FORM 10-Q Filing Information This document is a Quarterly Report on Form 10-Q for Zymeworks Inc., covering the period ended June 30, 2025, as a non-accelerated and smaller reporting company Filing Details This document is a Quarterly Report on Form 10-Q for Zymeworks Inc., covering the period ended June 30, 2025, as a non-accelerated filer and a smaller reporting company - The report is a Quarterly Report on Form 10-Q for the period ended June 30, 20252 - Zymeworks Inc. is a non-accelerated filer and a smaller reporting company45 Key Filing Details | Indicator | Value | | :--- | :--- | | Common Stock Par Value | $0.00001 per share | | Outstanding Common Stock (as of Aug 5, 2025) | 75,166,196 shares | Table of Contents This section provides an organized list of all chapters and sub-sections within the report for easy navigation Cautionary Note Regarding Forward-Looking Statements This section advises readers that the report contains forward-looking statements subject to inherent uncertainties and risks, which may cause actual results to differ materially Forward-Looking Statements Disclosure This section highlights that the report contains forward-looking statements, which are based on current expectations and assumptions but are inherently uncertain - The report includes forward-looking statements related to plans, objectives, goals, strategies, future events, revenue, performance, capital expenditures, and financing needs9 - Actual results could differ materially due to uncertainties and factors such as market size, platform advancements, clinical trial progression, partnership evolution, and government regulation1011 - The company does not undertake any obligation to update or revise forward-looking statements, except as required by law14 Trademarks and Currency Zymeworks Inc. owns or has rights to several trademarks, and all financial amounts in the report are expressed in U.S. dollars unless otherwise indicated - Zymeworks owns trademarks such as Azymetric, Zymeworks, ZymeCAD, EFECT, ZymeLink, and 'Building Better Biologics'16 - All amounts in the report are expressed in U.S. dollars, with references to '$' and 'US$' for U.S. dollars and 'C$' for Canadian dollars17 PART I. FINANCIAL INFORMATION This section presents the unaudited interim condensed consolidated financial statements and management's discussion and analysis of Zymeworks Inc.'s financial condition and results of operations Item 1. Financial Statements This section presents the unaudited interim condensed consolidated financial statements of Zymeworks Inc. for the period ended June 30, 2025, including the Balance Sheets, Statements of Income (Loss) and Comprehensive Income (Loss), Statements of Changes in Stockholders' Equity, Statements of Cash Flows, and accompanying notes Condensed Consolidated Balance Sheets (Selected Data, in thousands) | Metric | June 30, 2025 (unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $98,253 | $66,103 | | Short-term marketable securities | $183,126 | $159,673 | | Accounts receivable | $2,631 | $55,815 | | Total current assets | $296,130 | $300,451 | | Total assets | $408,385 | $463,091 | | Total current liabilities | $38,502 | $88,294 | | Total liabilities | $73,879 | $124,323 | | Total stockholders' equity | $334,506 | $338,768 | Condensed Consolidated Statements of Income (Loss) (Selected Data, in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $48,726 | $19,243 | $75,836 | $29,273 | | Research and development expense | $34,449 | $29,163 | $70,187 | $61,205 | | General and administrative expense | $14,951 | $15,679 | $31,936 | $31,469 | | Impairment on acquired IPR&D | $0 | $17,287 | $0 | $17,287 | | Net income (loss) | $2,317 | $(37,686) | $(20,319) | $(69,339) | | Basic EPS | $0.03 | $(0.49) | $(0.27) | $(0.91) | | Diluted EPS | $0.03 | $(0.49) | $(0.27) | $(0.91) | Condensed Consolidated Statements of Cash Flows (Selected Data, in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $8,666 | $(62,668) | | Net cash provided by financing activities | $2,635 | $3,180 | | Net cash provided by (used in) investing activities | $20,927 | $(27,287) | | Net change in cash and cash equivalents | $32,150 | $(86,594) | | Cash and cash equivalents, end of period | $98,253 | $70,963 | Nature of Operations Zymeworks Inc. is a clinical-stage biopharmaceutical company focused on developing next-generation multifunctional biotherapeutics, primarily for cancer and autoimmune/inflammatory diseases - Zymeworks Inc. is a clinical-stage biopharmaceutical company developing next-generation multifunctional biotherapeutics27 - The company has primarily focused resources on research and development activities, including therapeutic platforms and product candidates28 - An internal reorganization (Redomicile Transactions) in October 2022 resulted in a Delaware-incorporated entity becoming the listed company2930 Summary of Significant Accounting Policies The interim condensed consolidated financial statements are prepared in accordance with U.S. GAAP and SEC rules for interim financial information, reflecting normal recurring adjustments - Financial statements are prepared in accordance with U.S. GAAP and SEC rules for interim financial information31 - Management makes estimates and judgments for revenue recognition, expense accruals, stock-based compensation, deferred taxes, and contingent liabilities34 - All amounts are expressed in thousands of U.S. dollars, except for share and per share data33 Recent Accounting Pronouncements The company is evaluating the impact of recently issued ASUs, including ASU No. 2023-09 on Income Tax Disclosures and ASU 2024-03 on Disaggregation of Income Statement Expenses - ASU No. 2023-09 (Income Taxes) requires specific categories in rate reconciliation and disaggregation of income taxes paid, effective for fiscal years beginning after December 15, 202435 - ASU 2024-03 (Expense Disaggregation Disclosures) requires more detailed information about expense types, effective for annual periods beginning after December 15, 202636 Net Earnings (Loss) Per Share For the three months ended June 30, 2025, basic and diluted net earnings per common share were $0.03, a significant improvement from a loss of $0.49 in the prior year Net Earnings (Loss) Per Common Share | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) attributable to common stockholders (Basic) | $2,317 | $(37,686) | $(20,319) | $(69,339) | | Basic EPS | $0.03 | $(0.49) | $(0.27) | $(0.91) | | Diluted EPS | $0.03 | $(0.49) | $(0.27) | $(0.91) | | Weighted-average common stock outstanding (Basic) | 75,337,168 | 76,392,593 | 75,254,553 | 76,303,713 | | Weighted-average common stock outstanding (Diluted) | 77,378,449 | 76,396,217 | 75,302,357 | 76,321,941 | - Potentially dilutive securities (stock options and RSUs) were excluded from diluted net earnings (loss) per share computation for periods with net losses, as their effect would be anti-dilutive37 Cash, Cash Equivalents and Marketable Securities As of June 30, 2025, Zymeworks held $98.3 million in cash and cash equivalents and $235.1 million in marketable securities, primarily U.S. Treasury notes and corporate debt securities Marketable Securities (in thousands) | Category | June 30, 2025 Fair Value | December 31, 2024 Fair Value | | :--- | :--- | :--- | | Short-term marketable securities | $183,126 | $159,673 | | Long-term marketable securities | $51,996 | $98,428 | | Total marketable securities | $235,122 | $258,101 | Cash and Cash Equivalents (in thousands) | Category | June 30, 2025 Total | December 31, 2024 Total | | :--- | :--- | :--- | | Cash | $79,317 | $34,620 | | Money market funds | $18,936 | $16,398 | | GICs | $0 | $15,085 | | Total Cash and Cash Equivalents | $98,253 | $66,103 | IPR&D and Goodwill In Q2 2024, Zymeworks recorded a $17.3 million impairment charge on acquired In-Process Research and Development (IPR&D) assets due to the discontinuation of the zanidatamab zovodotin clinical development program - An impairment charge of $17,287 thousand was recorded in Q2 2024 due to the discontinuation of the zanidatamab zovodotin clinical development program40 - Goodwill was last tested for impairment on December 31, 2024, with no impairment indicators as of June 30, 202541 Liabilities Total current liabilities significantly decreased from $88.3 million at December 31, 2024, to $38.5 million at June 30, 2025, primarily driven by a reduction in accounts payable and accrued R&D expenses, and deferred revenue Accounts Payable and Accrued Liabilities (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Trade payables | $32 | $3,903 | | Accrued research and development expenses | $22,790 | $43,114 | | Employee compensation and related accruals | $4,376 | $6,222 | | Total Accounts payable and accrued liabilities | $31,003 | $59,838 | Other Long-Term Liabilities (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Liability from in-licensing agreements | $447 | $447 | | Finance lease liability | $0 | $28 | | Other | $381 | $448 | | Total Other long-term liabilities | $828 | $923 | Stockholders' Equity Stockholders' equity decreased slightly from $338.8 million at December 31, 2024, to $334.5 million at June 30, 2025, influenced by a net loss offset by stock-based compensation and common stock issuances Stockholders' Equity (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Common stock | $1,074,079 | $1,015,618 | | Exchangeable shares | $8,178 | $8,188 | | Additional paid-in capital | $109,243 | $152,249 | | Accumulated deficit | $(850,654) | $(830,335) | | Total stockholders' equity | $334,506 | $338,768 | - The company's authorized share capital consists of 900,000,000 common shares and 100,000,000 preferred shares43 - A stock repurchase program authorized up to $60.0 million, with $30.0 million remaining as of June 30, 2025464748 - Pre-funded warrants were net exercised in full on June 26, 2025, resulting in the issuance of 5,086,480 common shares4950 Stock-Based Compensation Expense (in thousands) | Expense Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $2,891 | $2,381 | $6,052 | $4,306 | | General and administrative | $2,832 | $2,107 | $5,945 | $3,641 | | Total Stock-Based Compensation | $5,723 | $4,488 | $11,997 | $7,947 | Research, Collaboration and Licensing Agreements Revenue from research and development collaborations significantly increased to $48.7 million for the three months ended June 30, 2025, from $19.2 million in the prior year, driven by milestone and option exercise fees Revenue from Research and Development Collaborations (in thousands) | Partner/Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Jazz (Development support, drug supply, royalties) | $2,866 | $10,838 | $10,518 | $20,700 | | BeOne (Milestone, deferred revenue, drug supply, royalties) | $38,360 | $8,405 | $38,568 | $8,405 | | BMS (Option exercise fee) | $7,500 | $0 | $7,500 | $0 | | GSK (Milestone revenue) | $0 | $0 | $14,000 | $0 | | Daiichi Sankyo (Milestone revenue) | $0 | $0 | $3,100 | $0 | | Total Revenue | $48,726 | $19,243 | $75,836 | $29,273 | - In May 2025, the Company recognized $7.5 million from BMS's exercise of its commercial license option63 - In May 2025, the Company recognized $20.0 million milestone revenue from BeOne upon NMPA approval of zanidatamab for HER2+ BTC in China, plus $18.3 million of deferred revenue64 - In January 2025, the Company recognized $14.0 million milestone revenue from GSK64 - In March 2025, the Company recognized $3.1 million milestone revenue from Daiichi Sankyo65 Other income, net Other income, net, decreased significantly to $(0.6) million for the three months ended June 30, 2025, from $0.1 million in the prior year, primarily due to net foreign exchange losses Other Income, Net (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Foreign exchange (loss) gain, net | $(613) | $61 | $(615) | $346 | | Other | $(8) | $53 | $43 | $72 | | Total Other income, net | $(621) | $114 | $(572) | $418 | Leases The company leases office and laboratory spaces in Vancouver, Bellevue, and Redwood City, with total operating lease liabilities of $18.7 million as of June 30, 2025 - The company leases office and laboratory spaces in Vancouver, Bellevue, and Redwood City, with lease terms expiring between June 2026 and February 203268 Operating Lease Liabilities (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Current portion | $3,586 | $2,740 | | Long-term portion | $15,092 | $15,738 | | Total operating lease liabilities | $18,678 | $18,478 | Operating Lease Expenses (in thousands) | Expense Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Operating lease expense | $797 | $552 | $1,573 | $974 | | Variable lease expense | $526 | $603 | $1,142 | $1,021 | | Termination of long-term facility lease in Seattle, net | $0 | $1,033 | $0 | $1,033 | | Total Lease Expenses | $1,323 | $2,188 | $2,715 | $3,028 | Financial Instruments The company's financial instruments include cash, marketable securities, accounts receivable, and liabilities, with fair values approximating carrying values for short-term items - Financial instruments include cash, marketable securities, accounts receivable, and various liabilities73 - Marketable securities are classified as available-for-sale and recorded at fair value75 - The company limits credit risk by investing with high credit quality financial institutions and does not use derivative instruments to hedge foreign exchange risk7679 - The company believes its principal sources of liquidity are sufficient to fund operations for at least the next 12 months78 Commitments and Contingencies Zymeworks has research collaboration agreements with strategic partners that include potential milestone and royalty payments, and holds commercial and product liability insurance to limit potential indemnification liabilities - The company has research collaboration agreements with strategic partners that may include contractual milestone and royalty payments81 - Commercial and product liability insurance is held to limit potential indemnification liabilities, which are considered minimal81 - The company does not believe it is currently subject to any material legal proceedings or claims82 Business Segments Zymeworks operates as a single reportable segment focused on the discovery, development, and commercialization of next-generation multifunctional biotherapeutics - The company operates and manages its business in a single reportable segment: biotherapeutics83 - The CODM (Chair of the board and CEO) assesses segment performance and allocates resources based on strategic planning84 Segment Income (Loss) (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue from research and development collaborations | $48,726 | $19,243 | $75,836 | $29,273 | | Total segment expenses | $41,038 | $39,558 | $84,761 | $82,775 | | Segment income (loss) | $7,688 | $(20,315) | $(8,925) | $(53,502) | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Zymeworks' financial condition and results of operations for the three and six months ended June 30, 2025, highlighting key developments, financial performance, and liquidity - Zymeworks is a clinical-stage biotechnology company developing novel, multifunctional biotherapeutics for cancer and autoimmune and inflammatory diseases (AIID)87 - Ziihera® (zanidatamab-hrii) received accelerated FDA approval in 2024 for HER2+ BTC, conditional NMPA approval in China in May 2025, and conditional European Commission marketing authorization in July 202589 - The company reported a net income of $2.3 million for the three months ended June 30, 2025, and a net loss of $20.3 million for the six months ended June 30, 20252294 - As of June 30, 2025, cash resources (cash, cash equivalents, and marketable securities) totaled $333.4 million, expected to fund operations for at least the next twelve months9293153 Overview Zymeworks is a clinical-stage biotechnology company focused on developing multifunctional biotherapeutics for cancer and AIID, with its lead product zanidatamab (Ziihera®) receiving multiple approvals - Zymeworks is a clinical-stage biotechnology company developing novel, multifunctional biotherapeutics for cancer and AIID87 - Zanidatamab (Ziihera®) received accelerated FDA approval in 2024 for HER2+ BTC, conditional NMPA approval in China in May 2025, and conditional European Commission marketing authorization in July 202589 - The company has funded operations primarily through public offerings and payments from license and collaboration agreements, with an accumulated deficit of $850.7 million as of June 30, 2025919294 Wholly-Owned Pipeline Zymeworks is advancing a wholly-owned pipeline of novel Antibody Drug Conjugates (ADCs) and Multispecific Antibody Therapeutics (MSATs) for solid tumors, and a bispecific molecule for Autoimmune and Inflammatory Diseases (AIID) - ZW191 is a clinical-stage ADC targeting FRα-expressing tumors (ovarian, endometrial, NSCLC) using ZD06519 payload, currently recruiting patients in a global Phase 1 study96 - ZW251 is a potential first-in-class clinical-stage GPC3-targeting ADC for hepatocellular carcinoma (HCC); IND cleared by FDA in July 2025, with Phase 1 studies planned for 20259798 - ZW220, a NaPi2b-targeting ADC, has paused preparations for Phase 1 study to facilitate ZW251's accelerated development, but remains an IND-ready asset99 - ZW171 is a clinical-stage 2+1 format T cell engager (TCE) targeting MSLN-expressing cancers, actively recruiting patients in a global Phase 1 study100 - ZW209 is a novel trispecific T cell engager (TriTCE) targeting DLL3-expressing tumor cells; IND submission expected in 1H-2026101102 - ZW1528 is a novel IL-4Rα x IL-33 bispecific molecule for AIID (respiratory inflammation); non-U.S. regulatory filing for Phase 1 expected in 2H-2026103 Our Proprietary Therapeutic Platforms Zymeworks leverages modular and complementary therapeutic platforms, including Azymetric, Drug Conjugate Platforms, EFECT, and ProTECT, to develop multifunctional biotherapeutics - Proprietary therapeutic platforms include Azymetric (multispecific antibodies), Drug Conjugate Platforms (ADCs), EFECT (immune cell modulation), and ProTECT (tumor-specific activity)105108 - These platforms allow for engineering next-generation biotherapeutics with multifunctional activity, aiming for improved patient outcomes105 Recent Developments Recent developments include preclinical data for ZW1528, trial-in-progress posters for ZW171 and ZW191, FDA clearance for ZW251, and conditional approvals for zanidatamab in China and Europe - New preclinical data for ZW1528 (IL-4Rα x IL-33 bispecific) presented in May 2025 showed high-affinity binding, effective blockade of IL-4, IL-13, and IL-33 signaling, and extended pharmacokinetics107116 - Trial-in-progress posters for ZW171 (MSLN TCE) and ZW191 (FRα ADC) were presented in June 2025 at ASCO and ESMO Gynaecological Cancers Congress, respectively, detailing Phase 1 study designs109110 - FDA cleared the IND application for ZW251 (GPC3-targeting ADC) in July 2025, with Phase 1 clinical studies planned for 2025111 - Long-term Phase 2 data for zanidatamab in first-line HER2+ mGEA showed a median OS of 36.5 months, presented in May 2025112 - NMPA in China granted conditional approval for zanidatamab for HER2+ BTC in May 2025, and the European Commission granted conditional marketing authorization in July 2025113114 - The company recognized $7.5 million from BMS's commercial license option exercise and $20.0 million milestone revenue from BeOne for zanidatamab approval in China116117118 - Zymeworks is evolving its business strategy to anchor future growth around anticipated royalty and milestone revenues from Ziihera® and existing/new partnerships121 Strategic Partnerships and Collaborations Zymeworks has strategic partnerships with companies like Jazz, BeOne, BMS, GSK, Daiichi Sankyo, J&J, and Merck, providing non-dilutive funding and accelerating product development - Strategic partnerships provide non-dilutive funding and accelerate clinical development122 Collaboration and Licensing Agreements Summary (as of June 30, 2025) | Partner | Program & Platform | Current Stage | Potential Future Milestone Payments | Royalty Rate | | :--- | :--- | :--- | :--- | :--- | | Jazz Pharmaceuticals | Ziihera® (zanidatamab-hrii) Azymetric EFECT | Marketed in first indication (BTC) | Up to $1.36 billion | Tiered worldwide royalties between 10% to 20% other than in BeOne territories | | BeOne | Zanidatamab Azymetric EFECT | Marketed in first indication (BTC) | Up to $144 million | Tiered royalties up to 19.5% of net sales in BeOne territories | | J&J | JNJ-78278343 CD3 x KLK2 Bispecific Azymetric EFECT | Phase 1 | Up to $459 million | Tiered worldwide royalties in the mid-single digit percentages | | BMS | Bispecific Antibody Azymetric EFECT | Oncology Phase 1 | Up to $313 million | Tiered worldwide royalties on sales | | GSK | Bispecific Antibody Immuno-Oncology Clinical Stage | Clinical Stage | Up to $230 million | Tiered worldwide royalties from low single digit percentages up to 10% | | Daiichi Sankyo | Bispecific Antibody Azymetric EFECT | Undisclosed Preclinical | Up to $1.1 billion | Tiered worldwide royalties in the low single digit percentages | | Merck | Bispecific Antibody Azymetric EFECT | Undisclosed Preclinical | Up to $921.8 million | Tiered worldwide royalties on sales | - Received $491.0 million from zanidatamab collaborations and $208.1 million from platform partnerships through June 30, 2025124125 - Eligible to receive up to $1.51 billion in potential regulatory, development, and commercial milestone payments for zanidatamab, and up to $4.09 billion from platform partnerships124125 Financial Operations Overview Zymeworks' revenue primarily stems from collaboration agreements, while operating expenses consist mainly of research and development (R&D) and general and administrative (G&A) costs, with R&D expenses expected to increase - Revenue primarily consists of collaboration revenue, including upfront fees, milestone payments, and royalties126 - Operating expenses are mainly R&D and G&A, with personnel costs being a significant component128 - R&D expenses are expected to increase with the advancement of product candidates and ongoing preclinical activities130 - Critical accounting policies involve significant judgments and estimates, especially for revenue recognition and expense accruals133135 Results of Operations for the Three and Six Months Ended June 30, 2025 and 2024 For the three months ended June 30, 2025, total revenue increased by $29.5 million (154%) to $48.7 million, driven by milestone and deferred revenue recognition, while R&D expense increased and G&A expense decreased Revenue from Research and Collaborations (in millions) | Period | 2025 | 2024 | Increase/(Decrease) | Change % | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended June 30, | $48.7 | $19.2 | $29.5 | 154% | | Six Months Ended June 30, | $75.8 | $29.3 | $46.5 | 159% | Research and Development Expense (in millions) | Period | 2025 | 2024 | Increase/(Decrease) | Change % | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended June 30, | $34.4 | $29.2 | $5.2 | 18% | | Six Months Ended June 30, | $70.2 | $61.2 | $9.0 | 15% | General and Administrative Expense (in millions) | Period | 2025 | 2024 | Increase/(Decrease) | Change % | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended June 30, | $15.0 | $15.7 | $(0.7) | (4)% | | Six Months Ended June 30, | $31.9 | $31.5 | $0.4 | 1% | Impairment on Acquired IPR&D (in millions) | Period | 2025 | 2024 | Increase/(Decrease) | Change % | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended June 30, | $0 | $17.3 | $(17.3) | (100)% | | Six Months Ended June 30, | $0 | $17.3 | $(17.3) | (100)% | Other Income, net (in millions) | Period | 2025 | 2024 | Increase/(Decrease) | Change % | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended June 30, | $2.8 | $5.3 | $(2.5) | (47)% | | Six Months Ended June 30, | $6.3 | $11.5 | $(5.2) | (45)% | Liquidity and Capital Resources Zymeworks' liquidity is primarily from public offerings and collaboration agreements, with $333.4 million in cash resources as of June 30, 2025, anticipated to fund operations for at least the next 12 months - Sources of liquidity include public offerings and upfront fees, milestone payments, and research support from strategic collaborations151 - As of June 30, 2025, cash, cash equivalents, and marketable securities totaled $333.4 million153 - Cash provided by operating activities was $8.7 million for the six months ended June 30, 2025, compared to $62.7 million cash used in the prior year155 - The company anticipates existing cash resources will fund operating and capital expenditures for at least the next 12 months159 - Substantial additional funding will be required for continuing operations and long-term business plans, potentially through equity, debt, asset monetization, or strategic partnerships160161 Segment Reporting Zymeworks operates as a single reportable segment focused on the development of next-generation multifunctional biotherapeutics - The company views its operations and manages its business in one segment: the development of next-generation multifunctional biotherapeutics162 Outstanding Share Data As of August 5, 2025, Zymeworks had 75,166,196 shares of common stock outstanding, along with various stock options, restricted stock units, and exchangeable shares Outstanding Share Data (as of August 5, 2025) | Category | Number of Shares | | :--- | :--- | | Common Stock Issued and Outstanding | 75,166,196 | | Exercisable Outstanding Stock Options | 4,738,673 | | Unexercisable Outstanding Stock Options | 4,504,648 | | Outstanding Restricted Stock Units | 1,842,218 | | Exchangeable Shares | 569,189 | Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Zymeworks Inc. is not required to provide quantitative and qualitative disclosures about market risk - As a 'smaller reporting company,' Zymeworks Inc. is not required to provide quantitative and qualitative disclosures about market risk167 Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the effectiveness of Zymeworks' disclosure controls and procedures as of June 30, 2025, and concluded they were effective at a reasonable assurance level - Management concluded that disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2025168169 - No material changes in internal control over financial reporting occurred during the fiscal quarter ended June 30, 2025170 PART II. OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, equity security sales, and other disclosures Item 1. Legal Proceedings Zymeworks is not currently a party to any legal proceedings expected to have a material adverse effect on its business, financial condition, operating results, or cash flows - As of June 30, 2025, Zymeworks is not a party to any legal proceedings expected to have a material adverse effect on its business172 - Litigation can have an adverse impact due to defense and settlement costs and diversion of management resources172 Item 1A. Risk Factors This section outlines significant risks that could materially and adversely affect Zymeworks' business, financial condition, and operating results, spanning product development, regulatory approval, competition, financial needs, and intellectual property - The company faces risks related to its limited number of product candidates, which are still in preclinical or clinical development, and the uncertainty of obtaining regulatory approval175177 - Clinical trials are expensive, time-consuming, and involve uncertain outcomes, with previous results not necessarily predictive of future success175179 - Significant competition from other pharmaceutical and biotechnology companies, many with greater resources, could negatively impact commercial opportunities175222 - Dependence on collaborative relationships with partners like Jazz and BeOne for development and commercialization of zanidatamab poses risks if these relationships are unsuccessful or terminated175312 - The company has incurred significant losses since inception and will require substantial additional funding, which may not be available on acceptable terms, leading to potential delays or scaling back of programs175302304 - Ability to obtain, maintain, and enforce patent and trade secret protection for product candidates and technology is critical, with risks of infringement, invalidation, or unenforceability175344 - The company's stock price is likely to be volatile, and provisions in its corporate documents could delay or prevent a change in control180402418 Summary of Risk Factors This section provides a high-level overview of the principal risks associated with investing in Zymeworks' common stock, including product development, clinical trials, competition, market acceptance, and intellectual property - Investment in common stock is speculative due to risks in product development, clinical trials, regulatory approval, competition, and market acceptance175228 - Key risks include potential for undesirable side effects, product liability lawsuits, security breaches, and the need for substantial additional funding175219255262304 - Dependence on strategic partners and the ability to protect intellectual property are critical for business success175312344 Risks Related to Our Business and the Development and Commercialization of Our Product Candidates Zymeworks faces significant risks in developing and commercializing its product candidates, including the uncertainty of regulatory approval, high costs and uncertain outcomes of clinical trials, and intense competition - Failure to obtain regulatory approval or significant delays in doing so for product candidates would materially adversely affect the business177 - Clinical trials are expensive, time-consuming, and have uncertain outcomes; previous preclinical/clinical results may not predict future success179183 - Product candidates may have undesirable side effects, leading to delays, failure to obtain approval, or market withdrawal219221 - Significant competition from more effective, safer, or less expensive products could negatively impact commercial opportunities222223 - Market acceptance of approved products by physicians, patients, and payors is crucial for revenue generation and profitability228229 - Disruptions at the FDA or other government agencies could hinder timely development, approval, or commercialization of products216 - Manufacturing difficulties, including contamination or supply chain disruptions, could delay or prevent product supply for clinical trials or commercialization259 Risks Related to Additional Legal and Compliance Matters Zymeworks is exposed to legal and compliance risks, including security breaches, data loss, stringent privacy regulations, employee misconduct, and geopolitical events that could disrupt international operations - Security breaches, data loss, or other disruptions could compromise sensitive business or health information, leading to liability and reputational harm262263 - The company is subject to stringent and changing privacy and security obligations, including HIPAA, HITECH, GDPR, and CCPA, with potential for significant fines and penalties for non-compliance267269271 - Employee misconduct, including noncompliance with regulatory standards, insider trading, or fraud and abuse laws, could lead to criminal sanctions, civil penalties, and reputational damage386387 - Compliance with export/import controls, sanctions, embargoes, and anti-corruption laws is critical, with violations potentially leading to criminal liability and harm to business298300 - Economic, political, and regulatory risks associated with international operations, including trade policies and currency fluctuations, could adversely affect the business285286 Risks Related to Our Financial Position and Need for Additional Capital Zymeworks has incurred significant losses since inception, with an accumulated deficit of $850.7 million as of June 30, 2025, and anticipates continued losses, requiring substantial additional funding that may not be available on acceptable terms - The company has incurred significant losses since inception, with an accumulated deficit of $850.7 million as of June 30, 2025, and anticipates continued losses302 - Substantial additional funding will be required to advance product candidates, and such funding may not be available on acceptable terms or at all304307 - Raising additional capital through equity or convertible debt securities will dilute stockholders' ownership interest309 - Debt financing may involve agreements with covenants limiting specific actions, such as incurring additional debt or declaring dividends310 - Tax law changes, such as the OBBB Act, could adversely affect the company's effective tax rate and financial condition311 Risks Related to Our Dependence on Third Parties Zymeworks heavily relies on strategic partners for product development and commercialization, and on other third parties for manufacturing, clinical trials, and operational services, exposing it to risks of non-performance or termination - Dependence on Jazz and BeOne for zanidatamab development and commercialization means success is largely beyond Zymeworks' control312316 - Strategic partners may not commit sufficient resources, pursue development, or may terminate agreements, requiring Zymeworks to raise additional capital318320 - Reliance on third-party manufacturers for product candidates carries risks of production difficulties, quality control issues, and regulatory non-compliance323324326 - Reliance on third parties to monitor and conduct clinical trials means less control over timing, cost, and patient recruitment, with risks of delays or data rejection329331332 - Dependence on third-party operational and administrative services, including cloud-based software, exposes the company to risks of service failures or disruptions337339 Risks Related to Our Intellectual Property Zymeworks' commercial success hinges on its ability to operate without infringing third-party patents and to obtain, maintain, and enforce its own intellectual property (IP) rights, facing risks of infringement claims, patent invalidation, and competitive challenges - Commercial success depends on operating without infringing third-party patents, with risks of litigation and inability to obtain necessary licenses340342343 - Failure to obtain, maintain, and enforce patent and trade secret protection for product candidates and technology could materially harm the business344 - Issued patents could be found invalid or unenforceable if challenged, potentially leading to loss of patent protection348349 - Intellectual property rights may not provide sufficient competitive advantages due to various limitations, including design-arounds or independent development by competitors352355 - Changes in patent laws or jurisprudence could diminish the value of patents, impairing the ability to protect products372374 - Protecting intellectual property rights globally is challenging due to varying laws and enforcement, potentially limiting market potential375378 - Use of open source software in R&D programs could lead to unanticipated conditions, litigation, or requirements to release proprietary source code380381 Risks Related to Employee Matters and Managing Growth Zymeworks' success is highly dependent on retaining key executives and attracting qualified personnel, and the company may face difficulties in managing organizational growth or modifications as its product candidates advance - Future success depends on retaining key executives and attracting, retaining, and motivating qualified personnel399400 - Organizational growth or modifications may be necessary as product candidates advance, imposing significant responsibilities on management401 - Ineffective management of growth could lead to increased expenses, operational errors, loss of business opportunities, and reduced productivity401 Risks Related to Our Common Stock The market price of Zymeworks' common stock is likely to be volatile due to various factors, and the company does not anticipate paying cash dividends in the foreseeable future - The stock price is likely to be volatile due to factors like clinical trial results, regulatory developments, competition, and market conditions402407 - An active trading market for common stock may not be sustained, potentially making it difficult for stockholders to sell shares404 - The company does not anticipate paying cash dividends for the foreseeable future; stockholders must rely on stock appreciation for returns406 - Principal stockholders could exert substantial influence over the company, potentially delaying or preventing a change in corporate control410 - As a smaller reporting company, compliance with reduced reporting requirements may make common stock less attractive to investors411412 - Bylaws designate Delaware courts as the exclusive forum for certain disputes and federal district courts for Securities Act claims, potentially limiting stockholders' choice of forum423424425 - The stock repurchase program may be suspended or discontinued at any time, and there's no assurance of additional repurchases at favorable prices428429 Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities Zymeworks' board authorized a stock repurchase program of up to $60.0 million in August 2024, with $30.0 million remaining authorized for future repurchases as of June 30, 2025 - A stock repurchase program authorized up to $60.0 million of common stock in August 2024432 - No shares were repurchased under this program during the three months ended June 30, 2025432 - $30.0 million remained authorized for repurchase under the program as of June 30, 2025432 Item 3. Defaults upon Senior Securities Zymeworks Inc. reported no defaults upon senior securities - There were no defaults upon senior securities433 Item 4. Mine Safety Disclosures This item is not applicable to Zymeworks Inc - This item is not applicable434 Item 5. Other Information During the last fiscal quarter, no director or officer adopted or terminated a Rule 10b5-1 trading arrangement or any non-Rule 10b5-1 trading arrangement - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the last fiscal quarter435 Item 6. Exhibits This section lists the exhibits filed as part of the Form 10-Q, including corporate organizational documents, an amendment to pre-funded warrants, a research license and commercial option agreement amendment, and certifications from the CEO and CFO - Exhibits include corporate organizational documents (Amended and Restated Certificate of Incorporation, Bylaws), an amendment to pre-funded warrants, and certifications from the CEO and CFO436 SIGNATURES This section contains the official signatures of the company's principal executive and financial officers, certifying the accuracy and completeness of the report Signatures The report is signed by Kenneth Galbraith, Chair of the Board of Directors, President and Chief Executive Officer, and Leone Patterson, Executive Vice President, Chief Business Officer and Chief Financial Officer, both dated August 7, 2025 - The report is signed by Kenneth Galbraith, CEO, and Leone Patterson, CFO, on August 7, 2025439
Zymeworks(ZYME) - 2025 Q2 - Quarterly Report