and ZW251, zanidatamab and zanidatamab zovodotin and a decrease in personnel expenses. This was partially offset by an increase in preclinical and research expenses for our ZW209 and ZW1528 programs, progression of clinical studies for ZW171 and 191 and an increase in noncash stock-based compensation expense.

Net loss was $19.6 million for the 3 months ended September 30, 2025, compared to a net loss of $29.9 million for the same period in 2024. This was primarily due to an increase in revenue, partially offset by a decrease in interest income and an increase in income tax expense. As of September 30, 2025, we had $299.4 million of cash, cash equivalents and marketable securities, which is a decrease in cash resources compared to $324.2 million as of December 31, 2024.

Our cash resources as of September 30, 2025, did not include the $25 million milestone from J&J recognized in the third quarter and expected to be received in the fourth quarter. We remain well capitalized. And based on our current operating plans, we expect our existing cash resources as of September 30, 2025, when combined with the assumed receipt of certain anticipated regulatory milestones will enable us to fund planned operations in the second half of 2027, which is anticipated to take us through multiple catalyst events on our pipeline.

These achievements underscore the strength of our foundational partnerships and the relevance of our platform across multiple products moving into clinical development by our partners. For additional details on our quarterly results, I encourage you to review our earnings release and other SEC filings as available on our website at www.zymeworks.com.

With that, I'd like to hand over to our Senior Vice President of Clinical Development, Dr. Sabeen Mekan, to run through progress on our clinical development programs.

Thank you, Leone, and good afternoon, everyone. I'd like to start off by providing a recap of the initial Phase I data for ZW191 as presented at the AACR-NCI-EORTC conference last month. As it pertains to the safety, we are encouraged by the tolerability profile that we've seen. The safety profile for ZW191 allowed us to escalate dose up to 11.2 milligram per kilogram, which is quite high for topoisomerase payload of this potency similar to deruxtecan.

Across all treated patients, there was a low incidence of grade 3 or higher treatment-related adverse events and adverse events leading to dose interruptions or reductions were infrequent. The most commonly reported events were nausea, fatigue and anemia, which are generally consistent with our expectations for an ADC. Importantly, there were no serious treatment-related adverse events, no discontinuations due to adverse events and no deaths observed in this study. These findings support a favorable safety profile, particularly in a population that has been heavily pretreated. Overall, these data gave us confidence that this drug is well tolerated at clinically active doses, providing a solid foundation for ongoing and future studies.

Moving now to the efficacy results. This slide shows the waterfall plot summarizing the best change in tumor size across dose levels. What we see here is also very encouraging. There are meaningful reductions in tumor size across multiple dose levels with objective responses observed at doses as low as 3.2 milligram per kilogram and the majority of patients continuing on treatment at data cutoff. Importantly, these responses were seen across the spectrum of folate receptor alpha expression, an important observation as we think about future development and patient selection. In participants with gynecological cancers dosed between clinically relevant doses of 6.4 and 9.6 milligram per kilogram, we observed an objective response rate of 64%.

Taken together, these early data show promising antitumor activity across multiple dose levels and tumor types. reinforcing the potential of this program to be a best-in-class folate receptor alpha directed ADC. Based on the integrated assessment of safety, efficacy and pharmacokinetic data, we have selected 2 doses of 6.4 milligram per kilogram and 9.6 milligram per kilogram for optimization with approximately 30 patients planned in each cohort. Enrollment is expected to begin in this quarter, and this will allow us to further refine the balance between efficacy and safety and inform optimal dose registrational studies.

We expect to share additional data at a future medical conference with a larger and more mature data set. Overall, early results support ZW191 as a potential best-in-class asset with promising early activity and a manageable safety profile. We continue to be data-driven in planning further development for registration and expanding into earlier lines of therapy and in combination. As we move forward, we -- our focus remains on disciplined clinical execution while exploring strategic partnerships that could accelerate development and expand global reach.

Based on the encouraging clinical findings for ZW191, we are moving forward with the clinical development of our second ADC candidate, ZW251 and are pleased to confirm the dosing of the first patient in our Phase I open-label multicenter study of ZW251. The study is actively recruiting and aims to enroll approximately 100 participants across North America, Europe and the Asia Pacific region. The patient population includes advanced or metastatic hepatocellular carcinoma that has progressed after standard of care treatments where regardless of gpiin-3 expression levels and with measurable disease as per RECIST. Part 1 of the study will evaluate escalating doses of ZW251 to determine safety and maximum tolerated dose. Part 2 of the study includes randomized dose optimization at 2 selected doses of ZW251 in order to further evaluate safety and explore efficacy according to the RECIST evaluation criteria.

I will now hand over to our Chief Scientific Officer, Dr. Paul Moore, to provide an overview of R&D developments.

Thank you, Sabeen. I'd like to just add a few final thoughts on the developments disclosed this quarter for both ZW191 and ZW171. Firstly, the initial data presented on ZW191 provides important translational insights that could help accelerate and reduce risk in the future development of ZW251 and other pipeline ADCs using our ZB06519 payload.

As you can see on this slide, behind 191 and 251, we also have preclinical stage candidates targeting more novel antigens such as Ly6E and PTK7. Also, our NaPi2b program remains IND ready, and we continue to explore next-generation ADCs. Importantly, each of our ADCs has been tailored to factor in target biology by toggling drug-to-antibody ratio and the Fc modifications. Furthermore, we also ensure to utilize the most optimal antibody to deliver an internalized payload, whether this be a superior monoclonal antibody to benchmark as ZW191 or LE or a biparatopic antibody such as in the case of PTK7.

Our approach of tailoring these parameters to target biology, patient population needs and preclinical safety efficacy data aims to ensure optimal therapeutic windows while minimizing off-target toxicities. Secondly, I wanted to touch briefly on our decision to discontinue the development of ZW171 and importantly, the valuable insights, both scientifically and operationally that we took from this experience.

Internally, we hold ourselves to very high standards when it comes to our target product profiles. That discipline is important because we have a broad and productive pipeline, and we want to ensure our capital and our focus go to programs with the clearest path to meaningful patient benefit. Based on the totality of the dose escalation data, we concluded that as a monotherapy, this program did not fully meet our internal threshold to advance further within our portfolio as it was unlikely to support a benefit risk profile consistent with the desired monotherapy target product profile.

It was not an easy decision as we continue to believe there is potential for mesothelin-directed therapies, including ZW171, perhaps in specific subpopulations in combination settings or through the right external partnership. So we felt it was the right choice to prioritize programs that more closely align with our long-term strategic and clinical goals. Our experience of taking 171 through dose escalation significantly strengthened our understanding of the T-cell engager design and provided clinical experience, which will aid us in executing future clinical trials for our next-generation T-cell engagers.

For example, we were able to advance 171 safely and efficiently through dose escalation in under a year, which is a real testament to our team and technology. We also deepened our understanding of dosing strategies, routes of administration and investigator engagement, all of which we can apply to our next generation of trispecific T-cell engagers. The study also reinforced our hypothesis around the importance of co-stimulation for T-cell engagers, the use of our novel CD3 epitope and tailoring our candidates for patient characteristics and target biology.

Our ongoing portfolio management is a reflection of our discipline, our high scientific standards and the strength of our portfolio. We will continue to hold ourselves and our target product profiles to high standards of success and remain focused on advancing the programs we believe can have the most impact for patients, partners and shareholders.

With that in mind, we look forward to presenting 3 poster presentations at the SITC Annual Meeting this weekend with one showcasing the versatility and application of our innovative TriTCE Co-Stem T-cell engager platform to enable diverse targeting strategies across different target tumor types, one featuring a next-generation tumor targeted Mast IL-12 enabled by Iometric and the third covering new research co-authored with NeoGenomics on ADC resistant mechanisms using spperum models. Together, we believe these presentations showcase our continued leadership in advancing innovative and target oncology research.

With that, I'll hand over to our Chair and CEO, Ken Galbraith, to conclude today's call and open up the call for Q&A.

Thanks, Paul. Over the last 2 years, we've redefined what this company can achieve by combining R&D innovation, smart partnerships and disciplined capital allocation to help deliver potential best-in-class therapies while helping to grow shareholder value. Our partnership-based model continues to generate value today while also providing opportunities for growing potential cash flows. We plan to continue leveraging partnerships across our wholly owned pipeline to bring in external capital and accelerate development.

We believe this approach allows us to main control of our R&D innovation while helping to derisk clinical development and to help ensure that every investment we make has the potential to contribute meaningfully to durable value creation. As we look beyond important near-term events for our pipeline and partner programs, our long-term focus is on compounding returns from Ziihera and protecting and enhancing future cash flows that can be reinvested to drive the next wave of innovation.

With this in mind, this quarter, we announced some changes to our Board of Directors to align governance and leadership with the next phase of our strategy. We welcomed 2 new directors in August and 3 members transition off the Board effective today. We'd like to thank those 3 directors for their service to Zymeworks. In October, we appointed Dr. Adam Schayowitz as acting Chief Development Officer to help advance our portfolio and strengthen our partnership-driven strategy. With this refreshed leadership, we believe we're well positioned to transit our scientific innovation into a scalable model that builds durable royalty streams and deliver sustainable long-term value for our shareholders.

To close, I want to emphasize that our capital allocation decisions, whether investing in R&D, advancing partnerships or returning capital through share repurchases, all serve one purpose to help build sustainable long-term value. Our R&D priorities remain focused on programs with clear differentiation and strong scientific rationale, and we'll continue to fund those using partnerships to extend our reach and offset development risk. Those collaborations also aim to provide a meaningful revenue floor through milestones and royalties, giving us the flexibility to invest with conviction and discipline. This is how we plan to sustain momentum through focus, partnership and the power of compounding. I want to thank you for your continued support.

I'd like to turn the call back over to the operator for the question-and-answer session. Operator?[ id="-1" name="Operator" /> The first question comes from the line of [Technical Difficulty].

Can you hear me?

Yes, we can hear you.

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

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

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

Yes. No, good question, Charles. Yes, we're intrigued as your question suggests as well and looking forward to continued recruitment of ZW191 in dose escalation, moving to dose optimization, which provide a larger, more mature data set. At the same time, as we announced, we're recruiting patients now in the ZW251 study. So far, our clinical execution is as good as it has been to date with our prior programs. We're looking forward to that.

I think in terms of what we think about that, I think maybe I'll give Sabeen and then Paul both a chance to add their flavor to that because it's a really, really interesting intriguing question for us as well. So I don't know, Sabeen, if you want to go first and I'll ask Paul to follow up.

Yes. I can go first. So as you know, hepatocellular carcinoma is a population with very high unmet medical need, particularly post first-line setting. There are not many treatment options for those patients. And that's why we think we should be able to create a difference given the construct of our ADC and what we've observed in ZW191 based upon the clinical data that we've observed.

One of the key concerns with the hepatocellular population is concern for safety because this patient population often is very fragile and they have underlying liver disease. So the concern for safety is very important. And it is for this reason that we have selected DAR4 for this ADC molecule. And given the safety profile that we've observed with ZW191, we're fairly confident that we should be able to have a good safety profiles and to be able to have a therapeutic window in terms of treatment for hepatocellular carcinoma patients. I'll pass over to Paul.

Yes. No, I think Sabeen really captured the key points. I think the tolerability -- I mean, from the 191 study, it was both the tolerability was really what we were hoping for, but we also got the efficacy. And we've gone with the DAR4, we know from preclinical studies that we can maintain the same -- we can get to the same activity level with that. So we were really being careful on just making sure we had the most tolerable molecule to develop in such a challenging cancer indication.

And I think the data from the Phase I sort of supports that we're in the right direction with the way that we selected the payload. We were very careful in how we pick that payload in the sort of the space of the topisomerase inhibitors that it would support a tolerable profile while maintaining our ability to get good dose into patients, and you could see that from our data. I think ultimately, we want the molecules to be combinable with other modalities as well so that we can go up in line. But obviously, first, we want to establish the profile as a monotherapy, and this really energizes us now after seeing the 191 data to really chase after the 251.

[ id="-1" name="Operator" /> The next question comes from the line of Yaron Werber of TD Cowen.

Congrats as well on the folate receptor alpha. I got maybe a couple of questions actually on the pipeline. Maybe the first one, while we're staying on GPC3, B1 today on their call said that with their bispecific GPC3 4-1BB, they actually established proof of concept. So they're moving forward. That's definitely very encouraging. In terms of the payload that you're using is irinotecan and typically -- I'm sorry, a TOPO1 kind of based payload. That's not -- are TOPO1 typically used in liver cancer? And kind of maybe give us a little bit of a sense from the preclinical data, what are you expecting in terms of showing efficacy?

And then secondly, for the next IND in the first half of next year, the DLL3 CD3, CD28 trispecific, we know DLL3 is a great target, and we've seen a lot of activity with both the bispecific on the market and the ADC. CD28 has not worked out so far in most other cases. So maybe what makes you more optimistic this time around?

Yes. I'll let Paul talk about the DLL3 and then maybe let Sabine and Paul both comment about CDC3, that's okay.

Yes. So yes, maybe I'll -- yes, I'll take the second question first. And then -- so great question, Yaron, on why do we think we can make CD28 work where others have had challenges, right? And so I think we do take precedents from the CAR-T space where adding in co-stimulation has shown benefits. So something like CD28 or 4-1BB that you refer to in the context of the B1 molecule. But -- and a lot of people have chased after that because of the attraction of getting that CD28 costimulatory signal to the T-cell to maintain or enable activity that you don't achieve just by having signal 1 through CD3.

And I think what the challenge has been is actually getting that timing, that simultaneous engagement of CD3 and CD28 in the kinetics and the timing that you need to get that benefit. So that is what we took the challenge on when we developed a trispecific so that we knew that when we engage CD3, that T-cell could be then engaged with CD28. And no one's really developed a solution until what we think we have the solution for that. And so that's where we feel we can make an impact based on our preclinical data that gives us encouragement that we'll see that impact in the clinical setting.

So it's a little bit to do with just the way we design it. Others have tried doing CD3 bispecific plus the CD28 bispecific. And in some cases, that may work. But we feel a more precise way is to hit the same T-cell with the primary and the secondary signal in a concert in a manner that can be done with a single molecule. So that's the DLL3.

And certainly, we've presented data, we'll show a little bit more actually at SITC this week and that really shows the benefit that we can achieve with that above like a bispecific molecule, but doing it safely in the preclinical setting. For the TPC341BB, and I think also your question was about why do we think a chemo can work there in the liver setting. And certainly, it isn't a standard of care chemotherapy for liver cancer, but there is precedent for chemo working in liver cancer. It's just that it's not -- it just can't be tolerated. It's not just well -- given as a systemic treatment.

So we think there is precedent there, and we think the way that we can deliver payload or chemo such as a topo inhibitor with our ADC gives us the opportunity to do it in such a way that we can thread the needle and get the right level of payload to the patient that can enable then the sustained exposure that will give you the benefit, but still with doing it within a tolerable profile. So that's kind of the preclinical hypothesis or the hypothesis and the preclinical data that we have has shown that when we've looked at like a scan of different HCCPDX models, we see 8 out of 10 or that sort of range of responses of models responding, but we can go up to like 100 mg per kg with this molecule in cynomolgus monkeys.

So we have the safety tolerability profile with the evidence of efficacy with some glimpses that in patient population they can under certain conditions respond to chemo, we think we can open that window up with the ADC.

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

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

[ id="-1" name="Operator" /> The next question comes from the line of Andrew Berens from Leerink Partners.

Congrats on the progress. Just a question. I know Jazz is controlling the trial, but I was wondering, would the increase in the -- to the intent-to-treat analysis today also increase the number of PFS events that are necessary to trigger the analysis? Just try to put this announcement in context.

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

[ id="-1" name="Operator" /> The next question comes from the line of Stefan Wiley of Stifel.

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

Yes. Good question, Steve. Sabeen, do you want to -- obviously, we haven't disclosed the starting dose yet. We'll obviously look to do that probably a similar way we did with 191. But Sabeen, is there anything you want to add about the dose schema for dose escalation for 251 as it relates to the 191 schema that now people have seen?

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

Okay. That's helpful. And then -- maybe just a question for Paul. Just curious how big the universe of target antigens you think is for a trispecific format beyond DLL3. I know that target has a pretty exquisite expression profile between tumor and healthy tissue that obviously mitigates some of the concerns about amplifying off-tumor tox with a signal 2. But just curious where and how you might be able to leverage this format to other targets of interest.

Yes. No, thanks, Steve. That's definitely very much in our mind. And actually, I sort of alluded to we have actually a presentation this weekend at SITC and what we're going to show there is application of the technology to different targets and the way that we designed the molecule for the target. So the base molecule on the context of the CD3/CD28, we know sort of the positions of those molecules. We're not telling people really the secret sauce there and how they're in the geometry of the molecule.

But what we also can think about is how do you then target the antigen and design the targeting of the tumor antigen in such a way to get that maximum window. So we are looking at that. We're looking at targets both in solid tumor and in hematological cancers. We can deploy against sort of the 2 plus 1 strategies. We can think about logic gated strategies as well. So there are ways with the Azymetric so versatile and flexible that we can put in multi binding sites to help us get more selectivity and targeting.

We can share more of that. But that we're very much thinking about how do we tailor that so that we can have that therapeutic window. We don't rule out the use of masking. We do have masking technology. We're actually applying that to the IL-12 molecule, and that can also be adapted to our T-cell engagers. So we have that toggle if we feel we need it as well. But we just run it through, we test all the different permutations of the molecules, let the data drive and then we have the preclinical models that then allow us to understand the toxicity profile and the therapeutic window.

So we're very excited about the application of that. And again, looking forward to pushing forward with the DLL3 program, but we do have other molecules coming behind as well.

[ id="-1" name="Operator" /> The next question comes from the line of Brian Cheng of JP Morgan.

Just 2 quick ones from us. So in a trial design for GPC3, we noticed that you're recruiting patients actively through the patients who have been through standard of care. So just one is, Paul, I'm curious what you saw in the preclinical setting that gives you confidence that GPC3 will be active in the post-IL setting, given that NIVO IPI got approved in the first-line HCC not too long ago.

And then just on the biomarker side, I'm curious if you perceive a potential need for -- to develop a biomarker assay near term, is there a need for it today? Just curious what you think about that front, too.

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

Yes. No, thanks. So I think from the preclinical setting, your question was how do we -- what's our confidence that we can go behind other standard of care, right? So I think the expression level of GPC3, we've looked at that. And that doesn't -- we don't anticipate or any -- there's no proof that, that would be modulated by IL treatment. So I think the complementary mechanisms and how they work wouldn't really preclude us going with a targeted medicine that's going after GPC3.

And we've got preclinical data in different PDX models. Some of those will be collected potentially after treatment, right? But I think just mechanically, we don't see that as a barrier. And I think one of the Yaron mentioned there's encouraging data with other GPC3 modalities that are also going behind -- they would be tested behind standard of care from those clinical trials. So we take encouragement from what others have seen with GPC3 targeted therapies using different modalities.

We just feel the ADC modality could just give us an additional mechanism that -- and the power of that approach can just give us an opportunity for more meaningful differences in benefit there. So that was the thinking there.

And then on the biomarker side, there, just like we did with folate receptor, we will look at GPC3 levels and make a decision on whether that would be something that we would need as we move forward in clinical development, and we'll collect that data as we go on that. And Sabeen can reiterate that or elaborate on that.

So I'm answering a question regarding NIVO IPI being approved not too long ago. I don't think that changes our development plan. If you look at the treatment landscape for first-line hepatocellular carcinoma, the treatment is currently includes checkpoint inhibitors and VEGF and also checkpoint inhibitors plus CTLA. So prior to approval of NIVO IPI durvatremi has been approved as well. So it's the same mechanism of action, and it really doesn't have an impact on how we think an ADC, particularly a topoisomerase ADC would perform in this setting. So I think we remain confident with regards to that.

And I think Paul answered all your questions regarding the biomarker. We are enrolling similar strategy to our 191 enrolling patients regardless of expression and be able to ultimately do a correlation of how the expression level relates to clinical activity.

[ id="-1" name="Operator" /> The next question comes from the line of Mayank Mamtani of B. Riley Securities.

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

No. I'll just answer the partnership question quickly, and then I'll turn it over to Sabine, I think can answer part 1 A, B and C of your first question. But obviously, we found the data from 191, although early in initial clinical data, very interesting. I think there are others who are interested in other ADCs that are differentiated. We think ours clearly are.

And so we'll continue to talk to parties who might have an interest in joining us and moving that forward that might allow us to accelerate development, might allow us to find a better ability to compete even on a time basis and explore the full potential of ZW191. So we'll continue to have those discussions. And as I think you've seen that data was very intriguing to KOLs and obviously, people on this call and especially to us. And I think there are potential partners where that data was also very intriguing.

And so we'll continue to let the data mature, continue to collect more data and have ongoing discussions at the same time. And I'll let Sabeen answer the subparts of your first part of your question, if that's okay.

So with regards to durability of responses, I think some of the key things when you look at efficacy is the number of patients who responded. So our overall response rate looks pretty encouraging, particularly in the doses we would like to take forward that is 6.4 to 9.6 milligram per kilogram. Key things that we noted were we have a pretty wide therapeutic index with responses starting at 3.2 milligrams per kilogram, that actually gives us a lot of confidence.

And if you look at our swimmers plot that we shared in our poster, a few things that give us encouragement is that most of the responses, particularly at higher doses occurred early. And looking at the waterfall plot, the depth of responses, we had a pretty good depth of responses in terms of reduction in tumor size for the target lesions, even though our follow-up is relatively short. And vast majority of patients are staying on treatment.

So combined with our safety profile, which would hopefully allow patients to stay on treatment for a long period of time, I think that would help us give the durability that we're going to need to achieve the PFS and OS that we -- that would be important in these indications.

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

Yes. I'll let Paul talk about just learnings from our 171 program and how they're going to apply to our thoughts around 209.

Yes. And I think one of your questions was just thinking about the dosing and how we go about thinking about the step-up. And what we did for 171 was we used QSP modeling and we sort of leaned on prior clinical precedents to allow us to really nail what we thought was a good starting dose and then how we could accelerate through the dose escalation. And that approach we will use a similar approach for projecting the starting dose and the step-ups for 209.

And what I would say is that those projections when we looked at the exposure levels in the PK, they seem to really fit nicely with what we had projected. So we're anticipating that we can use that again. Obviously, the target toxicity profile, the safety profile is a little bit different for DLL3 than it is for mesothelin. But we still think there's relevant learnings from the design of them -- from the clinical design. But then also there was also some design features in 171 that we're also carrying over into 209. I think that also gives us confidence then that we have that human experience with that approach that it sets us up well for 29.

[ id="-1" name="Operator" /> The next question comes from the line of Robert Burns of H.C. Wainwright.

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

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

So I would say that H-score is pretty well-known and very well-validated research method in evaluating expression levels of different targets, and it combines both intensity, which is usually measured in IC treatments for 1, 2 plus intensity as well as the number of patients with positive -- number of cells with positive scores. So it's a pretty well integrated method for evaluating the number of pay cells that express the target.

And it has had a pretty good correlation with both TPS score, which is often used in certain assays that are ultimately commercialized as well as IHC scores. So that is why we use the H score. It's a composite, and it's got a pretty wide range from 0 to 300, and that gives us a pretty good evaluation across the range for the expression level. So one of the things that we did also do in our poster is categorize the H-score into 3 different categories, high, intermediate and low.

And within those categories, the high category that we defined is correlates with high expression that of folate receptor that is used for treatment with ELAHERE. And that is a measure where we can evaluate how many of our patients responded who would have been candidates for ELAHERE versus patients who were low or negative and were not candidates for that treatment. Paul, if you want to add something. Please go ahead. Yes.

Yes. No, I think that's good. Yes. No, great, Sabine, you covered it. I think with the H-score, it just gives us a little bit more granularity across that than using the PS2+ score. But by having the H-score, the score the way that, that specimen sample is scored with the test, we can -- as Sabeen alluded to, we can also calculate the PS2+. That's doable. So you can -- we can take that data and analyze it whichever way we want. But we felt for this analysis, this was the appropriate way to show the H-score because it just gives people more breadth and understanding of the profile of the patients that we're seeing.

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

It should be a very high correlation.

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

So as you saw from our data, we showed pretty transparently across a spectrum of H scores across low and negative that we observed clinical activity across folate receptor expression levels. We're looking at data from -- which we are pretty confident about, and we're showing pretty good activity. Given in our sample size, we had roughly around 2/3 of patients who were low negative roughly. which correlates very well to the number of patients who are not candidates for ELAHERE.

And comparing our data to the competitors you talked about GES and Lilly, I think we feel pretty confident about our activity in the low negative patient population from what we've observed so far. Obviously, we're going to continue to follow our patients. We are enrolling very actively in our study with more patients in dose escalation and longer follow-up, and we are initiating our Part 2 dose optimization, which will provide us more data at the doses that we would like to move on. I think that would give us a lot of confidence in our activity across the spectrum for expression levels, including low and negative.

I can't wait to see the additional data for ZW191.

[ id="-1" name="Operator" /> The next question comes from the line of Akash Tewari of Jefferies.

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

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

The tolerability profile, we're very pleased, particularly with our safety event rate. Most of the safety events that we saw were pretty expected, as we mentioned, which were mostly not vomiting cytopenias. Our cytopenia rate is -- actually, we're very pleased with that rate because this is something that you would expect very typically from a topoisomerase ADC. And the rates that we observed for anemia, neutropenia and thrombocytopenia are well within expected for an ADC, particularly with the fact that we're going at relatively high doses compared to other ADCs with similar payload.

So with that, we are confident that, that would help us drive efficacy. And at the same time, the safety profile with cytopenias helps us combine with treatments in earlier lines of therapy. As you know, in ovarian cancer, earlier lines of treatment consists of a combination of platinum, taxanes and bevacizumab. So that gives us a lot of confidence to combine with all of these treatments going in earlier lines of treatment, particularly some of the pitfalls that we've seen with other ADCs, cytofolate with combinations in earlier lines is neutropenia, and that often leads to reduction in doses to the point that it affects efficacy.

And we're hoping with our safety profile and particularly the lower rates of neutropenia that we're observing, ZW191 should be able to be combinable with the platinum agents at a much more efficacious dose. So that's one of the key areas. The other thing that we're thinking about in earlier lines of therapy from a tolerability perspective, obviously, is the ability to treat patients for much longer, particularly in the maintenance setting. And I think these are all areas where we can differentiate.

[ id="-1" name="Operator" /> The next question comes from the line of Jon Miller of Evercore.

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

Okay. Paul, do you want to...

Yes. No, I think absolutely. I mean, DLL3, a lot of excitement. It's a attractable target in solid tumors. We're getting encouraging response rates. For sure, we think there may be patients that could still -- that could benefit from -- that don't respond that don't have the T-cells that can really mount a response or a prolonged response. And that's really what we're trying to do here with our molecule. So really change the game and really get the next level of response and durability of response is really what we're hoping for. And we think by having the CD28 co-stimulation, it gives us opportunity to do that.

So there may also be some benefits in the mechanism that can lead to thinking about the duration of response and the way that we dose the molecule. They could also be intrinsic in the design and the fact that we have that extra T-cell response, but that will away further analysis. But it's really more patients responding and longer responses. Again, that's the goal, Jonathan, and our data suggests that we can from a preclinical, we have a chance to achieve that.

Fair enough. I guess since you were talking earlier about being almost finished with your repo, I am curious, given the expected upcoming milestones from Jazz would be one on the GEA readouts, what is your expected use for future milestones? Should we be expecting that repo will make a return when you have cash inflows in that response? Or is that money spoken for, for your internal programs?

Really good question. I think as we started this last year, we do want to have the ability to always have an authorized stock repurchase program that then gives us the ability to allocate capital to reducing share count at what we think is attractive prices to boost TSR. So we always want to have that optionality. So I think you should expect that we will always have an authorized stock purchase plan in place. We get to decide when and how we use that for shareholder benefit.

So I think you should just expect as we're getting to the end that we should always have one in place to be able to do that. It's not the only place we've been allocating capital over the past period of time. We have been allocating capital to R&D programs that make sense for us and when the data justifies it, continuing to move forward with additional investment as we are with ZW191. We've obviously talked a little bit about our strategy of maybe creating another area to allocate capital as capital comes in from milestones and royalties from Ziihera and hopefully eventually pasritamig.

Having the ability to then decide to allocate that capital back into a royalty portfolio, given that those royalty portfolio we have right now, it earns very attractive annualized rates of return, we think, from holding it from development through commercialization and having the ability as some of those gains are realized through payments from our partners to put that back into an attractive royalty portfolio that could generate really interesting rates of return is something another piece of the puzzle and strategy that we've talked about putting in place, and we'll talk more about this in the weeks and months ahead.

So I think you should see us in in the future, be disciplined on capital allocation. I think we'll obviously have a stock repurchase plan authorized, and we've obviously shown that we like to use it to generate TSRs. We'll allocate capital into R&D when we think is differentiated and productive and data justifies it. And I think we'll develop the capability, infrastructure and strategy and the interest to consider putting some of the cash flows that come out of our licensed products back into a royalty portfolio with potentially other licensed products, and we'll talk more in the future about the strategy and differentiation of how we think we can accomplish that.

And I think all 3 of those together, having the optionality to allocate capital to those resources is important for us. I think getting the mix right is important for us. I think if we can do all 3 of those in the right way at the right time and the right mix, we can generate some very interesting long-term TSRs in Zymeworks. And that's what we've been working on and we'll continue to work on as our licensed products move from development to commercialization.

[ id="-1" name="Operator" /> The last question comes from the line of Yigal Nochomovitz from Citi.

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

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

[ id="-1" name="Operator" /> This does conclude the question-and-answer section. I would now like to hand the call back over to Chair and CEO, Ken Gabre. Ken, please go ahead.

That's great. So thanks, everyone, for your time and attention and questions on today's call. Obviously, back in 2021, we designed and initiated a really important clinical study with zanidatamab, the HERIZON-G01 study. And we're really pleased that Jazz continues to be optimistic and confident of reporting out the top line data in this quarter. And we're as interested as anyone in understanding that data set and what the potential is for zanidatamab to be practice-changing in this patient population.

And we're very pleased that we won't have to wait that long to understand that. And so please stay tuned and look forward to talking about that further with our partners, Jazz and B1 as appropriate. So thank you very much for your time, and we'll talk to you all very soon.

[ id="-1" name="Operator" /> This concludes today's presentation. You may now disconnect.

Thank you for standing by. This is the conference operator. Welcome to Zymeworks conference call to discuss initial results from the Phase I trial of ZW191. [Operator Instructions] The conference is being recorded. [Operator Instructions]

I would now like to turn the conference over to Dr. Sabeen Mekan, Senior Vice President of Clinical Development of FarmWorks. Dr. Mekan. Please go ahead.

Good afternoon. Thank you for joining our call discussing the highlights from our presentation on preliminary Phase I trial results for ZW191 at the AACR-NCI-EORTC Conference on molecular targets and cancer therapeutics to date in Boston.

Before we begin, I would like to remind you that this presentation contains forward-looking statements, and we encourage you to review our latest SEC filings for a full breakdown of risks and uncertainties related to any forward-looking statements we make during today's presentation. On today's call, Stuart Barnscher, Senior Director of ADC Development at Zymeworks will begin by providing a review of the design rationale and scientific principles that guided the development of ZW191.

Following this, Dr. Patricia LoRusso, Professor of Medicine at Yale Cancer Center will then summarize highlights from the initial Phase I clinical data as presented at the conference. Lastly, I will outline next steps for ZW191, including our development path forward. At the end of the call, Dr. LoRusso and I will be available for Q&A. As a reminder, the audio and slides from this call will also be available on the Zymeworks website later today.

I will now turn the call over to Stuart.

Thank you, Dr. Mekan, and thank you all for joining us today. Before we get to the exciting clinical data, I'd like to quickly review the design of ZW191. At Zymeworks, we think deeply about how we design our antibody drug conjugates. And over the past few years, we've shared many of our insights through publications, all of which can be found on our publications page of our website. Those learnings directly shaped the design of ZW191, including both the antibody features and the linker payload properties. The ZW191 has built on a novel IgG monoclonal antibody that specifically binds to folate receptor alpha and is conjugated through a peptide cleavable linker to our proprietary topoisomerase 1 inhibitor ZD06519 to a drug-to-antibody ratio of 8.

The antibody binds a distinct epitope on folate receptor alpha and was selected for its ability to internalize efficiently deliver high levels of payload and penetrate tumors more effectively, allowing ZW191 to target tumors with low fully receptor alpha expression and achieve strong antitumor activity. The ZD06519 payload was selected for its moderate potency in the 1 to 10 nanomolar range, along with strong bystander activity and proven antibody linker stability all of which are intended to support better tolerability, enable higher protein dosing and maintain activity even in tumors with low or heterogeneous fully receptor alpha expression.

Taken together, the antibody and linker payload features create a differentiated profile for ZW191 that we believe will translate into a compelling clinical performance and that's exactly what we're beginning to see in the data presented today. With that, it is now my pleasure to hand over to Dr. LoRusso, the lead author of the poster presented at the AACR-NCI-EORTC Conference today. Dr. LoRusso brings more than 25 years of expertise in medical oncology, drug development and early phase clinical trials. Dr. LoRusso, over to you.

Thank you so very much. And I thank everybody on the link for watching this presentation today as I'm very excited about this drug. I've actually been doing clinical drug development for over 35 years and to have a drug as exciting as this one is true treasure, not only as an investigator and a physician treating patients. But as I think you will see and hopefully appreciate and understand as well a true pleasure and very exciting data for our patients.

So if you could advance to the next slide, please. So first, I'm going to just show you briefly, this is the study schema of the Phase I trial that we've been -- that is currently ongoing, pursuant to ZW191. As you can see, the key eligibility included, obviously, patients greater than or equal to 18 years of age and focused in escalation on 3 primary tumor types. Platinum-resistant epithelial ovarian cancer, serous or endometrial cancer; and finally, adenocarcinoma non-small cell lung cancer. These patients, as you will see, had exhausted available systemic treatment options and we did not require a prerequisite of folate receptor alpha expression on that -- that was done looking at that retrospectively. And our patients were allowed to have a performance status of either 0 or 1.

I'm going to be presenting to you today the dose escalation cohort as it exists prior to the data cutoff date. But this trial is currently ongoing. And as Sabeen will talk to you later, is going into -- or currently enrolling in dose optimization. As you can see, the many cohorts that we evaluated all the way from 1.6 up to 11.2 mgs/kg in this dose escalation cohort.

Next, this drug, by the way, is given once every 3 weeks intravenously. This is a very busy slide, I know, but it looks at the baseline characteristics of the 41 patients that were treated up to the time of data cutoff, which was September 10, 2025. As you can see, there was a mix of Asians and Caucasians, roughly 70% to 75% of them are Asians, the remainder Caucasians.

Next slide. as you can see, there was about a 50-50 split between patients who had an ECOG of 0 versus those that had an ECOG of 1. Next slide. Also, as you can see, 70% of the patients that were recruited in the escalation had metastatic platinum-resistant ovarian cancer, 20% endometrial cancer and the remaining 10% non-small cell lung cancer. Next slide. The median number of prior treatments was 3. But as you can see, the range of prior treatments in this population were anywhere between 1 to 9, but looking specifically at the number of prior treatments, what you see is that roughly a little over 1/3 had 3 to 4 prior treatments and about 1/3 also had 5 or more prior treatments. I would consider this a heavily pretreated patient population.

Next slide. And as you can see, based on the prior treatments that these patients had, because the ovarians were the predominant patient population and because of the tumor types involved, all patients had seen prior platinum as well as prior taxing. The majority had seen also prior bevacizumab, there were only 2 patients recruited because of that -- there were only 2 patients that were treated on the study that it had prior mirvetuximab in part -- in large part because of the geography of where the patients had been treated as well as not requiring prior mirvetuximab for protocol entry.

Next slide. So overall, based on the summary of baseline characteristics, enrollment continued at a dose of 11.2 milligram per kilogram and that was currently ongoing at the time of data cutoff. Only 6 participants had discontinued 191 treatment, and all of them had discontinued because of disease progression. Of the 41 patients enrolled, 35 were continuing on 191 treatment at the time of data cutoff.

Next slide. This is just a slide looking at the summary of safety of this patient population. As you can see in those 41 patients, the Grade 3 or greater treatment-related adverse events was very minimal. Very minimal compared to what I see with many of the other antibody drug conjugates of similar payload. Only 7 patients had greater than or equal to grade 3 treatment-related adverse events. But importantly, there were no serious treatment-related adverse events. There were no discontinuations due to adverse events, and there were no deaths from drug.

Next slide. This, again, is a busy slide, but basically, it shows treatment-related adverse events of any grade that occurred in at least 15% of patients. It looks quite busy, but the data is actually very similar, especially if we look at the last 2 columns, which are the total number of treatment-related adverse events of greater than or equal to 15% in the cohort of 41 patients that were recruited to this trial. As you can see, any treatment-related adverse event of greater than or equal to grade 3 occurring in at least 15% or more of patients only occurred in 7 patients for a total of 17%.

Of those 7 patients that reported greater than or equal to grade 3 adverse events, treatment-related adverse events -- the most common was anemia, which was identified, as you can see, in 4 patients as well as neutropenia, which occurred in 2 patients and thrombocytopenia that occurred in 2 patients as well.

Next slide. This is the waterfall plot as well as a preliminary efficacy table, demonstrating the antitumor activity in this patient population. As you can see on the left, the waterfall plot shows significant reduction in tumor size across various doses of drug administered and responses as seen in as low as the 3.2 milligram per kilogram dose. But I think what's also very interesting on this graphic on the left is that looking at the bar graph on the top or the bar on the top, what we see is, albeit there were responses in folate receptor alpha high patients we see quite amazingly significant antitumor activity in patients that were either folate receptor low or negative, which with other folate receptor alpha inhibitor targeted ADCs currently FDA approved. The requirement for efficacy based on significant data in those drugs -- in mirvetuximab as an example, those patients had to have folate receptor alpha high based on the data that had come out of the randomized Phase III trial. The initial data showing very little activity or no therapeutic advantage of that ADC in folate receptor low to medium patients.

So this is, to me, quite astounding data to be able to not have to necessarily preselect for folate receptor alpha expression and yet get significant antitumor activity in this patient population. The chart on the right is looking at preliminary efficacy for response evaluable participants that had gynecologic cancers. There were 24 patients for which that we could look at response in this patient population. Of those, 50% of the patients had a partial response. And at the time of data cutoff, 29% had confirmed partial response.

But if we look specifically at the 6.4 to 9.6 milligram per kilogram dose. 64% of patients with GYN malignancies had a partial response at the time of data cutoff with, as you can see, over 25% having confirmed partial response.

Next slide. This is on the left, the swimmers plot and as you can see again, across the board, patients had response at low doses, and there were several patients that actually had dose escalation. But I think what is very impressive in this swimmers plot is that the majority of patients that were treated. In fact, there were very, very few patients at the time of data cutoff that had discontinued treatment. The majority of patients remained on study for a prolonged period of time while they were being followed on this trial up to the time of data cutoff. And the graph on the right shows the percent change from baseline in CA-125 over a week's duration, which again, is quite impressive in this patient population.

Next slide. So in conclusion, I believe that 191 has been safely administered during dose escalation up to the 11.2 milligram per kilogram dose with the majority of participants still on treatment. I personally enjoy treating patients on this drug because of the lack of side effects and the prolongation of response. There have been low rates of dose modifications, dose delays and greater than or equal to grade 3 adverse events, and there were no discontinuations due to adverse events, again, quite impressive.

Preliminary activity, I believe, is promising, starting at 3.2 mg per kg every 3 weeks. The overall response rates, especially at the doses between 6.4 to 9.6 mg per kg were overall 53%. But if you looked at GYN malignancies, 64% of patients up to the data cutoff that had GYN cancers had a minimum, a partial response. The antitumor activity was observed, as I said previously, across all folate receptor alpha expression levels.

And finally, these data represent a broad therapeutic window for 191 and support further investigation in advanced solid tumors. As a practicing medical oncologist that does early phase clinical trials exclusively in my practice. This type of a trial, this very trial, which I am participating in is extremely exciting for us, and we welcome recruiting patients to this clinical trial.

Thank you so very much for your time today.

Thank you, Dr. LoRusso. The data that we've shared today will provide important clinical validation for our ADC design philosophy. We're encouraged by these initial results and look forward to continue following the data as it matures further over the coming months. Beyond the data presented here, we have determined 11.2 milligram per kilogram as the maximum tolerated dose and are proceeding with Part 2a of the study focused on dose optimization in patients with platinum-resistant ovarian cancer. Based on the integrated assessment of safety, efficacy and pharmacokinetic data, we have selected 2 doses, 6.4 milligram per kilogram and 9.6 milligram per kilogram for randomized dose optimization with approximately 30 patients planned in each cohort.

We are planning to begin enrollment this quarter. This will allow us to further refine the balance between efficacy and safety and justify the optimal dose for registrational studies. We expect to share additional data at a future medical conference with a larger and more mature data set. Overall, Early results continue to support ZW191 as a potential best-in-class asset with promising early activity and a manageable safety profile. As previously, we would continue to be data-driven and planning our further development plans for registration and expand into earlier lines of monotherapy and combinations.

As we move forward, our focus remains on disciplined clinical execution by exploring strategic partnerships that could accelerate development and expand global reach. That said, the ZW191 is also giving us important translational insights that could help accelerate and derisk the future development of ZW251 and other pipeline ADCs using our ZD06519 payload. Based on our data thus far, informing our growing understanding of tolerability and efficacy for our novel payload, we're confident in moving ZW251 into Phase I clinical development this year. As you can see on this slide, we also have other preclinical candidates beyond ZW151 targeting more novel antigens such as [indiscernible] and PTK7.

Our NaPi2b program remains IND ready and we continue to explore next-generation ADCs. With that, I'd like to thank everyone for listening, and I'll turn the call over to the operator to begin the question-and-answer session. Operator?

[Operator Instructions] Our first question coming from the line of Mayank Mamtani with B. Riley Securities.

Great to see some exciting data here. So on the 2 patients who had prior mirvetuximab, could you maybe talk about what experience there was? And then also, I was curious, as you think about dose expansion and optimization, do you expect to enroll more with prior mirv exposure? And -- and I was also obviously curious to hear the data that you presented on FR alpha positive versus negative. And I guess, a derivative question there is, are you thinking of the development plan being different for positive versus negative patients?

I think i'll let Sabeen start, Sabeen?

Sure. Thank you for this question. I think from our clinical trial eligibility, we allow patients with prior mirvetuximab treatment. However, this is a global trial, and we enrolled a large number of patients from Asia where mirvetuximab is not approved and available. That is one of the reasons we had a few patients with mirvetuximab. The other reason also is we're enrolling all levels of folate alpha expression levels. And as you know, about 2/3 of patients even in the U.S. where mirvetuximab is available are not candidates for this treatment. That's I think part of the reason -- main reason why we have fewer patients.

But I think as mirvetuximab gets approved globally, and gets more views. So as we go into expansion part of our studies, we probably would get more patients. And then over to efficacy with regards to folate receptor expression levels, we are pretty pleased with efficacy across, hopefully, a receptor expression. I'll turn over to Dr. Patricia LoRusso. She talked a fair amount about it. in terms of the fact that we're seeing efficacy in patients, both folate receptor high as well as medium low. Dr. LoRusso?

Yes. But first, I'd like to answer or have you, Sabeen, help me answer the 1 question that he had. Do you know what the responses were in the 2 patients that had prior mirvetuximab.

We are seeing activity regardless of prior mirvetuximab.

Yes. They both responded. And just to let you know, I mean, that is the one huge advantage of this drug over mirvetuximab as an example because mirvetuximab, I mean, if you know the randomized Phase III data that the first Phase III that they did, they didn't get a therapeutic advantage in the medium, low or negatives. They were only in the high folate receptor alpha. This has a huge advantage there. And I don't even believe yet in the data in the patients that we're treating that the degree of expression has anything to do with the efficacy.

This is pretty amazing for me as a clinician and clinical investigator. I've done a lot with antibody drug conjugates, especially with TOPO1 payloads. And to see this lack of efficacy as early as in the Phase I trial, not efficacy of toxicity, excuse me, this little toxicity with this degree of efficacy, I'm very impressed. I'm very impressed. I don't have the fortune of having that opportunity often even after working with some of the ADCs that have since been FDA approved for this patient population, mirvetuximab as well as others. I hope that answers your question.

Yes. And Dr. LoRusso, maybe just a quick follow-up for you. We saw at ESMO a lot of data also from the FR alpha ADC, some of them next generation. If I had to ask -- I know the data is very early in this case, but was just is, as we think about a lot of these therapies moving earlier lines and they will be all TOPO1 based, you're thinking of the next generation. How would you maybe think about the different data sets that?

Yes, I'm familiar with about 3 of them that were presented, Ryan, I know the AZ one and a few of the other ones. In fact, I believe one of them may have been presented in one of the sessions that I also presented a different drug on. One of the unique characteristics -- and remember, that data was Phase I, primarily Phase I. Some of it included some expansion. But for the most part, what we saw was the Phase I data. And if you dissect out just toxicity initially, let's just look at toxicity and look at the toxicity profiles of at least 3 of them that we saw versus what we see with this drug, this drug is much safer.

Some of the Phase 1s required folate receptor expression. We don't require folate receptor expression within the context of our Phase I trial to demonstrate efficacy. But when we're treating patients, efficacy is very important. But for quality of life, toxicity is extremely important as well. And I don't work for Zymeworks. I have no stack in Zymeworks. I have no reason other than benefit for my patients to talk about this drug. The toxicity profile that I'm seeing at this stage is extremely encouraging relative to what some of the toxicity profiles of some of the other drugs that were presented demonstrated. Does that help?

Super helpful. Thank you. Yes, very helpful.

I mean some of them had like grade 2, 3 nausea like 80%. One of them -- anyway, I don't have to go on. I think I've brought my point home. I apologize.

Our next question coming from the line of Yigal Nochomovitz with Citigroup.

Yes. So I had a question. So in the folate receptor alpha low negative. So for the -- there are 2 ones in blue there that are low negative at the very right side of the waterfall, I guess, how do you get responses in the negatives meaning, I guess, it's just negative on the biopsy, but it was a false negative. There must be some folate receptor alpha present, obviously, right? Or can you just explain how you get the strong responses in the negatives, not the lows, but the negatives.

I think that relates to our construct of our ADCs and our ADC design, as Stuart had pointed out earlier, during our presentation, we -- for our ADCs, particularly for this one as well, we utilize a very highly internalizing antibody and go in tumors that have high levels of expression for the targets. So ovarian cancer, endometrial and non small cell lung cancer that we are evaluating have all very high levels of expression of folate. We are moving with high-expressing antibody, internalizing antibodies, and our linker payload system. It's moderately tight linker, moderately toxic payload that allows us to deliver a lot more payload to the tumor compared to some of our competitors. And that we believe brings us to the edge in terms of having patients respond at very little levels of expression for the target. I think one of the examples that I can provide with ADC construct in this design is the fact that certain gynecological tumors, for example, are pretty sensitive to topoisomerase. So you have very, very -- they require very, very little expression of folate receptor with this highly internalizing antibody and payload construct to work.

Okay. And then my second question for the principal investigator, please. So you mentioned that 11.2%, I think is the maximum tolerated dose, but you also mentioned that you're going to take forward 2 of the lower doses in the dose optimization. And Dr. Given that you said that it's so well tolerated. I'm just wondering if you would be curious or are you curious to see how this drug could perform in more patients at that higher 11.2% or are you sort of happy with the way the company is going with these 2 other doses?

Yes. So I mean, I can first comment on that, Sabeen, if you want me to, and then you can add to my comments. So I'm a big proponent, first of all, of dose optimization. And there was one DLT that was identified at the maximum tolerated dose of 11.2. We saw what makes one help identify what doses one is going to advance forward in Project Optimus dose optimization that would lend you some level of comfort to advance that dose into a randomized Phase III trial. We think that -- I believe that at 6.4, 9.2, we've really achieved many of the pillars that we would look at to assist us with a significant level of confidence that we have the right dose to advance forward. Number one, patients are extremely tolerable. There's very little toxicity, and I'm talking specifically at 6.4 and 9.2.

There's very little toxicity. We've achieved with pharmacokinetics. We've overachieved with pharmacokinetics, the exposure levels that we were hoping to obtain in order to elicit significant efficacy based on preclinical models. The duration is significant, virtually minimal toxicity. Why would I want to potentially enhance with what I have now in my portfolio, which I'm looking as a clinician who's guiding in identification of the optimal dose, the main 5 pillars that would help me determine what dose I feel comfortable with moving forward. I've achieved all of those pillars with both 6.4 and 9.2. I've got -- and it's very tolerable. And let me just tell you something. I see a lot of patients that are treated with ADCs either on our investigational studies, but more importantly, have come to me on and have progressed on ADCs. This drug is so tolerable at those doses that I really feel we're there. I don't know if that helps, but I can go on and Sabeen, maybe you can add to that.

Thank you, Dr. LoRusso. I think you've been pretty comprehensive. So I don't have much to add beyond there.

Our next question coming from the line of Yaron Werber with TD Cowen.

This is [indiscernible] on for Yaron. Congrats on the data. A couple of quick ones from us. Yes, your overall response rate was really impressive at 6 mg per kg at 64%, but obviously, the confirmed response rate is a little lower. Have any of the 5 pending response unconfirmed responses been confirmed since your September data cut? And then to dig a little deeper into the mechanism. Obviously, safety is very, very [indiscrnible] all the other ADCs in the field. What aspect specifically of your ADC design do you think accounts for this very low rate of kind of grade 3 toxins, especially neutropenia versus other ADCs?

Sabeen, you want to start with both of those questions?

Sure. So I think from our safety profile, I think this is, again, coming back to rule that is also given the fact that we have very little free payload in the circulation because that's often what's associated with toxicity. And given the fact that our payload is a linker payload system where we have a moderately tight linker with a moderately toxic payload. We're different from a number of our direct competitors who have much more toxic payloads compared to us. And I think that's what is driving the safety profile that we're seeing.

And then they wanted to know about the efficacy of those 5 patients that had unconfirmed PRs at the time of data cut off. Can you expound on any of the efficacy that we've been seeing since then?

So as the efficacy, we -- a part of the reason that the unconfirmed responses was that those patients did not have enough follow-up at the time of the data cut for our confirmation of the responses. All of those patients are ongoing on study treatment. So they were all awaiting confirmation that when we reported them. And since then some of those responses have been confirmed. Others are still abating confirmation and all of those patients remain on treatment.

I just want to add one thing. I got cut off because I think Zoom froze, so I apologize if Sabeen had said this. But working with ADCs for as long as I have, the linker chemistry is pivotal for efficacy and toxicity and their linker chemistry is different.

Our next question coming from the line of Jonathan Miller with Evercore ISI.

Thanks for the great results and congrats on the progress. I would love to ask about time to response. And I ask that partially because of the questions you just had about confirmatory scans on patient who have uncontrolled responsed, but among the patients who have had responses, how late have you seen patients go before they tripped over into response? And is it possible we could see some of the stable disease patients still on therapy transition over? Is it reasonable to expect that ORR might even go up from here? And then I have a follow-up on that.

Yes, it depends -- this is a dose escalation. So we have started escalating from a pretty low dose of 1.6 milligram per kilogram. As we mentioned, we started seeing confirmed responses at 3.2 milligram per kilogram. That's a relatively low dose. So it does -- in seeing those responses that did take a little while more than the first couple of scans to see the confirmed responses. But as we've gone up higher on the doses, we started to see responses much faster, particularly at the higher doses going from 6.4 to 9.6. Many of the responses that we've observed have occurred on the first imaging scan.

The other thing you have to keep in mind is not only is it -- do you mind if I add to this? the other thing to keep in mind is not only are we starting low and going high, these are heavily pretreated patients. Many of the ADCs that are currently in development in Phase I are limiting the number of prior treatments in the metastatic setting. So that is something else to take into consideration where you're seeing patients that have had 5 prior, 6 prior up to 9 prior treatments responding. It's, first of all, amazing that they're responding. Secondly, it's not uncommon, at least with other drugs that we see that if we're going to get a response, it may be later. But these responses are actually happening earlier than what we would anticipate given the heavy pretreatment of this patient population.

Dr. I did hear you earlier say that patients who had prior Elahere did respond. Can you confirm that both of those patients prior Elahere did respond? And can you talk a little bit about mechanisms of resistance for folate receptor alpha-based ADCs? Would you expect that antigen loss is a major driver there? Or should we expect it to be reasonable to see similar response rates across previously treated patients and patients who haven't been previously exposed?

I'll let Sabeen start, specifically, Sabeen with the mirvetuximab patients and what type of response they had.

So like I said, we had a small population of patients with mirvetuximab and they have responded in the study population. From what I can see, there's been a fair amount of data that has been public on the expression of folate and how stable it is from what we reviewed across the literature. Folate receptor expression remains stable because a lot of these samples not just from us but also from our competitors, they are archival samples which were evaluated at the time the patients were diagnosed. And over time, this folate expression level has remained stable with other therapies and with use of folate receptor therapies as well. So we expect that the responses in patients who have received with prior mirvetuximab should be similar. I mean mirvetuximab has a different payload. It's not a topoisomerase payload, DM4. So we should be expecting similar level of efficacy. Overall, our population in the study, as Dr. LoRusso pointed out, is quite heavily pretreated, and we would consider mirvetuximab as one of those previous treatments.

Can I add to that? The other thing you need to take into consideration, and first of all, you asked a million-dollar question, mechanism of resistance with ADCs. That's -- is it the payload? Is it the target? But some of the "potential resistance mechanisms" could be export of the payload from the cell after it gets internalized. And I believe that this payload does not do that nearly as much as some of the other payloads, specifically with things like BCRP and other transporters. So I think that is a potential another advantage, not only the chemistry of the linker on both ends, but also the chemistry of the payload.

Makes sense. Maybe one final one for me, if I may. And sorry if I missed you talking about this earlier. But given the safety profile looking very clean even all the way up to the higher doses, I'm curious what were the events that drove 11.2 mg to be defined as the MTD?

I'll let Sabeen. And there's been no ILD either, which is really exciting for me as a clinician.

Our next question coming from the line of Brian Cheng with JPMorgan.

Maybe just first, can you elaborate a little bit more on the 1 DLT event that you saw the 6.4 mg per kg. The 11.2 mg per kg, you said that is defined as MTD. Can you just give us a little bit more color on how -- what drove that definition of MTD there? And then we have a follow-up.

I mean, I can start with the 6.4. Do you want to, Sabeen, why don't you take it away?

Okay. So 6.4 milligram per kilogram patient, we had one patient with anemia. And this patient had Grade 3 anemia occurring at cycle 1, day 8, recovered spontaneously by the time the next dose was due, did not require transfusions. At the earlier version of a lot of the protocols do not have Grade 3 anemia that does not require an intervention as DLT, but ours did. So we wanted to be transparent and call it as a DLT. Following on with your next question on what qualified 11.2 as a maximum tolerated dose. As Dr. LoRusso alluded to earlier in this call, after this data cut that we presented today, we had one dose-limiting toxicity at the 11.2 milligram per kilogram dose, which was a cytopenia. And we could have expanded that cohort further.

But given the fact that we are all aware that there's a lot of competition in this area, we're seeing a lot of good efficacy and the safety profile. We wanted to move forward into dose optimization given the balance of safety and efficacy we're seeing, and that's why we're moving forward at this dose.

Okay. And then maybe just second for Sabine, follow-up on your comments related to a combo strategy here. You're seeing Lilly moving forward with combo with bev. Does it make sense to combine 191 with bev? Or do you think that it makes more sense to pick another component in a combo approach?

What I would say is that a number of combination approaches can be tried given the safety and efficacy that we're seeing. Bvacizumab is an easier combination because there are very little overlapping toxicities with bevacizumab. So that's certainly one of the options, particularly as we go to earlier lines of treatment in ovarian cancer, majority of patients do get treated with bev. However, we're looking at other combinations as well. Like, for example, in earlier lines, patients are treated with platinum combination. So that would be another combination that we may be willing to experiment with given our clean safety profile that we're observing at this time. So there are a number of options that we're considering in terms of combinations and also going into earlier lines of therapy. I think a lot would depend upon further data that we see with longer follow-up, more patients and the fact that with our company strategy, we are planning to move along with a partnership model. So being in discussions with that would also help clarify the development path.

Our next question our next question coming from the line of Akash Tewari with Jefferies.

This is Phoebe on for Akash. I just wanted to ask about the 8-milligram per kilogram dose. Can you tell us what the grade 4 TRAE was? And I guess, is that why you didn't take forward this dose into the next step? And then additionally, what gives you the strong confidence behind the selected 6.4 and 9.6 milligram doses given that the grade 3 TRAEs don't seem to have a dose response with the relatively small end?

That's exactly right. Between 6.4 milligram per kilogram and 9.6 milligram per kilogram, we did not really see a dose response with regards to safety. And that's why we believe that our drug has a pretty wide therapeutic index fom both efficacy and a safety perspective. And taking that, we wanted to take a wider range in terms of selecting doses for optimization. And we thought that 6.4 and 9.6 give us that range to evaluate for the most optimal dose to take the registrational studies, both from a safety perspective as well as an efficacy perspective. 8 milligram per kilogram dose safety seemed as reasonable as the other 2 doses. It's just that from a clinical pharmacology perspective, there is a larger difference between 6.4 and 9.6 and with the optimization will have -- we think that it will give us better clarity of the optimal dose between those 2.

Understood. Actually, on the grade 4, was there any color on what that one was?

So we have -- like I said, we did not -- we are not sharing patient level data. It was a cytopenia and it was Grade 4. That's all I'm going to say.

Our next question coming from the line of Charles Zhu with LifeSci Capital.

Congrats on the data. I had a quick one for you. I noticed this, but can you talk about why you're dose optimizing only in ovarian, but then when you continue onward with dose expansion, it looks like you listed endometrial and non-small cell lung cancer, but not ovarian cancer.

Well, that's a very simple answer because dose optimization in ovarian cancer will give us the expansion data in endometrial and non-small cell lung cancer. So we thought that 191 is our first ADC in the clinic. We wanted to move forward in optimization in ovarian cancer because that's where we have the biggest benchmarks with other folate receptor and other ADCs, and that's why we wanted to move forward in optimization there. But once we have an optimized dose, we think we can easily apply that to other tumors such as endometrial and non-small cell lung cancer for expansion.

Understood. Great. And also wanted to ask regarding your thoughts on potential partnerships. To what degree would you want to partner this asset. And to what degree would you want to retain some sort of in-house rights rather than -- or versus fully out-licensing or somewhere in between?

For Zymeworks, our research model for further development as outlined in our last earnings call has been the partnership model. We have a number of assets in early clinical development that we would like to focus on. And ultimately, as we develop further, we would like to pass on the development of our assets to partners who can take these assets and advance them much faster and better than we can, particularly for folate ADC. We are very well aware of the competitive landscape in this area and the need to move forward very quickly. And therefore, we think the partnership model would be the best one that can help take us forward further, not only into registrational studies, but also in going into earlier lines of treatment and in combination therapies where we can expand and develop much faster and quicker. And in terms of this model, I think where in terms of -- we will be looking at the right partnerships with the right companies where -- and it's going to be fit for purpose for each asset in terms of how best and where we can develop it ourselves, whereas at what point a partnership can take on further from there on.

Our next question coming from the line of Stephen Willey with Stifel.

This is Josh on for Steve. Congrats on the data. I'll start with a question for Dr. LoRusso. What assets or mechanisms do you think would make for a good combination partner in the gynecological malignancies and what's the appetite for an ADC with this kind of safety and tolerability profile and the platinum-sensitive and maintenance setting? And then I have a follow-up.

Yes, going all the way to the platinum sensitive. So first and foremost, I want to be brutally transparent. I'm a Phase I investigator. So I routinely do not treat patients with standard of care. I just see them after they failed standard of care. But given the heme profile, first of all, platinum-sensitive patients, obviously, you just pretty much -- it would be interesting to see what the combination with platinum -- with a platinum would look like. Given the role of PARP inhibition in ovarian cancer, especially in the metastatic setting, some of the PARP1 selective agents are looking very good, especially in terms of less heme toxicity, some of that were presented at ESMO this year.

And I think that especially in those patients that have DDR alterations, this may be an exciting combination to take forward this ADC with one of the PARP select PARP1 selective inhibitors, small molecules but yes, I mean, I think that that's just looking at ovarian. There may be opportunities for other tumor types as well. I don't know if that helps. But you have less -- with this toxicity profile and some of the other agents that are coming through that treat these tumors in terms of toxicity profile, I'm pretty excited. I mean, like I had said previously that a lot of these other folate alpha targeted ADCs have significant myelosuppression, GI tox. Some of them have ILD, but also some of these folate alpha receptor inhibitor ADCs that have TOPO1 payloads are also seeing ophthalmologic tox, which I thought was very interesting when I'm looking at their Phase I data.

This doesn't -- this has not manifested any ahotox, has not manifested any ILD. The heme profile, I think, is quite acceptable. And I think there is opportunity for combination strategies, at least from my perspective as a result of the toxicity. One question that was posed previously is bev. And let's just talk about that. I see a lot of metastatic GYN patients, and they've cycled bev through multiple lines of treatment. So that could potentially, although one -- I know somebody asked about that, I do believe that especially if this drug was brought into a much earlier metastatic setting, which I think it has a lot of potential to do so, bev would not be unrealistic at all as a combination. I think it would be a very, very welcomed combination.

Okay. Great. And then for Zymeworks, there were some pretty interesting NaPi2b data presented at ESMO for a DAR TOP01 equipped ADC. And just curious how that may impact your perception of ZW220 prioritization, if at all, just especially now with your payload being a little more incrementally derisked and how the overlapping indications with ZW191 might influence any decision to move this candidate into the clinic.

So I can speak to that. I think ZW220 was deprioritized from IND earlier this year to make room for 251 to move forward because we thought that the antibody for 251 GPC3 was something we wanted to move forward more urgently. We still believe in NaPi2b. We've always done so. And the other reason we wanted to hold off on 220 was the fact that we are already developing our folate receptor ADC 191 in the same tumor types like in gynecological tumors and non-small cell lung cancer. However, with this data, we still believe in our NaPi2b as a great target. It has pretty high expression in gynecological tumors, non-small cell lung cancer. And we're also looking at other tumors such as gastroesophageal and other GI tumors where we could see expression of NaPi2b and potentially can take forward in those tumors. We would like to do that with the help of a partner. We're actually evaluating whether we should do it ourselves or quite likely with the help of a partner into the clinic. So our interest in NaPi2b remains intact, and we think that this is a great ADC to move forward.

Okay. Great. And then if I may just sneak in one more quick follow-up. I know you talked about the development of potential combination based strategies. But just curious if you could expand a little bit more on your prioritization here and when you think any combination-based trial could potentially initiate.

I mean we're going to take our development step by step. So first thing we want to do is get and justify a monotherapy dose for ZW191 through our dose optimization, and that's what we've unveiled today. We are looking through our combination strategy and strategy for further development overall for ZW191, we're developing it very closely, and we will be ready to share that the detailed steps at a future date. However, combination strategy going into earlier lines, these are all opportunities we want to evaluate. I mean we are very well aware of the competitive landscape. We know that we have ability to differentiate based upon the safety and efficacy profile, and we would like to leverage that as much as possible and combination will be part of our strategy in terms of differentiation.

Our next question coming from the line of Derek Archila with Wells Fargo.

This is Evan on for Derek. Congrats on the data. A quick one from us. Still early days, but it looks like there's not much response in lung compared to patients with ovarian and endometrial. And so do you have any updated thoughts on how you're thinking about development and the opportunity in lung versus gynecological cancers based on this data?

So as you've mentioned, the majority of our data that we presented today is in gynecological tumors, and that's why the emphasis here is on gynecological tumors. We only enrolled a very small number of patients in non-small cell lung cancer in this trial. So as you can see in the baseline characteristics, only 4 patients and 3 out of those 4 patients are efficacy evaluable. And all of these 3 patients had low negative levels of folate receptor expression. So it's very early to say how the efficacy for this ADC is going to be in non-small cell lung cancer. I think as we develop further, we would likely need to generate more data to determine the efficacy and antitumor activity in non-small cell lung cancer, which, as you can see from our trial design is part of our development plan.

Thank you. I'm showing no further questions in the Q&A queue at this time. Ladies and gentlemen, this concludes today's conference call. Thank you all for participating, and you may now disconnect.