Zymeworks Inc. Investor update

Shrinal, please go ahead. Thank you, operator, and good afternoon or good morning, depending on where you're joining from.

During today's call, Adam Schayowitz, our Head of R&D, will provide an overview of how our R&D strategy and the Roche partnership announced by Zymeworks on Friday last week both work together as part of our broader business strategy. As a reminder, the Roche agreement remains subject to HSR clearance. Paul Moore, our Chief Scientific Officer, will then provide a deeper dive into the design of ZW209 and the underlying platforms and technologies that made the design and development of this molecule possible. Lastly, Sabeen Mekan, our Chief Medical Officer, will provide an overview of the data presented at ESMO on ZW191 and zanidatamab by our partners, Jazz and BeOne. Ken Galbraith, our Chair and Chief Executive Officer, will join us at the end as we open up for Q&A.

As usual, I'd like to remind you that we'll be making a number of forward-looking statements during the 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 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'll refer you to our SEC filings as found on our website and as filed with the SEC. I'll now pass the call over to Adam.

Thanks, Shrinal, and thank you all for joining us today. Following a busy weekend at ESMO, we're pleased to have the opportunity to share several updates across our portfolio. I'd like to begin by stepping back for a moment and giving an overview of how we think the different components of our business model work together to create multiple pathways for long-term value creation. Our recurring cash flows from commercial products like Ziihera, YUPELRI, and VIBATIV provide greater flexibility to invest selectively in our R&D engine, while our business development opportunities create additional opportunities to generate upfront payments, milestones, royalties, and licensing proceeds. This allows us to pursue attractive science without assuming that every program needs to be developed entirely on our own balance sheet.

An important part of our strategy is to build a sustainable R&D organization, one that can contribute to the long-term net asset value into shareholder return while still balancing capital deployment. The partnering model that we're executing on today is central to that ambition. By working with our external partners to advance promising programs, we can access additional funding, expertise, share in development risks, retain meaningful participation in future milestones and royalties. This R&D life cycle creates an opportunity to fund and to replenish our pipeline in a more capital-efficient way while continuing to invest in novel science and generate the next wave of value-creating partnerships and opportunities. Our capital allocation approach reflects that philosophy.

We intend to continue to invest in our internal R&D capabilities, to selectively pursue acquisitions and royalty opportunities where we see strong strategic and scientific fit, and to continue to return capital to shareholders through our share repurchase program when we believe it's appropriate. Over time, our goal is to build this diversified royalty portfolio, creating a more durable financial foundation that supports continued innovation while giving us multiple opportunities to participate in the long-term success of the medicines that we help to develop. This strategy builds on a long history of successful partnerships at Zymeworks, and we believe the recent transaction just further demonstrates the potential of our model. With the recent acquisition of Theravance and the new partnership announced last Friday with Roche, of course, pending completion of HSR clearance, we continue to build on that track record.

Across our partnering activities, we have generated almost $1 billion in payments to date, with the potential for substantial additional value over the coming years. Those future opportunities are linked to continued clinical development, regulatory milestones, and ultimately the commercialization of additional candidates by our partners. Several partner programs have already advanced into the commercialization or phase III development, illustrating how our partners' development capabilities and resources can help move Zymeworks-originated science forward. We believe that this is an important differentiator for us. Our partnerships do more than provide capital at a particular point in time. They enable our programs to progress across development stages and geographies while allowing us to retain meaningful participation in their future success through milestones and royalties without the requirement for capital-intensive contributions at risk.

We see this as a repeatable model, originate differentiated science, identify the right partner and structure, and retain attractive economics as the program advances. What excites us most about our platform and partnering model is the opportunity to repeat this approach across the differentiated pipeline of multifunctional therapeutics. Our proprietary engineering capabilities have enabled us to generate innovative candidates that can be developed alongside leading pharmaceutical companies. These partnerships combine our scientific innovation with the development expertise, resources, and commercial reach of our partners. For today's update, we'll start to focus most of our time on the two programs highlighted in this slide, including the latest clinical findings, what they mean, and what they mean for future development. With that context, I'd like to turn to our partnerships with Roche and explain how the economics and the division of responsibilities illustrate our broader strategy.

The Roche partnership is a great example of how we can combine our discovery capabilities with partners' resources, development expertise, and still retain meaningful participation in the program's future economics. Under the agreement, and of course, subject to successful completion of HSR waiting period, Zymeworks will receive an upfront payment of $55 million, with a further $40 million payable upon initiation of the phase I-B. Beyond those payments, the agreement includes up to $718 million in additional potential development, regulatory, and commercial milestones together with tiered royalties. The royalty structure ranges from high single digits to mid-teens, with the potential to extend into the 2040s, subject to the contractual royalty terms. Taken together, these economics create the potential multiples on invested capital based on upfront fee and early clinical milestones alone.

Of course, the ultimate return will depend upon the program's clinical progress, achievement of applicable milestones, and ultimately success of commercialization of ZW209 by Roche. Another important aspect of this agreement is how the development responsibilities are funded and structured. Roche is expected to fund the program's research and development, including the phase I-A study, while Zymeworks will leverage its own development capabilities to conduct that initial global study. Roche will then assume responsibility for subsequent development and commercialization in accordance with the agreement. We believe that this structure allows us to advance our science, to limit the long-term capital burden on our own balance sheet, and to retain meaningful upside if the program succeeds. The slide illustrates why we believe the collaboration, once HSR clearance is obtained, is strategically attractive for both Roche and for Zymeworks.

ZW209 builds on Zymeworks' proprietary and clinically validated Azymetric platform, which has generated multiple partnered assets with a significant commercial potential. Our capabilities reflect years of work in antibody engineering, including extensive exploration of binding regions, molecular formats to identify and optimize our Co-Stim trispecific T cell engagers. With the IND clearance from the U.S. FDA complete, Zymeworks will conduct a global phase I-A study with the first patient dose expected in 2026. This allows us to apply our established development capabilities and move efficiently into the clinic without the need for an immediate operational handover. It also reflects the trust that Roche places in our ability to execute early clinical development, while the funding structure allows the program to benefit from Roche's broader resource and capabilities as it advances.

Looking beyond the initial study, Roche can bring global clinical development capabilities and commercial experience in first in line extensive small cell lung cancer. Its established relationships with prescribers, with payers, and clinical trial networks may help accelerate development and broaden the program's reach across potential lines of therapy. The opportunity is also worth highlighting that Roche has additional programs that may create future combination opportunities, potentially expanding the development options for the asset over time. By partnering with Roche before the commencement of the phase I-A study following HSR clearance, Roche can help us shape the early clinical development programs and with us, utilize our ability to execute the phase I-A study, which means the program will not lose any time in a very competitive environment where combination regimens may need to optimize for patient benefit.

We are also able to reallocate capital derived from the upfront payments and from the Phase I R&D costs that will be funded by Roche to drive additional value-adding investments to our business. We believe that this is a strong example of how we can advance innovative programs, how we can share risk, preserve and thoughtfully reallocate capital while participating in the potential long-term value created by our R&D innovation. With that, I'll hand the call over to Paul, who will provide more background on the ZW209 program and our Co-Stim platform.