Zymeworks Inc.

(unaudited)

(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 conditions, 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 its resources to research and development activities, including developing its therapeutic platforms and identifying and developing potential product candidates and 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 September 23, 2026, Zymeworks completed its previously announced acquisition of Theravance Biopharma, Inc. (“Theravance”) (Note 4), further advancing the Company’s strategy to build a diversified revenue-generating biotechnology company, combining innovative R&D with growing commercial and royalty-based cash flows.

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 nine months ended September 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 the Sale of Future Revenue

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. Additionally, in September 2026, in connection with the acquisition of Theravance Biopharma, Inc., the Company entered into a financing arrangement with OCM IP Healthcare Portfolio LP (“OMERS”) to monetize a portion of future YUPELRI cash flows. Refer to Note 8, Liability Related to the Sale of Future Revenue, for further details regarding these arrangements.

The Company’s arrangements with Royalty Pharma and OMERS were evaluated under the applicable accounting guidance and were determined to be liabilities related to the sale of future revenue. Accordingly, proceeds received, net of transaction costs, are recorded as liabilities on the condensed consolidated balance sheet. The Company continues to recognize the full amount of revenue generated from the underlying royalty and collaboration arrangements in the period earned. Amounts remitted to counterparties are recorded as reductions of the related liabilities. Transaction costs incurred in connection with these arrangements are deferred and amortized over the estimated life of the respective arrangements. The Company recognizes the associated interest expense using the effective interest method.

The liability related to the sale of future revenue, effective interest rate and related interest expense are determined using the Company’s estimate of future cash flows expected to be generated from the underlying revenue streams. These estimates are periodically reassessed based on internal projections and information from commercial partners responsible for generating the related revenue. If there is a material change in the estimates, the Company prospectively adjusts the carrying amount of the liability, effective interest rate and 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 values 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 a 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 values of these awards are amortized as stock-based compensation expense over the vesting period.

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 revenue, including anticipated future royalty and collaboration payments and the related effective interest rate, and the valuation of assets acquired and liabilities assumed in business combinations, including the determination of the fair value of acquired intangible assets and other acquisition-date fair value measurements. 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 6).

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 September 30, 2026, the maximum exposure to credit risk for accounts receivable was $413,861,65% of which was from Jazz Pharmaceuticals Ireland Limited or Jazz Pharmaceuticals, Inc. (subsidiaries of Jazz Pharmaceuticals plc, collectively referred to as “Jazz”) (December 31, 2025:37% of receivables from Jazz) and all accounts receivable are due within the next 12 months. As of September 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. Acquisition of Theravance

Summary

On September 23, 2026 (the “Closing Date”), Zymeworks completed its previously announced acquisition of Theravance pursuant to the Agreement and Plan of Merger, dated June 28, 2026 (the “Merger Agreement”). Pursuant to the Merger Agreement, Zymeworks Merger Sub 1, a wholly owned subsidiary of the Company (“Merger Sub”), merged with and into Theravance (the “Merger”), with Theravance surviving the Merger as a wholly owned subsidiary of the Company.

As a result of the Merger, the Company acquired Theravance’s portfolio of assets, including its economic interests in YUPELRI (revefenacin), consisting of its U.S. profit-sharing interest and rights to receive royalties on net sales outside the U.S. The Merger expands the Company’s portfolio of revenue-generating assets and provides additional financial flexibility to support its strategic priorities.

At the effective time of the Merger, each ordinary share of Theravance, par value $0.00001 per share, issued and outstanding immediately prior to the effective time, other than certain excluded shares and dissenting shares, was canceled and converted into the right to receive (i) $17.00 in cash, without interest (the “Per Share Cash Consideration”), and (ii)one contingent value right (“CVR” and, together with the Per Share Cash Consideration, the “Per Share Merger Consideration”).

Each CVR represents a non-tradeable contractual contingent right to receive (i) a pro rata share of 80% of the net proceeds received by the Company from any license, divestiture or other monetization transaction of ampreloxetine executed within the 10-year period following the Closing Date, (ii) a pro rata share of $50 million in cash upon the first commercial sale of ampreloxetine by the Company in the U.S., UK, Spain, France, Germany or Italy on or prior to the 10-year period following the Closing Date and (iii) a pro rata share of 10% of the net sales received by the Company on a country-by-country basis, from the date of the first commercial sale until the later of the 10th anniversary of such date, patent expiration or the loss of exclusivity. The Company determined the CVR to have a de minimis fair value based on the probability of monetizing ampreloxetine. The Company will continue to assess the likelihood of monetization throughout the 10-year period following the Closing Date.

Treatment of Theravance Equity Awards

At the effective time of the Merger:

Each Theravance stock option, whether vested or unvested, that was outstanding, unexercised and not expired immediately prior to the effective time was canceled and converted into the right to receive an amount in cash equal to the excess, if any, of the Per Share Cash Consideration over the applicable exercise price, multiplied by the number of ordinary shares underlying such option, plusone CVR for each ordinary share underlying such option. Theravance stock options with an exercise price equal to or greater than the Per Share Cash Consideration were canceled without payment of consideration.

Each Theravance restricted stock unit award (“RSU Award”), whether vested or unvested, that was outstanding immediately prior to the effective time was canceled and converted into the right to receive an amount in cash equal to the Per Share Cash Consideration multiplied by the number of ordinary shares underlying such RSU Award, plusone CVR for each ordinary share underlying such RSU Award.

Each Theravance performance stock unit award (“PSU Award”), whether vested or unvested, that was outstanding immediately prior to the effective time was canceled and converted into the right to receive an amount in cash equal to the Per Share Cash Consideration multiplied by the applicable number of ordinary shares underlying such PSU Award that remained outstanding and unreleased immediately prior to the effective time, plusone CVR for each ordinary share underlying such PSU Award.

Purchase Consideration

The Merger was accounted for as a business combination using the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. Accordingly, the assets acquired and liabilities assumed were recognized at their estimated acquisition-date fair values.

The preliminary consideration transferred in connection with the Merger was calculated as follows:

The cash consideration paid in connection with the Merger was funded through a combination of cash on hand, cash acquired from Theravance and proceeds from the issuance of $350.0 million aggregate principal amount of senior secured notes to OMERS Life Sciences. The notes are non-recourse to the Company and are secured by certain assets related to YUPELRI, with 75% of the U.S. YUPELRI profit-share cash flows used to service the associated debt obligations. See Note 8,“Liability Related to the Sale of Future Revenue - OMERS Financing Arrangement” for additional information regarding the financing of the Merger.

In connection with the Merger, the Company settled Theravance’s outstanding stock options, restricted stock unit awards and performance stock unit awards in accordance with the terms of the Merger Agreement. The aggregate fair value of the consideration provided in settlement of these awards was $38,973, of which $28,392 was attributable to the pre-combination period and was included in the consideration transferred. The remaining $10,581 was attributable to the post-combination period and was recognized as stock-based compensation expense, including $2,028 within research and development expense and $8,553 within selling, general and administrative expense during the three and nine months ended September 30, 2026. As of September 30, 2026, the $38,973 related to the settlement of these awards remained unpaid and was included in accounts payable and accrued liabilities on the Company's condensed consolidated balance sheet.

Deferred consideration

In connection with the Merger, certain former Theravance shareholders notified Theravance of their decision to dissent from the Merger and commenced the statutory appraisal process on October 23, 2026 in the Grand Court of the Cayman Islands pursuant to Section 238 of the Cayman Islands Companies Act. Under the Merger Agreement, shareholders who validly perfect their appraisal rights are not entitled to receive the Per Share Merger Consideration or CVRs and are instead entitled to the fair value of their shares as determined through the applicable statutory appraisal process. As a result, the Company recognized a liability of $26,281 for the deferred consideration related to the shares held by the dissenting shareholders. The liability was initially measured using the Per Share Cash Consideration of $17.00 per share, which management believes represents the best estimate of fair value as of the acquisition date.

The ultimate amount payable to the dissenting shareholders remains subject to the outcome of the statutory appraisal process and may differ from the amount initially recognized. The Company will continue to evaluate the liability as additional information becomes available. If any additional amounts are determined to be payable, including interest, such amounts will be recognized as expense in the period incurred.

Preliminary Purchase Price Allocation

The following table summarizes the preliminary allocation of the purchase consideration to the identifiable assets acquired and liabilities assumed based on their estimated fair values as of the Closing Date:

The preliminary purchase price allocation reflects the Company’s estimates of the acquisition-date fair values of the assets acquired and liabilities assumed. The valuation process requires significant estimates and assumptions, including estimates of future cash flows, revenue growth, market participant assumptions, discount rates, useful lives and other relevant inputs.

The purchase price allocation is preliminary and is subject to revision as additional information regarding the fair values of assets acquired and liabilities assumed, including uncertain tax positions and deferred income taxes, becomes available. The Company expects to finalize the purchase price allocation as soon as practicable, but no later than one year from the Closing Date. Measurement-period adjustments, if any, will be recognized in the reporting period in which the adjustment amounts are determined and will be calculated as if the accounting had been completed as of the Closing Date.

Valuation of Acquired Assets

YUPELRI

The preliminary fair value of the acquired rights associated with YUPELRI of $415,400, recognized as an intangible asset, was estimated using the income approach, specifically the multi-period excess earnings method. Significant assumptions used in the valuation included projected future profit-share receipts and royalty revenue, expected growth rates, the estimated duration of the related cash flows and the discount rate. The YUPELRI-related intangible asset has an estimated useful life of approximately 14 years and is amortized on a straight-line basis.

TRELEGY ELLIPTA Milestone Receivable

In connection with the Merger, the Company acquired contractual rights to receive a $100,000 milestone payment from Royalty Pharma contingent upon TRELEGY ELLIPTA achieving certain sales thresholds during 2026. The acquisition-date fair value of the milestone receivable of $96,700 was estimated using a probability-weighted expected return method. Significant assumptions used in the valuation included the probability of achieving the applicable sales thresholds, the expected timing of the milestone payment, and the discount rate.

Goodwill

Goodwill represents the excess of the purchase consideration transferred over the estimated fair value of the identifiable assets acquired and liabilities assumed. The goodwill recognized in connection with the Merger is primarily attributable to future growth opportunities and other benefits expected to result from combining the operations of Theravance with the Company.

The amount of goodwill recognized is preliminary and may change as the Company completes the measurement of the fair values of assets acquired and liabilities assumed.