Zymeworks Inc

Previous wording

The following discussion should be read in conjunction with the attached financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as our audited financial statements and related notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2023 included in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 6, 2024 and with the securities commissions in all provinces and territories of Canada on March 6, 2024. This Quarterly Report on Form 10-Q, including the following sections, contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results and events to differ materially from those expressed or implied by such forward-looking statements. As a result of many factors, including without limitation those set forth under “Risk Factors” under Item 1A of Part II below, and elsewhere in this Quarterly Report on Form 10-Q, our actual results may differ materially from those anticipated in these forward-looking statements. We caution the reader not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to update forward-looking statements which reflect events or circumstances occurring after the date of this Quarterly Report on Form 10-Q, except as required by law. Unless the context otherwise requires or otherwise expressly states, all references in this Quarterly Report on Form 10-Q to “Zymeworks,” the “Company,” “we,” “us” and “our” (i) for periods until completion of the Redomicile Transactions, refer to Zymeworks BC and its subsidiaries and (ii) for periods after completion of the Redomicile Transactions, refer to Zymeworks Inc. and its subsidiaries.

Current wording

The following discussion should be read in conjunction with the attached financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as our audited financial statements and related notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2023 included in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 6, 2024 and with the securities commissions in all provinces and territories of Canada on March 6, 2024. This Quarterly Report on Form 10-Q, including the following sections, contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results and events to differ materially from those expressed or implied by such forward-looking statements. As a result of many factors, including without limitation those set forth under “Risk Factors” under Item 1A of Part II below, and elsewhere in this Quarterly Report on Form 10-Q, our actual results may differ materially from those anticipated in these forward-looking statements. We caution the reader not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to update forward-looking statements which reflect events or circumstances occurring after the date of this Quarterly Report on Form 10-Q, except as required by law. .

Previous wording

Our lead product candidate, zanidatamab, is a novel bispecific antibody that targets two distinct domains of the human epidermal growth factor receptor 2 (“HER2”). Zanidatamab’s unique binding properties result in multiple mechanisms of action that may enable it to address unmet need in patient populations with HER2-expressing cancers. We have entered into separate agreements with BeiGene, Ltd. (“BeiGene”) and Jazz Pharmaceuticals Ireland Limited, granting to each of them exclusive rights to develop and commercialize zanidatamab in different territories. Jazz Pharmaceuticals Ireland Limited and Jazz Pharmaceuticals, Inc. (“Jazz Inc.”) are both subsidiaries of Jazz Pharmaceuticals plc. Jazz Pharmaceuticals Ireland Limited, Jazz Inc. and Jazz Pharmaceuticals plc are referred to herein collectively as “Jazz”. For additional information regarding these agreements with BeiGene and Jazz, see the section titled “Strategic Partnerships and Collaborations” below. In April 2024, our partner Jazz announced that the rolling Biologics License Application (“BLA”) submission seeking accelerated approval for zanidatamab in second-line biliary tract cancers (“BTC”) in the United States had been completed. Jazz’s plans to submit a marketing authorization application (MAA) to the European Medicines Agency (EMA) are also proceeding. Jazz has also initiated a Phase 3 confirmatory trial for zanidatamab as first-line treatment in BTC. Based on the expected timeline and subject to approval, Jazz is aiming to launch zanidatamab in the United States for second-line BTC in 2025 or earlier. Similarly, our partner BeiGene has announced its intention to submit a BLA for zanidatamab with the National Medical Products Administration (“NMPA”) in China for treatment of HER2-amplified inoperable and advanced or metastatic BTC in the second half of 2024. Jazz is also evaluating zanidatamab for the first-line treatment of HER2-positive unresectable locally advanced or metastatic gastroesophageal adenocarcinomas (“GEA”). Jazz is targeting the pivotal Phase 3 top-line readout from the zanidatamab HERIZON-GEA-01 trial in late 2024. In March 2024, Jazz announced its intention to initiate a Phase 3 clinical trial, anticipated in the second half of 2024, for breast cancer patients who have progressed on trastuzumab deruxtecan (“T-DXd”).

Current wording

Zanidatamab is a novel bispecific antibody that targets two distinct domains of the human epidermal growth factor receptor 2 (“HER2”). Zanidatamab’s unique binding properties result in multiple mechanisms of action that may enable it to address unmet need in patient populations with HER2-expressing cancers. We have entered into separate agreements with BeiGene, Ltd. (“BeiGene”) and Jazz Pharmaceuticals Ireland Limited, granting to each of them exclusive rights to develop and commercialize zanidatamab in different territories. Jazz Pharmaceuticals Ireland Limited and Jazz Pharmaceuticals, Inc. (“Jazz Inc.”) are both subsidiaries of Jazz Pharmaceuticals plc. Jazz Pharmaceuticals Ireland Limited, Jazz Inc. and Jazz Pharmaceuticals plc are referred to herein collectively as “Jazz”. For additional information regarding these agreements with BeiGene and Jazz, see the section titled “Strategic Partnerships and Collaborations” below. In May 2024, our partner Jazz announced that the FDA accepted and granted Priority Review of the Biologics License Application (“BLA”) for zanidatamab for the treatment of previously treated, unresectable, locally advanced, or metastatic HER2-positive biliary tract cancers (“BTC”). Under the Prescription Drug User Fee Act (“PDUFA”), the FDA has set a target action date of November 29, 2024. Jazz has also confirmed that the European Medicines Agency (“EMA”) has validated the Marketing Authorization Application (“MAA”) for zanidatamab in second-line (2L) BTC. Jazz has initiated a Phase 3 confirmatory trial for zanidatamab as first-line treatment in BTC. Based on the expected timeline and subject to approval, Jazz expects to launch zanidatamab for 2L BTC in the United States in the fourth quarter of 2024. Similarly, our partner BeiGene announced that the Center for Drug Evaluation (“CDE”) of the National Medical Products

Previous wording

Our second clinical-stage product candidate, zanidatamab zovodotin (formerly known as “ZW49”), combines the unique biparatopic antibody design of zanidatamab with our ZymeLink auristatin ADC technology, comprised of our proprietary cytotoxin (cancer cell-killing compound) and cleavable linker. We designed zanidatamab zovodotin to be a potential best-in-class HER2-targeting ADC to further address unmet need across a range of HER2-expressing cancers. Zanidatamab zovodotin remains ready for a Phase 2 study in combination with pembrolizumab in patients with locally advanced (unresectable) or metastatic HER2-overexpressing non-squamous non-small cell lung cancer (“NSCLC”). However, we have deprioritized the initiation of the planned Phase 2 study and have paused recruitment of our Phase 1 clinical trial in Japan. We continue to explore potential development and commercial collaborations for zanidatamab zovodotin.

Current wording

Our second clinical-stage product candidate, zanidatamab zovodotin (formerly known as “ZW49”), combines the unique biparatopic antibody design of zanidatamab with our ZymeLink auristatin ADC technology, comprised of our proprietary cytotoxin (cancer cell-killing compound) and cleavable linker. We designed zanidatamab zovodotin to be a potential best-in-class HER2-targeting ADC to further address unmet need across a range of HER2-expressing cancers. Following a strategic review of our emerging wholly-owned pipeline, we decided to discontinue the zanidatamab zovodotin clinical development program. This decision aligns with our commitment to focus on the development of our early-stage programs, which we believe have the potential to be best-in-class and/or first-in-class drugs. We believe zanidatamab zovodotin remains a promising Phase 2-ready asset, and we continue to explore partnering discussions where zanidatamab zovodotin may provide complementary coverage to a pipeline for non-small cell lung cancer (“NSCLC”), breast cancer and other indications.

Previous wording

Our preclinical programs include novel ADC and multispecific antibody therapeutics (“MSAT”) candidates focusing on validated targets which provide opportunities for benchmarking in preclinical development and expected clinical differentiation. Our ADC candidates exploit our proprietary topoisomerase 1 inhibitor (“TOPO1i”) payload (ZD06519) while exploring alternate mechanisms of action for longer-term development and leveraging validated peptide-cleavable linkers and stochastic conjugations. With potential for enhanced activity compared to combination therapy, our current MSAT candidates are developed with 2+1 bispecific or trispecific (with co-stimulation or checkpoint inhibition) T cell engager engineering. These approaches are designed to optimize tumor cell engagement and enhance T cell activation to increase anti-tumor activity while also minimizing cytokine release and off-tumor toxicities.

Current wording

Our early-stage programs include novel ADC and multispecific antibody therapeutics (“MSAT”) candidates focusing on validated targets which provide opportunities for benchmarking in preclinical development and expected clinical differentiation. Our ADC candidates exploit our proprietary topoisomerase 1 inhibitor (“TOPO1i”) payload (ZD06519) while exploring alternate mechanisms of action for longer-term development and leveraging validated peptide-cleavable linkers and stochastic conjugations. With potential for enhanced activity compared to combination therapy, our current MSAT candidates are developed with 2+1 bispecific or trispecific (with co-stimulation or checkpoint inhibition) T cell engager engineering. These approaches are designed to optimize tumor cell engagement and enhance T cell activation to increase anti-tumor activity while also minimizing cytokine release and off-tumor toxicities.

Previous wording

Our early-stage pipeline currently includes four preclinical candidates which have been nominated for development:

Current wording

Our early-stage pipeline currently includes four candidates which have been nominated for development:

Previous wording

•ZW191, an ADC that targets folate receptor alpha (“FRα”)-expressing tumors including ovarian, other gynecological, and NSCLC, is built using our drug conjugate platforms, including our novel bystander active TOPO1i-based payload technology. A drug-antibody-ratio (“DAR”) of eight was selected to balance tolerability and efficacy. The FRα monoclonal antibody (“mAb”) incorporated in ZW191 was generated in-house and selected based on enhanced internalization characteristics to enable targeting of high, mid, and low levels of FRα expression. FRα is a clinically validated target, and data supports its expression in approximately 75% of ovarian carcinomas and in 70% of NSCLC. Preclinical data is encouraging, demonstrating strong activity across a range of FRα-expressing patient-derived xenografts and superior internalization, payload delivery and tissue penetration compared to multiple FRα mAbs from other ADCs. ZW191 has been well tolerated in non-human primates at 60mg/kg.

Current wording

•ZW191, a clinical-stage ADC that targets folate receptor alpha (“FRα”)-expressing tumors including ovarian, other gynecological, and NSCLC, is built using our drug conjugate platforms, including our novel bystander active TOPO1i-based payload technology. A drug-antibody-ratio (“DAR”) of eight was selected to balance tolerability and efficacy. The FRα monoclonal antibody (“mAb”) incorporated in ZW191 was generated in-house and selected based on enhanced internalization characteristics to enable targeting of high, mid, and low levels of FRα expression. FRα is a clinically validated target, and data supports its expression in approximately 75% of ovarian carcinomas and in 70% of NSCLC. Preclinical data is encouraging, demonstrating strong activity across a range of FRα-expressing patient-derived xenografts and superior internalization, payload delivery and tissue penetration compared to multiple FRα mAbs from other ADCs. ZW191 has achieved a highest non-severely toxic dose in non-human primates of 60 mg/kg, which presents a compelling profile and enables the expectation of achieving an efficacious dose level in the Phase 1 clinical trial. The investigational new drug (“IND”) application for ZW191 has been cleared by the FDA, and the Company The Company expects to initiate clinical development of ZW191 during 2024. The Company is actively progressing applications seeking regulatory permission to commence first-in-human clinical studies for ZW191 in non-U.S. jurisdictions in the second half of 2024.

Previous wording

•ZW171, a multispecific antibody built using our Azymetric platform, is a novel 2 + 1 format T cell engaging multispecific antibody targeting mesothelin (“MSLN”)-expressing cancers. ZW171 has a unique geometry, with two single-chain fragment variable arms targeting MSLN and one Fab arm targeting the cluster of differentiation 3 protein (“CD3”) component of the T cell receptor, to redirect the body’s natural immune system to fight cancer cells. Preclinical data demonstrated in vivo anti-tumor activity, with engagement in high-expressing cells but not low-expressing cells, mitigating the risk of on-target, off-tumor toxicities. MSLN has strong expression in ovarian cancer (~84%), with moderate to strong expression levels across mesothelioma (~56%) and NSCLC (~36% ), making it an appealing target for therapeutic development with our proprietary T cell engager technology.

Current wording

•ZW171, a clinical-stage multispecific antibody built using our Azymetric platform, is a novel 2 + 1 format T cell engaging multispecific antibody targeting mesothelin (“MSLN”)-expressing cancers. ZW171 has a unique geometry, with two single-chain fragment variable arms targeting MSLN and one Fab arm targeting the cluster of differentiation 3 protein (“CD3”) component of the T cell receptor, to redirect the body’s natural immune system to fight cancer cells. Preclinical data demonstrated in vivo anti-tumor activity, with engagement in high-expressing cells but not low-expressing cells, mitigating the risk of on-target, off-tumor toxicities. MSLN has strong expression in ovarian cancer (~84%), with moderate to strong expression levels across mesothelioma (~56%) and NSCLC (~36% ), making it an appealing target for therapeutic development with our proprietary T cell engager technology. The IND application for ZW171 has been cleared by the FDA. The Company plans to initiate clinical development of ZW171 during 2024 and is actively progressing applications seeking regulatory permission to commence first-in-human clinical studies for ZW171 in non-U.S. jurisdictions in the second half of 2024. The Phase 1, open-label, multicenter study of ZW171, registered under NCT06523803 on clinicaltrials.gov, aims to enroll 160 participants with advanced or metastatic ovarian cancer, NSCLC, and other mesothelin-expressing cancers across North America, Europe, and the Asia-Pacific region. The study is designed to first evaluate the initial safety and tolerability and anti-tumor effect of different ascending doses of ZW171, followed by a second part of the study in larger numbers of participants with some selected doses to further evaluate safety, tolerability and the anti-tumor effects of ZW171.

Previous wording

We expect to submit investigational new drug (“IND”) and foreign equivalent applications for ZW191 and ZW171 in 2024. Similarly, we expect to submit INDs and foreign equivalent applications for ZW220 and ZW251 in 2025. Beyond this, we aim to nominate the preclinical candidate for our fifth development program during 2024, and intend to submit an IND and foreign equivalent applications for this candidate in 2026.

Current wording

We have received FDA clearance for our IND applications for ZW171 and ZW191, and are actively progressing submissions for non-U.S. applications for both product candidates in 2024. Similarly, we expect to submit INDs and non-U.S. applications for ZW220 and ZW251 in 2025. Beyond this, we aim to nominate the preclinical candidate for our fifth development program during 2024, and intend to submit an IND and non-U.S. applications for this candidate in 2026.

Previous wording

We maintain ongoing discovery efforts to identify and test new target combinations, product candidates and platform technologies that have the potential to address unmet medical needs. We have developed multiple preclinical product candidates targeting a combination of known and novel tumor antigens based on our platform technologies. All of these candidates remain unencumbered. We continue to focus on advancing multiple well-differentiated product candidates into clinical trials to build our pipeline portfolio as well as exploiting our protein engineering and ADC expertise to develop innovative product candidates.

Current wording

We maintain ongoing discovery efforts to identify and test new target combinations, product candidates and platform technologies that have the potential to address unmet medical needs. We have developed multiple early-stage product candidates targeting a combination of known and novel tumor antigens based on our platform technologies. All of these candidates remain unencumbered. We continue to focus on advancing multiple well-differentiated product candidates into clinical trials to build our pipeline portfolio as well as exploiting our protein engineering and ADC expertise to develop innovative product candidates.

Previous wording

Since our initial public offering (“IPO”) in 2017, we have funded our operations primarily through follow-on public offerings, including the issuance of pre-funded warrants, and payments received under our license and collaboration agreements. Payments received or receivables from our license and collaboration agreements include upfront fees, milestone payments, as well as research support and reimbursement payments. Prior to our IPO, we also received financing from private equity placements and the issuance of convertible debt, which was subsequently converted into equity securities, and a credit facility. From inception to March 31, 2024, we received $995.3 million, net of equity issuance costs, from these sources of financing including proceeds from exercises of stock options and employee stock purchase plans. As of March 31, 2024, we had $420.5 million of cash resources consisting of cash, cash equivalents and marketable securities.

Current wording

Since our initial public offering (“IPO”) in 2017, we have funded our operations primarily through follow-on public offerings, including the issuance of pre-funded warrants, and payments received under our license and collaboration agreements. Payments received or receivables from our license and collaboration agreements include upfront fees, milestone payments, as well as research support and reimbursement payments. Prior to our IPO, we also received financing from private equity placements and the issuance of convertible debt, which was subsequently converted into equity securities, and a credit facility. From inception to June 30, 2024, we received $996.4 million, net of equity issuance costs, from these sources of financing including proceeds from exercises of stock options and employee stock purchase plans. As of June 30, 2024, we had $395.9 million of cash resources consisting of cash, cash equivalents and marketable securities.

Previous wording

We reported a net loss of $31.7 million for the three months ended March 31, 2024 and through March 31, 2024, we had an accumulated deficit of $709.1 million. Over the next several years, we expect to continue to incur losses as we increase our research and development expenditures in connection with the ongoing development of our product candidates and other clinical, preclinical and regulatory activities.

Current wording

We reported a net loss of $69.3 million for the six months ended June 30, 2024 and through June 30, 2024, we had an accumulated deficit of $746.8 million. Over the next several years, we expect to continue to incur losses as we increase our research and development expenditures in connection with the ongoing development of our product candidates and other clinical, preclinical and regulatory activities.

Previous wording

In March 2024, our partner Jazz announced their intention to initiate a Phase 3 clinical trial, EMPOWHER, in the second half of 2024 to evaluate zanidatamab plus chemotherapy or trastuzumab plus chemotherapy in patients with HER2-positive breast cancer whose disease has progressed on previous T-DXd treatment.

Current wording

In July 2024, our partner Jazz announced the initiation of the Phase 3 EmpowHER-BC-303 trial to evaluate zanidatamab plus chemotherapy or trastuzumab plus chemotherapy in patients with HER2-positive breast cancer whose disease has progressed on previous trastuzumab deruxtecan (T-DXd) treatment.

Previous wording

Through collaboration agree ments with Jazz and BeiGene relating to our lead programs for zanidatamab and zanidatamab zovodotin, we have received over $435 million through March 31, 2024 in the form of non-refundable upfront payments and milestone payments. In addition, through these partnerships with Jazz and BeiGene with respect to zanidatamab, we remain eligible to receive up to $1.56 billion in potential regulatory, development and commercial milestone payments, as well as tiered royalties on potential future product sales, pending receipt of regulatory approval. These partnerships have provided us with a significant source of non-dilutive funding and provide for additional future funding for our lead asset, zanidatamab. These partnerships also leverage our partners’ commercial infrastructure, helping accelerate the development and expanding the potential reach of our lead product candidates.

Current wording

Through collaboration agree ments with Jazz and BeiGene relating to our lead programs for zanidatamab and zanidatamab zovodotin, we have received over $435 million through June 30, 2024 in the form of non-refundable upfront payments and milestone payments. In addition, through these partnerships with Jazz and BeiGene with respect to zanidatamab, as of June 30, 2024, we remain eligible to receive up to $1.56 billion in potential regulatory, development and commercial milestone payments, as well as tiered royalties on potential future product sales, pending receipt of regulatory approval. These partnerships have provided us with a significant source of non-dilutive funding and provide for additional future funding for our lead asset, zanidatamab. These partnerships also leverage our partners’ commercial infrastructure, helping accelerate the development and expanding the potential reach of our lead product candidates.

Previous wording

In addition to the payments we have received through our collaboration agreements with Jazz and BeiGene relating to zanidatamab and zanidatamab zovodotin as described above, as of March 31, 2024, we have received approximately $180.0 million in the form of non-refundable upfront and milestone payments from platform partnership and collaboration agreements. We continue to have revenue-generating strategic partnerships and collaborations with respect to our Azymetric, EFECT and drug conjugate therapeutic platforms with the following pharmaceutical companies: Celgene Corporation and Celgene Alpine Investment Co. LLC (now a Bristol-Myers Squibb company, “BMS”), GlaxoSmithKline Intellectual Property Development Limited (“GSK”), Daiichi Sankyo Co., Ltd. (“Daiichi Sankyo”), Janssen Biotech, Inc. (“Janssen”), Iconic Therapeutics, Inc. (“Iconic”), and Merck Sharp & Dohme Research GmbH (“Merck”). Under these agreements, we remain eligible to receive up to $1.91 billion in preclinical and development milestone payments and up to $3.52 billion in commercial milestone payments, as well as tiered royalties on potential future product sales, pending regulatory approval. It is possible, however, that our strategic partners’ programs will not advance as currently contemplated, which would negatively affect the amount of development and commercial milestone payments and royalties on potential future product sales we may receive. Importantly, these partnerships include predominantly non-target-exclusive licenses for any of our therapeutic platforms, so we maintain the ability to develop therapeutics directed to many high-value targets utilizing our platforms.

Current wording

In addition to the payments we have received through our collaboration agreements with Jazz and BeiGene relating to zanidatamab and zanidatamab zovodotin as described above, as of June 30, 2024, we have received approximately $180.0 million in the form of non-refundable upfront and milestone payments from platform partnership and collaboration agreements. We continue to have revenue-generating strategic partnerships and collaborations with respect to our Azymetric, EFECT and drug conjugate therapeutic platforms with the following pharmaceutical companies: Celgene Corporation and Celgene Alpine Investment Co. LLC (now a Bristol-Myers Squibb company, “BMS”), GlaxoSmithKline Intellectual Property Development Limited (“GSK”), Daiichi Sankyo Co., Ltd. (“Daiichi Sankyo”), Janssen Biotech, Inc. (“Janssen”), Iconic Therapeutics, Inc. (“Iconic”), and Merck Sharp & Dohme Research GmbH (“Merck”). During the three months ended June 30, 2024, the research program term under our agreement with BMS expired with respect to eight of the ten programs thereunder. Following such expiration, as of June 30, 2024, we remain eligible to receive up to $1.03 billion in preclinical and development milestone payments and up to $3.08 billion in commercial milestone payments, as well as tiered royalties on potential future product sales, pending regulatory approval. It is possible, however, that our strategic partners’ programs will not advance as currently contemplated, which would negatively affect the amount of development and commercial milestone payments and royalties on potential future product sales we may receive. Importantly, these partnerships include predominantly non-target-exclusive licenses for any of our therapeutic platforms, so we maintain the ability to develop therapeutics directed to many high-value targets utilizing our platforms.

Previous wording

There have been no material changes in our critical accounting policies and significant judgments and estimates during the three months ended March 31, 2024 as compared to what has been described in our most recent annual consolidated financial statements.

Current wording

There have been no material changes in our critical accounting policies and significant judgments and estimates during the three and six months ended June 30, 2024 as compared to what has been described in our most recent annual consolidated financial statements.

Previous wording

Results of Operations for the Three Months Ended March 31, 2024 and 2023

Current wording

Results of Operations for the Three and Six Months Ended June 30, 2024 and 2023

Previous wording

Total revenue decreased by $25.6 million in the three months ended March 31, 2024 compared to the same period in 2023. Revenue for the three months ended March 31, 2024 included $9.9 million for development support and drug supply revenue from Jazz and $0.2 million from our partners for research support and other payments. Revenue for the same period in 2023 included $34.4 million revenue for development support and drug supply payments from Jazz and $1.2 million from our partners for research support and other payments. The decrease in revenue from Jazz reflects the transfer of responsibility forcertain clinical trials regarding zanidatamabto Jazz pursuant to the Transfer Agreement (as defined below)andthe Amended Jazz Collaboration Agreement, with such future costs to be borne by Jazz instead of being incurred by us and reimbursed by Jazz.

Current wording

Total revenue decreased by $13.3 million in the six months ended June 30, 2024 compared to the same period in 2023. Revenue for the six months ended June 30, 2024 included $20.7 million for development support and drug supply revenue from Jazz, $8.0 million of milestone revenue from BeiGene in relation to the acceptance by the CDE of the NMPA in China of the BLA for zanidatamab for second-line treatment of HER2-positive BTC, $0.4 million from BeiGene for research support payments and $0.2 million from our partners for research support and other payments. Revenue for the same period in 2023 included $61.0 million for development support and drug supply revenue from Jazz, which was partially offset by a $20.1 million credit, issued to Jazz for contractual amendments to our partnership arrangement, and $1.7 million from BeiGene and our other partners for research support and other payments. The decrease in revenue from Jazz reflects the transfer of responsibility for certain clinical trials regarding zanidatamab to Jazz pursuant to the Transfer Agreement (as defined below) and the Amended Jazz Collaboration Agreement, with such future costs to be borne by Jazz instead of being incurred by us and reimbursed by Jazz.

Previous wording

(1)Excluding zanidatamab, we expect research and development expenditures to increase over time, subject to periodic fluctuations, in line with the advancement, expansion and completion of the clinical development of our product candidates, support of our ongoing collaborations, and our ongoing preclinical research activities.

Current wording

(1)Excluding zanidatamab and zanidatamab zovodotin, we expect research and development expenditures to increase over time, subject to periodic fluctuations, in line with the advancement, expansion and completion of the clinical development of our product candidates, support of our ongoing collaborations, and our ongoing clinical and preclinical research activities.

Previous wording

Research and development expense decreased by $13.9 million for the three months ended March 31, 2024 compared to the same period in 2023. The decrease in research and development expense was primarily due to a decrease in expenses for zanidatamab as a result of transfer of responsibility for this program to Jazz per our Transfer Agreement and the Amended Jazz Collaboration Agreement. This decrease, compared to the same period in 2023, was partially offset by an increase in preclinical expenses, primarily with respect to preclinical product candidates ZW171, ZW191 and ZW220. Salaries and benefits expenses decreased compared to the same period in 2023, due to lower headcount in 2024, which was partially offset by an increase in stock-based compensation expense in 2024.

Current wording

Research and development expense decreased by $24.1 million for the six months ended June 30, 2024 compared to the same period in 2023. The decrease in research and development expense was primarily due to a decrease in expenses for zanidatamab as a result of transfer of responsibility for this program to Jazz per our Transfer Agreement and the Amended Jazz Collaboration Agreement. This decrease, compared to the same period in 2023, was partially offset by an increase in expenses of other development programs, primarily with respect to product candidates ZW171 and ZW251, costs incurred for manufacturing activities to support the IND for ZW220, and other preclinical and research programs. Salaries and benefits expenses decreased compared to the same period in 2023, due to non-recurring severance expenses in 2023, which was partially offset by an increase in stock-based compensation expense in 2024.

Previous wording

Our research and development expenses relating to zanidatamab, following the May 2023 transfer of responsibility for the zanidatamab development program to Jazz, have decreased significantly compared to the three months ended March 31, 2023. We expect to continue incurring research and development expenses for activities over which we maintain responsibility under the Amended Jazz Collaboration Agreement and for costs of third party services and other expenses under certain contracts being transferred to Jazz pursuant to the Transfer Agreement. We are eligible for reimbursement of these expenses from Jazz and expect to recognize these reimbursements as revenue from research and collaborations.

Current wording

Our research and development expenses relating to zanidatamab, following the May 2023 transfer of responsibility for the zanidatamab development program to Jazz, have decreased significantly compared to the three and six months ended June 30, 2023. We expect to continue incurring research and development expenses for activities over which we maintain responsibility under the Amended Jazz Collaboration Agreement and for costs of third party services and other expenses under certain contracts being transferred to Jazz pursuant to the Transfer Agreement. We are eligible for reimbursement of these expenses from Jazz and expect to recognize these reimbursements as revenue from research and collaborations. We similarly expect that research and development expenses relating to zanidatamab zovodotin will decrease significantly in future periods following our decision to discontinue the zanidatamab zovodotin clinical development program.

Previous wording

General and administrative expense decreased by $1.1 million for the three months ended March 31, 2024 compared to the same period in 2023. The decrease in general and administrative expense was primarily due to a decrease in expenses related to external legal spend and insurance expenses compared to the same period in 2023.

Current wording

General and administrative expense decreased by $6.0 million for the three months ended June 30, 2024 compared to the same period in 2023. The decrease in general and administrative expense was primarily due to a decrease in external consulting expenses for information technology, legal fees and insurance costs, as well as depreciation and amortization expenses compared to the same period in 2023. This was partially offset by costs due to the termination of our long-term facility lease in Seattle in 2024.

Previous wording

Other income, net increased by $1.9 million for the three months ended March 31, 2024 compared to the same period in 2023. Other income, net for 2024 included $5.9 million in interest income and $0.3 million in net foreign exchange gain and other miscellaneous income. Other income, net for the three months ended March 31, 2023 included $4.8 million in interest income and a $0.5 million net foreign exchange loss and other miscellaneous amounts. The increase in interest income was driven by higher rates of return on our cash, cash equivalents and marketable securities.

Current wording

Other income, net increased by $2.6 million for the six months ended June 30, 2024 compared to the same period in 2023. Other income, net for 2024 included $11.1 million in interest income and $0.4 million in net foreign exchange gain and other miscellaneous income. Other income, net for the six months ended June 30, 2023 included $9.6 million in interest income and a $0.7 million net foreign exchange loss and other miscellaneous amounts. The increase in interest income was driven by higher rates of return on, and partially offset by a reduction in the balances of, our cash, cash equivalents and marketable securities, due to operating cash requirements.

Previous wording

Income tax expense decreased by $1.3 million for the three months ended March 31, 2024 compared to the same period in 2023, primarily due to a reduction in U.S. taxes under the global intangible low-taxed income rules for the three months ended March 31, 2024.

Current wording

Income tax expense decreased by $1.6 million and $2.9 million for the three and six months ended June 30, 2024 compared to the same periods in 2023, primarily due to a reduction in U.S. taxes under the global intangible low-taxed income rules and Subpart F income rules.

Previous wording

On November 9, 2022, we entered into a sales agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”) to sell shares of our common stock subject to a maximum aggregate dollar amount registered pursuant to an applicable prospectus supplement, from time to time, through an “at-the-market” equity offering program under which Cantor is acting as our sales agent. On June 16, 2023, we sold an aggregate of 3,350,000 shares of common stock at $8.12 per share under the Sales Agreement. We received gross proceeds of $27.2 million and net cash proceeds of $26.2 million, after underwriting commissions and offering expenses.

Current wording

In November, 2022, we entered into a sales agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”) to sell shares of our common stock subject to a maximum aggregate dollar amount registered pursuant to an applicable prospectus supplement, from time to time, through an “at-the-market” equity offering program under which Cantor would act as our sales agent. In June 2023, we sold an aggregate of 3,350,000 shares of common stock at $8.12 per share under the Sales Agreement. We received gross proceeds of $27.2 million and net cash proceeds of $26.2 million, after underwriting commissions and offering expenses. On July 29, 2024, we notified Cantor of our decision to terminate the Sales Agreement effective July 31, 2024. As part of the ongoing management of our operations and related funding needs, we evaluate various financing vehicles, including “at-the-market” equity offering programs, and may enter into similar “at-the-market” equity offering programs in the future, as well as other financing transactions.

Previous wording

As of March 31, 2024, we had $420.5 million of cash, cash equivalents, and marketable securities, comprised of $114.8 million in cash and cash equivalents and $305.7 million in marketable securities.

Current wording

As of June 30, 2024, we had $395.9 million of cash, cash equivalents, and marketable securities, comprised of $71.0 million in cash and cash equivalents and $325.0 million in marketable securities.

Previous wording

The following table represents a summary of our cash flows for the three months ended March 31, 2024 and 2023:

Current wording

The following table represents a summary of our cash flows for the six months ended June 30, 2024 and 2023:

Previous wording

During the three months ended March 31, 2024, cash used in operating activities was $37.7 million compared to $83.2 million for the same period in the prior year. The decrease in net cash used in operating activities was primarily due to a decrease in cash expenditures for operations as a result of transfer of responsibility over the zanidatamab program to Jazz and favorable movements in working capital compared to the same period in the prior year. This was partly offset by increased expenditure on our preclinical product candidates.

Current wording

During the six months ended June 30, 2024, cash used in operating activities was $62.7 million compared to $89.6 million for the same period in the prior year. The decrease in net cash used in operating activities was primarily due to a decrease in cash expenditures for operations as a result of transfer of responsibility over the zanidatamab program to Jazz and favorable movements in working capital compared to the same period in the prior year. This was partly offset by an increase in payments for our other preclinical and clinical product candidates.

Previous wording

Net cash provided by investing activities for the three months ended March 31, 2024 primarily related to net purchases of investments in marketable securities of $6.7 million and cash outflows of $0.7 million for the expenditures for software implementation and acquisition of property and equipment in our office and laboratory spaces in Canada and the U.S. Net cash used in investing activities for the three month period ended March 31, 2023 primarily related to net purchases of short-term investments in marketable securities of $137.8 million partially offset by cash outflows of $0.4 million for the acquisition of property and equipment in relation to our office and lab spaces in Canada.

Current wording

Net cash used in investing activities for the six months ended June 30, 2024 primarily related to net purchases of marketable securities of $25.5 million and cash outflows of $1.8 million for the expenditures for software implementation and acquisition of property and equipment in our office and laboratory spaces in Canada and the United States. Net cash used in investing activities for the six month period ended June 30, 2023 primarily related to net purchases of marketable securities of $197.7 million partially offset by cash outflows of $1.2 million for the acquisition of property and equipment in relation to our office and lab spaces in Canada.

Previous wording

Net cash provided by financing activities for the three months ended March 31, 2024 included net proceeds of $1.7 million from stock option exercises and $0.4 million from the issuance of shares of common stock under our employee stock purchase plan. Net cash provided by financing activities for the three months ended March 31, 2023 included net proceeds of $1.5 million from stock option exercises and $0.2 million from the issuance of shares of common stock in relation to our employee stock purchase plan.

Current wording

Net cash provided by financing activities for the six months ended June 30, 2024 included net proceeds of $2.9 million from stock option exercises and $0.4 million from the issuance of shares of common stock under our employee stock purchase plan. Net cash provided by financing activities for the six months ended June 30, 2023 included net proceeds of $26.2 million from our share issuance pursuant to the Sales Agreement, net proceeds of $2.9 million from stock option exercises and $0.2 million from the issuance of shares of common stock in relation to our employee stock purchase plan.

Previous wording

Our authorized share capital consists of 1,000,000,000 shares of stock, consisting of 900,000,000 shares of common stock, par value $0.00001 per share, and 100,000,000 shares of preferred stock, par value 0.00001 per share. As of April 30, 2024, 70,704,890 shares of common stock were issued and outstanding. In addition, as of April 30, 2024, we had 5,086,521 shares of common stock issuable pursuant to 5,086,521 pre-funded warrants, 4,486,687 shares of common stock issuable pursuant to 4,486,687 exercisable outstanding stock options, 4,337,507 shares of common stock issuable pursuant to 4,337,507 outstanding options that were not exercisable at that date, and 1,379,323 shares of common stock issuable upon vesting of outstanding restricted stock units.

Current wording

Our authorized share capital consists of 1,000,000,000 shares of stock, consisting of 900,000,000 shares of common stock, par value $0.00001 per share, and 100,000,000 shares of preferred stock, par value 0.00001 per share. As of July 31, 2024, 71,047,390 shares of common stock were issued and outstanding. In addition, as of July 31, 2024, we had 5,086,521 shares of common stock issuable pursuant to 5,086,521 pre-funded warrants, 4,431,698 shares of common stock issuable pursuant to 4,431,698 exercisable outstanding stock options, 4,310,310 shares of common stock issuable pursuant to 4,310,310 outstanding options that were not exercisable at that date, and 1,363,789 shares of common stock issuable upon vesting of outstanding restricted stock units.

Previous wording

In connection with the Plan of Arrangement (as defined in note 1 of our interim condensed consolidated financial statements as of and for the quarter ended March 31, 2024 within this Quarterly Report on Form 10-Q), we issued to Computershare Trust Company of Canada, a trust company existing under the laws of Canada (the “Share Trustee”), one share of our preferred stock, par value $0.00001 per share, which has certain variable voting rights in proportion to the number of Exchangeable Shares (as defined below) outstanding, enabling the Share Trustee to exercise voting rights for the benefit of the holders of Exchangeable Shares. In connection with the consummation of the Plan of Arrangement, 1,424,533 Exchangeable Shares were issued to former Zymeworks BC shareholders. We will issue shares of our common stock as consideration when a holder of Exchangeable Shares calls for Exchangeable Shares to be retracted by Zymeworks ExchangeCo Ltd (“ExchangeCo”), when ExchangeCo redeems Exchangeable Shares from the holder, or when Zymeworks CallCo ULC (“CallCo”) purchases Exchangeable Shares from the holder of Exchangeable Shares under CallCo’s overriding call rights.

Current wording

In connection with the Plan of Arrangement, we issued to the Share Trustee one share of our preferred stock, par value $0.00001 per share, which has certain variable voting rights in proportion to the number of Exchangeable Shares outstanding, enabling the Share Trustee to exercise voting rights for the benefit of the holders of Exchangeable Shares. In connection with the consummation of the Plan of Arrangement, 1,424,533 Exchangeable Shares were issued to former Zymeworks BC shareholders. We will issue shares of our common stock as consideration when a holder of Exchangeable Shares calls for Exchangeable Shares to be retracted by ExchangeCo, when ExchangeCo redeems Exchangeable Shares from the holder, or when CallCo purchases Exchangeable Shares from the holder of Exchangeable Shares under CallCo’s overriding call rights. For additional information and meaning of defined terms referenced in this paragraph, please see note 1 of our interim condensed consolidated financial statements as of and for the quarter ended June 30, 2024, within this Quarterly Report on Form 10-Q.