Zymeworks Inc.

(In thousands except share and per share data)

1. Nature of Operations

Zymeworks Inc. together with its subsidiaries (collectively the “Company” or “Zymeworks”) is a global biotechnology company managing a portfolio of licensed healthcare assets and developing a diverse pipeline of novel, multifunctional biotherapeutics to improve the standard of care for difficult-to-treat diseases, including cancer, inflammation, and autoimmune disease. Zymeworks BC Inc. (“Zymeworks BC”), (previously known as “Zymeworks Inc.”) was incorporated on September 8, 2003 under the laws of the Canada Business Corporations Act. On October 22, 2003, the Company was registered as an extra-provincial company under the Company Act (British Columbia). On May 2, 2017, the Company continued under the Business Corporations Act (British Columbia).

Since its inception, the Company has devoted substantially all of its resources to research and development activities, including developing its therapeutic platforms and identifying and developing potential product candidates by undertaking preclinical studies and clinical trials. The Company supports these activities through general and administrative support, as well as by raising capital, conducting business planning and protecting its intellectual property.

On June 28, 2026, Zymeworks Inc. (“Parent”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Zymeworks Merger Sub 1, a wholly owned subsidiary of Parent (“Merger Sub”), and Theravance Biopharma, Inc. (“Theravance”), providing for the merger of Merger Sub with and into Theravance (the “Merger”), with Theravance surviving the Merger as a wholly owned subsidiary of the Company (the “Surviving Company”).

Pursuant to the Merger Agreement, each outstanding Theravance ordinary share will be converted into the right to receive $17.00 in cash and one contingent value right (“CVR”), subject to the terms and conditions of the Merger Agreement and the related CVR agreement. The CVR will entitle holders to receive certain contingent payments tied to specified future ampreloxetine-related proceeds and milestones.

Consummation of the Merger is subject to customary closing conditions, including, without limitation, the expiration or termination of any waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, applicable to the Merger (“HSR Act Clearance”) and the approval of the Merger Agreement, the Merger and the other transactions contemplated thereby by the affirmative vote of holders of Ordinary Shares representing at least two-thirds of the Ordinary Shares (the “Theravance Requisite Vote”) present and voting in person or by proxy as a single class at an extraordinary general meeting of Theravance for the purpose of approving the Merger Agreement, the Merger and the other transactions contemplated thereby. The parties expect the Merger and the other transactions contemplated by the Merger Agreement to close in the second half of 2026.

The Company expects to finance the Merger with a combination of cash on hand and new debt financing. In connection with, and concurrently with entry into the Merger Agreement, Parent entered into a debt commitment letter dated June 28, 2026 (the “Debt Commitment Letter”) with OCM IP Healthcare Portfolio LP (“OMERS Life Sciences”), pursuant to which OMERS Life Sciences has agreed to purchase senior secured notes to be issued by certain newly formed special purpose vehicles in an aggregate principal amount of $350,000 on the terms and subject to the conditions set forth in the Debt Commitment Letter for the purposes of financing the transactions contemplated by the Merger Agreement. The obligations of OMERS Life Sciences to provide the debt financing under the Debt Commitment Letter are subject to conditions customary for a transaction of this type.

The Company has not completed its assessment of the accounting impacts of the proposed acquisition, including any preliminary allocation of consideration or valuation of acquired assets and assumed liabilities, as the transaction has not yet been completed.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying interim condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, these financial statements do not include all the information and footnotes required for complete financial statements and should be read in conjunction with the audited consolidated financial statements of the Company and the accompanying notes thereto for the year ended December 31, 2025.

These unaudited interim condensed consolidated financial statements reflect all adjustments, consisting solely of normal recurring adjustments, which, in the opinion of management, are necessary for a fair presentation of results for the interim periods presented. The results of operations for the three and six months ended June 30, 2026 and 2025 are not necessarily indicative of results that can be expected for a full year. These unaudited interim condensed consolidated financial statements follow the same significant accounting policies as those described in the notes to the audited consolidated financial statements of the Company for the year ended December 31, 2025.

Liability related to sale of future royalties

In March 2026, the Company entered into a royalty sale agreement with Royalty Pharma Development Funding, LLC (“Royalty Pharma”), to monetize a portion of the Company’s future Ziihera (zanidatamab‑hrii) royalties. Refer to Note 7, Royalty Revenue Monetization, for further details on the agreement.

The Company recorded the upfront payment received from the sale of future royalties as a liability, net of transaction costs. Royalty payments to Royalty Pharma are recorded as a reduction of the liability and the transaction costs are amortized over the estimated life of the related royalty stream. The Company accounts for the associated interest expense under the effective interest rate method, while continuing to recognize the full amount of royalty revenue in the period in which the commercial partner sells the related product and recognizes the related revenue.

The liability related to the sale of future royalties, effective interest rate and the related interest expense are calculated using the Company’s current estimate of anticipated future royalty payments under the arrangement, which the Company periodically reassesses based on internal projections and information from its partners who are responsible for commercializing the medicines. If there is a material change in the estimates, the Company will prospectively adjust the liability related to the sale of future royalties, effective interest rate and the related interest expense.

Performance Stock Units

In 2026, the Company started granting Performance Stock Units (“PSUs”) to certain executives. Under the terms of the PSUs, the number of units earned is based on the Total Shareholder Return (“TSR”) of Zymeworks’ common stock over a period of time. The primary performance metric for the TSR is based on cumulative Absolute Total Shareholder Return (“Absolute TSR”) of the Company’s common stock during athree-year period from January 12, 2026 to January 12, 2029, (“Performance Period”) where TSR begins after the first-year anniversary of the grant date. A secondary performance metric based on Relative Total Shareholder Return (“Relative TSR”) as ranked against the Nasdaq Biotech Index will be triggered if the above three-year performance period lapses with no Absolute TSR performance targets having been met. In addition, the PSU award includes a service condition where the individual must remain employed by the company until the final certification date, which will be within 30 days following the end of the Performance Period.

Under the terms of the grants no number of PSUs is guaranteed to vest and the actual number of PSUs that will vest at the end of each performance period may be anywhere from 0% to 200% of the target number depending on the Absolute TSR or Relative TSR. Payout percentages under the Absolute TSR range from 0% to 200%. If no payout has been earned pursuant to the Absolute TSR Criteria during the Performance Period, payout percentages under the Relative TSR will be used which range from 0% to 50%.

The PSUs are classified as equity awards and are settled in shares of the Company’s common stock. The fair value of the PSUs are determined using a Monte Carlo model because the performance target is based on the Company's Absolute or Relative TSR, which represents a market condition. The Monte Carlo simulation model is built on certain assumptions, including the Company's stock volatility. The prices at which the Company's common stock will trade in the future cannot be predicted and achievement of market conditions may occur in period different than estimated. Compensation cost is recognized regardless of whether the market‑based performance condition is ultimately achieved and is reversed only for service‑based forfeitures. The grant date fair value of these awards are amortized as stock-based compensation expense over the vesting period.

Deferred Financing Costs Related to Pending Debt Financing

In connection with obtaining commitments for debt financing associated with the proposed acquisition of Theravance, the Company incurs costs directly attributable to the contemplated financing, including legal, advisory and other third-party fees. Such costs are capitalized as other assets while the Company evaluates and pursues the related financing transaction.

Upon completion of the financing, the capitalized costs will be recorded as a direct deduction from the carrying amount of the related debt and amortized to interest expense over the term of the debt using the effective interest method. If the financing is not completed, the capitalized costs will be expensed in the period the Company determines completion of the financing is no longer probable.

As of June 30, 2026, the Company had capitalized approximately $1.4 million of costs related to the debt financing contemplated by the Debt Commitment Letter with OMERS Life Sciences. These amounts are included in prepaid expenses and other current assets on the condensed consolidated balance sheet.

Use of Estimates

The preparation of interim condensed consolidated financial statements in accordance with U.S. GAAP requires the Company to make estimates and judgments in certain circumstances that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates, most notably those related to revenue recognition including estimated timing of completion of performance obligations required to meet revenue recognition criteria, accrual of expenses including clinical and preclinical study expense accruals, stock-based compensation, valuation allowance for deferred taxes, estimates underlying the liability related to the sale of future royalties, including anticipated future royalty payments and the related effective interest rate. Management bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances. Actual results could differ from these estimates.

Financial Instruments

The Company evaluates financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level of classification each reporting period. This determination requires the Company to make subjective judgments as to the significance of inputs used in determining fair value and where such inputs lie within the fair value hierarchy.

Fair Value Measurements

The Company measures certain financial instruments and other items at fair value.

To determine fair value, the Company uses a fair value hierarchy that prioritizes the inputs, assumptions and valuation techniques used to measure fair value. The three levels of the fair value hierarchy are as follows:

• Level 1 inputs are unadjusted quoted market prices for identical instruments available in active markets.

• Level 2 inputs are inputs other than Level 1 prices, such as prices for a similar asset or liability that are observable either directly or indirectly. If the asset or liability has a contractual term, the input must be observable for substantially the full term. An example includes quoted market prices for similar assets or liabilities in active markets.

• Level 3 inputs are unobservable inputs for the asset or liability and will reflect management’s assessment about market assumptions that would be used to price the asset or liability.

Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy.

The Company’s financial instruments consist of cash and cash equivalents, short-term and long-term investments in marketable and other securities, accounts receivable, accounts payable and accrued liabilities, contingent consideration, finance and operating lease obligations, and other long-term liabilities.

The carrying values of cash and cash equivalents, accounts receivable and accounts payable and accrued liabilities approximate their fair values due to the near-term maturities of these financial instruments. All marketable securities are classified as available-for-sale and are recorded at fair value (note 5).

Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash and cash equivalents, short-term and long-term marketable securities and accounts receivable. Cash and cash equivalents and investments in marketable securities are invested in accordance with the Company’s cash investment policy with the primary objective being the preservation of capital and maintenance of liquidity. The cash investment policy includes guidelines on the quality of financial instruments and defines allowable investments that the Company believes minimizes the exposure to concentration of credit risk. The Company limits its exposure to credit loss by placing its cash and cash equivalents and investments with high credit quality financial institutions.

At June 30, 2026, the maximum exposure to credit risk for accounts receivable was $5,930,48% of which was from Jazz (December 31, 2025:37% of receivables from Jazz) and all accounts receivable are due within the next 12 months. As at June 30, 2026 and December 31, 2025, the Company has recognized nominal amounts of provision for expected credit losses in relation to accounts receivable.

3. Recent Accounting Pronouncements

Recent accounting pronouncements not yet adopted

In November 2024, the FASB issued ASU 2024-03, Income Statement Reporting – Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40), Disaggregation of Income Statement Expenses. The standard update improves the disclosures about a public business entity’s expenses by requiring more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation and amortization) included within income statement expense captions. The guidance will be effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The standard updates are to be applied prospectively with the option for retrospective application. The Company is currently evaluating the impact of adoption of the standard update on its consolidated financial statements.

4. Net Loss Per Share

Net loss per share for the three and six months ended June 30, 2026 and 2025 was as follows:

Weighted average number of shares of common stock used in the basic and diluted earnings per share calculations include (i) Exchangeable Shares for all the periods presented and (ii) for the three and six months ended June 30, 2025, the pre-funded warrants issued in connection with the Company’s December 2023 private placement as the warrants were exercisable at any time for nominal cash consideration until their exercise on June 25, 2025. The Company’s potentially dilutive securities, which include equity classified stock options, RSUs and PSUs, have been excluded from the computation of diluted net loss per share for the three and six months ended June 30, 2026 and for the six months ended June 30, 2025.

5. Cash, Cash Equivalents and Marketable Securities

The following table summarizes the Company’s marketable securities as of June 30, 2026:

The following table summarizes the Company’s marketable securities as of December 31, 2025:

The unrealized losses on the Company’s available-for-sale securities as of June 30, 2026 and December 31, 2025 were not material and were caused by fluctuations in market values and interest rates as a result of the economic environment. The Company concluded that an allowance for credit losses was unnecessary as of June 30, 2026 and December 31, 2025 because the decline in the market value was attributable to changes in market conditions and not credit quality, and that it is neither management’s intention to sell nor is it more likely than not that the Company will be required to sell these investments prior to recovery of their cost basis or recovery of fair value. There was no material realized gain or loss on available-for-sale securities in the periods presented.

The following tables present information about the Company’s cash, cash equivalents and marketable securities that are measured at fair value on a recurring basis, and indicate the fair value hierarchy of the valuation techniques used to determine such fair value:

6. Goodwill

The Company performed its most recent annual impairment test of goodwill as of December 31, 2025. As part of the evaluation of the recoverability of goodwill, the Company identified onlyone reporting unit to which the total carrying amount of goodwill has been assigned. As at December 31, 2025, the Company performed a qualitative assessment for its annual impairment test of goodwill after concluding that it was not more likely than not that the fair value of the reporting unit was less than its carrying value. Consequently, a quantitative impairment test was not required. The Company concluded that there wereno impairment indicators related to goodwill as of June 30, 2026.

7. Royalty Revenue Monetization

On March 2, 2026, Zymeworks BC entered into a sale agreement (the “Sale Agreement”) with Zymeworks Royalty Limited Partnership (the “Subsidiary”) a special purpose entity newly formed by Zymeworks BC and by its general partner Zymeworks General Partner ULC (“Zymeworks GP”). Under the Sale Agreement, Zymeworks BC sold to the Subsidiary a 30% interest in future royalties from the license agreements (the “Covered Agreements") with Jazz Pharmaceuticals Ireland Limited and BeOne Medicines Ltd. (“BeOne”) relating to Ziihera (zanidatamab‑hrii), not to exceed 120% of the maximum amount payable (excluding indemnification and other similar obligations) by the Subsidiary under the Loan Agreement (defined below) (such 30% interest, the “Transferred Royalty Interest”).

Following the transfer, the Subsidiary entered into a loan agreement (the “Loan Agreement”) with Royalty Pharma, acting as administrative agent and lender, pursuant to which the Subsidiary borrowed $250,000 in a non‑recourse, secured term loan (the “Loan”). The Loan bears fixed interest and matures on December 31, 2042 (the “Maturity Date”). Under the terms of the Loan Agreement, the amount payable to Royalty Pharma no later than the Maturity Date is approximately $481,300, provided that if the Loan is repaid in full on or before December 31, 2033, the amount payable is $412,500, in each case inclusive of all applicable interest, yield protection premiums, early redemption fees, exit fees and other amounts payable under the Loan Agreement (excluding indemnification and similar obligations). Amounts repaid may not be reborrowed.

Zymeworks BC will retain 70% of royalties on Ziihera annual net sales throughout the term of the Loan, with full royalty rights reverting to Zymeworks BC once the Loan and other amounts payable under the Loan Agreement to Royalty Pharma have been repaid in full. All earned regulatory and commercial milestone payments under the Covered Agreements will be retained by Zymeworks BC.

The Loan Agreement is fully non‑recourse to Zymeworks BC and Zymeworks Inc. and is secured solely by the Subsidiary’s assets, including the Transferred Royalty Interest, related rights under the Sale Agreement, and the deposit account used to receive royalty payments.

The Sale Agreement and Loan Agreement contain customary covenants and restrictions, including certain transfers, additional indebtedness, and related matters. In the event of certain defaults, such as termination of either Covered Agreement, specified breaches, or a change of control of the Company, Royalty Pharma may declare all outstanding principal, accrued interest, and applicable fees immediately due and enforce its rights against the collateral securing the loan.

The Company recorded the upfront payment of $250,000 as a liability related to the sale of future royalties, net of transaction costs of $5,563, which are being amortized over the estimated life of the arrangement using the effective interest rate method. The Company recognizes royalty revenue in the period in which the commercial partner sells the related product and recognizes the related revenue. The Company records royalty payments made to Royalty Pharma as a reduction of the liability.

The Company determines the effective interest rate used to record interest expense under this agreement based on an estimate of future royalty payments to Royalty Pharma. As of June 30, 2026, the estimated effective interest rate under the agreement was 10.7%.

The following is a summary of the Company's liability related to sale of future royalties for the six months ended June 30, 2026:

There are numerous factors, most of which are not within our control, that could materially impact the amount and timing of royalty payments from Jazz Pharmaceuticals Ireland Limited and BeOne, and result in changes to our estimate of future royalty payments to Royalty Pharma. Such factors include, but are not limited to, the regulatory approval and commercial sales of Ziihera, competing products or other significant events.

8. Stockholders’ Equity

Authorized Share Capital and Preferred Stock

The Company’s authorized share capital consists of 1,000,000,000 shares of stock, consisting of (i)900,000,000 shares of common stock, par value $0.00001 per share, and (ii)100,000,000 shares of preferred stock, par value $0.00001 per share.

On October 13, 2022, the Company completed an internal reorganization transaction resulting in a Delaware incorporated entity becoming the listed company (the “Redomicile Transactions”). Prior to the Redomicile Transactions, the shares of Zymeworks BC Inc. (formerly known as Zymeworks Inc.) were publicly listed. To effect the Redomicile Transactions, the Company conducted a share exchange, pursuant to which holders of the Company’s common shares exchanged their common shares in the Company for shares of common stock of Zymeworks Inc. (formerly known as Zymeworks Delaware Inc.) or, at their election with respect to all or a portion of their common shares in the Company and subject to applicable eligibility criteria and an overall cap, exchangeable shares (the “Exchangeable Shares”) in the capital of a newly formed indirect subsidiary of Zymeworks Inc. A special meeting of Company security holders was held on October 7, 2022 to approve the Redomicile Transactions. The Redomicile Transactions were governed by a transaction agreement dated July 14, 2022, as restated and amended on August 18, 2022 (the “Restated and Amended Transaction Agreement”), by and among the Company and its direct or indirect subsidiaries Zymeworks Inc., Zymeworks CallCo ULC (“CallCo”) and Zymeworks ExchangeCo Ltd., (“ExchangeCo”) including a plan of arrangement included as Exhibit A to the Restated and Amended Transaction Agreement (the “Plan of Arrangement”).

In connection with the Plan of Arrangement, the Company issued to Computershare Trust Company of Canada, a trust company existing under the laws of Canada (the “Share Trustee”), one share of the Company’s preferred stock, par value $0.00001 per share, which has certain variable voting rights in proportion to the number of Exchangeable Shares outstanding (the “Special Voting Preferred Stock”), enabling the Share Trustee to exercise voting rights for the benefit of the holders of the Exchangeable Shares.

Immediately prior to the completion of the Redomicile Transactions, there were 61,699,387 Zymeworks BC common shares issued and outstanding. In connection with the consummation of the Plan of Arrangement,60,274,854 shares of common stock and 1,424,533 Exchangeable Shares were issued to former Zymeworks BC shareholders. As of June 30, 2026, there were 550,000 Exchangeable Shares held by former Zymeworks BC shareholders (December 31, 2025:553,184). The Company will issue shares of its 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 Exchangeable Shareholder under CallCo’s overriding call rights. These Exchangeable Shares and the Special Voting Preferred Stock, when taken together, are similar in substance to the Company’s common stock and are treated as such in calculation of basic net loss per share.

2024 Repurchase Program

On August 1, 2024, the board of directors of the Company authorized a stock repurchase program (the “2024 Repurchase Program”), whereby the Company may repurchase up to $60,000 of the Company’s outstanding common stock, par value $0.00001 per share.

During the year ended December 31, 2024, the Company repurchased 2,545,402 shares of its common stock for a cost of $30,000, and incurred commission expense of $51, under the 2024 Repurchase Program, which have been recorded against accumulated deficit. The Company’s share repurchases in excess of issuances are subject to a 1% excise tax enacted by the Inflation Reduction Act of $152. During the year ended December 31, 2024, the Company retired all 2,545,402 shares repurchased. These shares were returned to the status of authorized and unissued shares. During the year ended December 31, 2025, the Company completed the 2024 Repurchase Program by repurchasing 1,856,907 shares of its common stock for a cost of $29,997 and incurred commission expense of $37, which have been recorded against accumulated deficit. Excise tax was estimated asnil. The Company retired all 1,856,907 shares repurchased. These shares were returned to the status of authorized and unissued shares.

The following table presents the Company’s 2024 Repurchase Program activity:

2025 Repurchase Program and 2026 Repurchase Program

On November 16, 2025, the board of directors of the Company authorized a new stock repurchase program (the “2025 Repurchase Program”), whereby the Company may repurchase up to $125,000 of the Company’s outstanding common stock, par value $0.00001 per share.

During the year ended December 31, 2025, the Company repurchased 431,217 shares of its common stock for a cost of $11,188, incurred an obligation to purchase common stock for a cost of $464 which had not been settled by December 31, 2025, and incurred commission expense of $9, under the 2025 Repurchase Program, which have been recorded against accumulated deficit. Excise tax was estimated asnil. The Company retired all 431,217 shares repurchased. These shares were returned to the status of authorized and unissued shares.

During the six months ended June 30, 2026, the Company repurchased 3,766,336 shares of its common stock for a cost of $91,069, and incurred commission expense of $75, under the 2025 Repurchase Program, which have been recorded against accumulated deficit. The Company retired all 3,766,336 shares repurchased. These shares were returned to the status of authorized and unissued shares.

The following table presents the Company’s 2025 Repurchase Program activity for the periods indicated:

On May 14, 2026, the Company terminated the 2025 Repurchase Program and the board of directors of the Company authorized a new share repurchase program providing the ability to repurchase up to $125.0 million in shares of the Company's common stock (the “2026 Repurchase Program”).

During the six months ended June 30, 2026, the Company repurchased 2,008,243 shares of its common stock for a cost of $51,908, incurred an obligation to purchase common stock for a cost of $1,996 which had not been settled by June 30, 2026, and incurred commission expense of $42, under the 2026 Repurchase Program, which have been recorded against accumulated deficit. The Company retired all 2,008,243 shares repurchased. These shares were returned to the status of authorized and unissued shares.

Excise tax was estimated as $797 during the six months ended June 30, 2026, for purchases under the 2025 Repurchase Program and 2026 Repurchase Program.

The following table presents the Company’s 2026 Repurchase Program activity:

Stock-Based Compensation

In connection with Redomicile Transactions in 2022, Zymeworks BC assigned to the Company, and the Company assumed, all of Zymeworks BC’s rights and obligations under each of the stock-based compensation plans, as described below, and such plans became the Company’s stock-based compensation plans, with each outstanding award assumed by the Company and deemed exchanged for equivalent awards of the Company, except that the security issuable upon exercise or settlement, as applicable, will be shares of common stock of the Company rather than common shares of Zymeworks BC.

Original Stock Option Plan

On July 14, 2006, the shareholders of the Company approved an employee stock option plan (the “Original Plan”). The total number of options outstanding is not to exceed 20% of the issued common shares of the Company. Options granted under the Original Plan are exercisable at various dates over their 10-year life. The exercise prices of the Company’s stock options under the Original Plan are denominated in Canadian dollars. Upon the effectiveness of the Company’s New Plan described below, no further options were issuable under the Original Plan. However, all outstanding options granted under the Original Plan remain outstanding, subject to the terms of the Original Plan and the applicable grant documents, until such outstanding options are exercised or they terminate or expire by their terms.

New Plan and Inducement Plan

On April 10, 2017, the Company’s shareholders approved a new stock option plan, which became effective immediately prior to the consummation of the Company’s initial public offering (“IPO”). This plan allows for the grant of options and also permitted the Company to grant incentive stock options (“ISOs”), within the meaning of Section 422 of the Internal Revenue Code, to its employees, until the shares reserved for issuance of ISOs were depleted. On June 7, 2018, the Company’s shareholders approved an amendment and restatement of this plan (this plan, as amended and restated, the “New Plan”), which includes an article that allows the Company to grant restricted shares, RSU, PSU and other share-based awards, in addition to stock options. As of June 30, 2026,5,190,276 shares of common stock were available for future award grants under the New Plan (December 31, 2025:5,023,809 shares of common stock).

On January 5, 2022, the board of directors approved the Zymeworks Inc. Inducement Stock Option and Equity Compensation Plan (the “Inducement Plan”) and reserved 750,000 of the Company’s common shares for issuance pursuant to equity awards granted thereunder. On July 19, 2024, the board of directors approved an amendment and restatement of the Inducement Plan, which increased the number of shares of the Company’s common stock available for future issuance pursuant to equity awards granted under the Inducement Plan by 700,000 shares. As a result of this increase, a total of 1,450,000 shares will have been available for issuance pursuant to equity awards granted under the Inducement Plan since the inception of the Inducement Plan in January 2022. As of June 30, 2026,622,500 shares of common stock were available for future award grants under this plan (December 31, 2025:390,000).

RSUs

The following table summarizes the Company’s RSU activity under the New Plan since December 31, 2025:

As of June 30, 2026, there was $25,108 of unamortized RSU expense that will be recognized over a weighted average period of 1.92 years.

PSUs

The following table summarizes the Company’s PSU activity under the New Plan since December 31, 2025:

As of June 30, 2026, there was $9,473 of unamortized PSU expense that will be recognized over a weighted average period of 2.61 years.

Stock Options

The following table summarizes the Company’s stock options granted in Canadian dollars under the Original Plan and the New Plan:

The following table summarizes the Company’s stock options granted in U.S. dollars under the New Plan and the Inducement Plan:

During the six months ended June 30, 2026, the Company received cash proceeds of $11,605 from stock options exercised.

The stock options outstanding at June 30, 2026 expire at various dates from November 9, 2026 to June 9, 2036.

The estimated fair values of options granted to officers, directors, employees and consultants are amortized over the relevant vesting periods. Stock-based compensation expense for equity classified instruments, RSUs, PSUs as well as the financial statement impact of the amortization and periodic revaluation of liability classified instruments, are recorded in research and development expense and general and administration expense as follows:

The amounts above include stock-based compensation expense relating to RSUs and PSUs of $5,167 and $8,863 for the three and six months ended June 30, 2026, respectively (2025: $2,346 and $4,626).

The estimated fair value of stock options granted under the New Plan was determined using the Black-Scholes option pricing model with the following weighted-average assumptions:

The weighted-average Black-Scholes option pricing assumptions for liability classified stock options outstanding at June 30, 2026 and 2025 are as follows:

At June 30, 2026, the unamortized compensation expense related to unvested options was $26,728. The remaining unamortized compensation expense as of June 30, 2026 will be recognized over a weighted-average period of 1.82 years.

9. Research, Collaboration and Licensing Agreements

Revenue recognized from the Company’s strategic partnerships which includes amounts from Jazz Pharmaceuticals Ireland Limited or Jazz Pharmaceuticals, Inc. (subsidiaries of Jazz Pharmaceuticals plc, collectively referred to as “Jazz”) is summarized as follows:

Since December 31, 2025, there have not been any material changes to the key terms of our collaboration and license agreements.

Contract Assets and Liabilities

As at June 30, 2026, contract assets from research, collaboration and licensing agreements were $1,799 (December 31, 2025: $2,752). As at June 30, 2026, short-term and long-term contract liabilities were $16,436 and $0, respectively (December 31, 2025: $2,418 and $14,606, respectively). Contract liabilities relate to deferred revenue from the BeOne and Jazz agreements.

10. Leases

The lease for the Company’s office and laboratory spaces in Vancouver, British Columbia, which we entered into in January 2019, has an initial term expiring in February 2032, withtwo five-year extension options. In addition, the Company leases office spaces in Bellevue, Washington and in Redwood City, California with lease terms expiring between August 2027 and July 2029. None of the optional extension periods have been included in the determination of the right-of-use assets or the lease liabilities for operating leases as the Company did not consider it reasonably certain that the Company would exercise any such options. The Company ceased its use of its office space in Redwood City, as of March 31, 2026 and fully amortized the right-of-use asset of this lease as of March 31, 2026.

The Company also leases office equipment under capital lease agreements.

The balance sheet classification of the Company’s lease liabilities was as follows:

Cash paid for amounts included in the measurement of operating lease liabilities for fixed payments for the three and six months ended June 30, 2026 was $1,084 and $2,173, respectively (2025: $1,075 and $2,123), and were included in net cash used in operating activities in the consolidated statement of cash flows.

As of June 30, 2026, the maturities of the Company’s operating lease liabilities were as follows:

The cost components of the operating leases were as follows for the three and six months ended June 30, 2026 and 2025:

The expense for the six months ended June 30, 2026 includes $766 of accelerated amortization for the right-of-use asset of the Company's office space in Redwood City.

11. Commitments and Contingencies

Commitments

The Company has entered into research collaboration agreements with strategic partners in the ordinary course of operations that may include contractual milestone payments related to the achievement of pre-specified research, development, regulatory and commercialization events and indemnification provisions, which are common in such agreements. Pursuant to the agreements, the Company is obligated to make research and development and regulatory milestone payments upon the occurrence of certain events and royalty payments based on net sales. The maximum amount of potential future indemnification is unlimited, however, the Company currently holds commercial and product liability insurance that limits the Company’s liability and may enable it to recover a portion of any future amounts paid. Historically, the Company has not made any indemnification payments under such agreements and believes that the fair value of these indemnification obligations is minimal. Accordingly, the Company has not recognized any liabilities relating to indemnification obligations for any period presented in the interim condensed consolidated financial statements.

Subject to the terms and conditions of the Merger Agreement (note 1), the Parent or Theravance may terminate the Merger Agreement if the Merger is not consummated by December 28, 2026, which period may be extended automatically fortwo three-month periods if at the end of the prior period, all conditions to closing of the Merger other than conditions relating to HSR Act Clearence have been satisfied or waived as of such date (the “End Date”). The Merger Agreement provides that the Parent will be required to pay Theravance a reverse termination fee of $32,515 in the event the Merger Agreement is terminated in certain specified circumstances, including if the Merger is not consummated before the End Date because certain conditions related to HSR Act Clearance have not been satisfied or waived.

Contingencies

From time to time, the Company may be subject to various legal proceedings and claims related to matters arising in the ordinary course of business. The Company does not believe it is currently subject to any material matters where there is at least a reasonable possibility that a material loss may be incurred.

12. Business Segments

The Company operates and manages its business in a single reportable segment, which is the management of a portfolio of licensed healthcare assets and development of novel multifunctional biotherapeutics (the “biotherapeutics segment”).

The accounting policies of the biotherapeutics segment are the same as those described in the summary of significant accounting policies.

The Company’s Chief Operating Decision Maker (“CODM”) is the Chair of the Board of Directors and Chief Executive Officer. The CODM assesses performance for the biotherapeutics segment and decides how to allocate resources based on the results of our strategic planning, with segment (loss) income being used to monitor performance against the budgeted costs of that strategy. The measure of segment assets is reported on the balance sheet as total consolidated assets.

Segment profit or loss is measured as net loss presented in the consolidated statements of operations and comprehensive loss. For the purpose of evaluating segment performance and allocating resources, the CODM reviews the Company’s consolidated financial information together with certain operating metrics and evaluates net loss against comparable prior periods and the Company’s annual operating plan. The measure of segment assets is reported on the consolidated balance sheets as total consolidated assets.

In addition to the significant expense categories included within the consolidated statements of loss and comprehensive loss, the following table sets forth disaggregated research and development expenses: