Zymeworks Inc.

Thank you for standing by. This is the conference operator. Welcome to DesignWorks' fourth quarter 2025 results conference call and webcast. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. I would now like to turn the conference over to Shernell Elmander, Vice President of Investor Relations. Shernell, 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 the risks and uncertainties, including those associated with the companies in our industry and at our stage of development. The discussion of these risks and uncertainties I refer you to the latest SEC findings 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, CEO, and Interim Chief Financial Officer, who will provide an overview of recent business updates. Ken will then hand the call over to Bijal Desai, our Senior VP of Finance, to discuss our cash position and financial results for the fourth quarter of 2025. Following this, Dr. Sabine Mikan, our SVP and Chief Medical Officer, We provide progress updates on the Phase 1 clinical trial for 251. At the end of the call, Ken, Sabine, and Bijal will be joined for Q&A by Paul Moore, our Chief Scientific Officer, Scott Pashtun, our Acting Chief Investment Officer, and Adam Shaywitz, our Acting Chief Development Officer. As a reminder, the audio and slides from this call will also be available on the ZionWorks website later today. I'll now hand the call over to Ken.

That's great. Thank you, Chanel. 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 C Horizon GA01 trial, as presented by ASCO GI, by our partners Jazz and B1. Xanadatamab, in combination with chemotherapy, with or without a checkpoint inhibitor, demonstrated a median PFS exceeding one year, with a median overall survival exceeding two 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 xenodatamab plus chemo regimen that just missed the statistical significance of 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 G01 rather than a stratification factor. Based on these data, we're optimistic that Xenodatamab has the potential to redefine the treatment paradigm and first find HER2-positive metastatic or locally advanced GEA. We received strong positive feedback from key opinion leaders who recognized both the magnitude and durability of benefits 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, JAS 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. Xanadamab has been granted breakthrough therapy designation for patients with HER2-positive GEA. We expect these designations will allow for greater speed in regulatory interactions. In addition, the data from Horizon G01 study has been submitted for inclusion in the National Comprehensive Cancer Network Guidelines as previously disclosed. We therefore share in Jazz's expectations to have Xanadatamab approved and launched for the treatment of GEA in the second half of this year, subject to completion of FDA review and approval. Concurrently, B1 is working towards the supplemental BLA for TISLI in the U.S. in the first half of 2026 for 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 JAS and B1 will intend to continue working on plans and timelines for regulatory interactions with respect to Xanadidimab and Tisley in GEA, and we look forward to reporting such progress as appropriate. Our confidence in Xanadidimab's potential has only increased since we commenced registration studies in 2021 and partnered with JAS in 2022 as an addition to our existing APAC partnership with BayOne. These partnerships allowed us to accelerate the development of Xanadatamab and broaden its therapeutic potential in many other HER2-expressing tumors while sharing development risk and transferring costs to our partners. We believe Xanadatamab's demonstration of a substantial survival benefit in metastatic or locally advanced GEA, a tumor type where prior HER2-targeted agents have struggled to materially extend outcomes, strengthens confidence in Xanadatamab's differentiated mechanism of action, and meaningfully reduces risk in the broader development program beyond the initial accelerant approvals for second-line biliary tract cancer received previously in the U.S., China, Europe, and now Canada. Building on this foundation, Xanadamab is being evaluated by JAS 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 Xanadamab, may provide opportunities to continue improving upon the current standard of care for patients in multiple treatment settings. In January, JAS 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 Xanadatamab's dual epitope binding and differentiated biology, we're optimistic about its potential performance for the treatment of patients with metastatic HER2-positive breast cancer. Jazz is also pursuing collaborations with partners to combine Xanadimab with novel therapies. For example, the Phase I trial in combination with BI's Zoncurdinib 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 Xanadimab into indications where meaningful differentiation may translate into durable clinical and patient benefit. Consensus estimates for peak sales of Xanadatamab have doubled over the last few years, indicating a clear potential for Xanadatamab to achieve a multibillion-dollar peak sales level. With progress from 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 Zymorx and our shareholders. This quarter, we reported regulatory approvals for Xanadatamab 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 GEA of up to $440 million, as well as further $89 million collectively from JASM-B1 upon approval in a third indication, as highlighted in our press release. Zymerx 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 agreements with JAZ and 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 agreement with JAZ, Zymerx 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 agreement with B1, Zymerx is eligible to receive tiered royalties of mid-single to mid-double digits on global annual net sales of Zahira up to $1 billion and and 19.5% on annual net sales above $1 billion. B1 holds marketing rights to Zahira in Asia, excluding Japan. The Strengthening Clinical Foundation Presented Data Map 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 this 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, non-dilutive capital in the form of a non-recourse, royalty-backed note. To be clear, this is not a monetization. The full value of Zahira royalties returns to Zymerx after the note is fully repaid. But unlike a traditional royalty-backed loan, there's no stated interest rate, and not all the Zahira 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 non-recourse 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 Zenedatamab and first-line GEA as loans not conditional on FDA or other regulatory approvals, and our hope that Zena Data Map 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, Zymerx retains 70% of the royalty stream throughout the duration of the term, preserving the majority of ongoing cash flows reinvestment, unlike in a traditional royalty loan where 100% of the royalties will be utilized to repay the interest of 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 JAS and B1 will be retained by Zymworks, including, as mentioned earlier, $440 million in near-term milestone payments tied to future regulatory approvals of Zaheer and GEA, $89 million in regulatory milestones for a third indication beyond biliary tract cancer and GEA, and up to $977.5 million in potential commercial milestone payments. Altogether, again, these milestone payments represent $1.5 billion in potential future revenue for Zymworks. Just as importantly, Royalty Pharma demonstrated strong conviction in the underlying Royalty Presenter data map 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 the royalty is subject to disagreement. 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 commercialized by our partners. In addition, no other future royalty streams that may become available to us, like with Pazritamig under our license with J&J or others, are encumbered by the royalty note. This transaction ultimately allows us to protect our core Zahira 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 two 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. If 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. 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 business's 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 acquisitions. To summarize, this transaction with Royalty Farmer 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. Part of our strategy, we see acquisitions as a potential way to add to our existing royalty portfolio, where acquisitions also allow us to feed our R&D engine. Internal discovery will always be important at Zymerx, 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 would allow us to translate scientific progress into 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 we'll build and diversify our emerging royalty portfolio. So in practice, we hope that acquisitions will expand what R&D we work on, should help de-risk 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.