On March 2, 2020 Zymeworks Inc. (NYSE: ZYME), a clinical-stage biopharmaceutical company developing multifunctional biotherapeutics, reported financial results for the year ended December 31, 2019 (Press release, Zymeworks, MAR 2, 2020, View Source [SID1234555059]).
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"We’ve started the year off strong thanks to significant clinical progress in the second half of 2019 and a recent financing that has provided expanded resources to further advance global development of our clinical candidates, ZW25 and ZW49," said Ali Tehrani, Ph.D., Zymeworks’ President & CEO. "We plan to initiate registration-enabling studies for ZW25 in both biliary tract and gastric cancer, as well as explore additional indications, with a vision toward establishing ZW25 as the new foundational HER2 therapy. We also remain confident in the potential of ZW49 to be transformative in refractory and low HER2-expressing cancers and expect to begin expansion cohorts later this year."
2019 Business Highlights and Recent Developments
Strengthened Balance Sheet
In January 2020, Zymeworks completed an upsized US$320.8 million public financing to accelerate and expand global development of its lead clinical candidates, ZW25 and ZW49, and support further advancement of its novel preclinical programs.
Robust ZW25 Clinical Data and Initiation of Two Phase 2 Clinical Trials Pave the Way for Upcoming Registration-Enabling Studies
ZW25 has been well tolerated and has demonstrated promising anti-tumor activity both as a single agent and in combination with chemotherapy, supporting the planned initiation of two registration-enabling trials in refractory HER2-positive biliary tract cancer and first-line HER2-positive gastroesophageal adenocarcinomas. In addition, Zymeworks recently initiated a Phase 2 trial and collaboration with Pfizer to evaluate ZW25 in combination with palbociclib and fulvestrant in HER2-positive, hormone receptor-positive breast cancer.
ZW49 Advancing Phase 1 Dose-Escalation and Interim Clinical Update
Zymeworks’ second product candidate, ZW49, began a Phase 1 clinical trial to evaluate safety and anti-tumor activity, and to establish a recommended dose and schedule for expansion cohorts. A recent update highlighted that there had been no dose-limiting toxicities observed and the maximum tolerated dose had not been reached. The majority of treatment-related adverse events were grade 1 or 2, and were reversible and manageable on an outpatient basis. Preliminary results from these initial dose cohorts included anti-tumor activity.
Partner Programs Progress into the Clinic
In 2019, Eli Lilly entered the clinic with a novel bispecific; Merck, Celgene (now BMS), and Daiichi Sankyo advanced bispecific candidates toward clinical testing; GSK expanded its Azymetric partnership; and the first ZymeLink ADC collaboration was signed with Iconic Therapeutics. Zymeworks currently has nine active collaborations that offer up to US$7.9 billion in potential milestone payments as well as royalties on potential product sales.
Financial Results for the Year Ended December 31, 2019
Revenue in 2019 was $29.5 million as compared to $53.0 million in 2018. Revenue for both years was primarily comprised of non-recurring upfront fees, expansion payments and milestone payments from Zymeworks’ licensing and collaboration agreements. Revenue for 2019 included $8.0 million received from Eli Lilly for achievement of a development milestone upon their submission of an IND application, $7.5 million received upon BMS’s exercise of its commercial license option, $3.5 million received upon Daiichi Sankyo’s exercise of a commercial license option, and $7.0 million received in other development milestones and research support and other payments from our partners. Revenue in 2019 also included recognition of $3.5 million from deferred revenue relating to the upfront payment received in the prior year from BeiGene under the 2018 licensing and collaboration agreement for development of ZW25.
Revenue for 2018 included recognition of $23.5 million of the $60.0 million upfront fee from BeiGene associated with a new licensing agreement, an $18.0 million upfront fee related to a second licensing agreement with Daiichi Sankyo, a $5.0 million upfront fee related to a new licensing agreement with LEO Pharma, a $4.0 million research program expansion fee from BMS and $2.5 million in other milestones and research support payments from our partners.
For the year ended December 31, 2019, research and development expenses were $115.9 million as compared to $56.9 million in the prior year. The change was primarily due to an increase in activities related to the progression and expansion of ZW25 clinical studies and the associated manufacturing costs, as well as development activities for ZW49 in 2019, and an increase in other research and development activities, which include an increase in salaries and benefits expense as a result of an increase in headcount and non-cash stock-based compensation expense compared to the same period in 2018. Research and development expense included non-cash stock-based compensation expense of $14.3 million, including expense of $8.4 million related to the mark-to-market revaluation of certain historical liability classified equity awards.
For the year ended December 31, 2019, general and administrative expenses were $64.2 million as compared to $29.5 million in the prior year. The change was due to an increase in headcount to support our expanding research and development activities and non-cash stock-based compensation expense. General and administrative expense included non-cash stock-based compensation expense of $34.2 million including $27.5 million expense related to the mark-to-market revaluation of certain historical liability classified equity awards.
Net loss for the year ended December 31, 2019 was $145.4 million as compared to $36.6 million in 2018. This increase in net loss was primarily due to the variances in revenue, research and development expenses and general and administration expenses noted above.
Zymeworks expects research and development expenditures to increase over time due to the ongoing development of our product candidates and other clinical, preclinical, and regulatory activities. Additionally, Zymeworks anticipates continuing to receive revenue from its existing and future strategic partnerships, including technology access fees, milestones and research support payments. However, Zymeworks’ ability to receive these payments is dependent upon either Zymeworks or its collaborators successfully completing specified research and development activities.
As of December 31, 2019, Zymeworks had $298.9 million in cash and cash equivalents and short-term investments.