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Zymeworks is undervalued, Paradigm Capital says

Zymeworks

ZymeworksVancouver-based biopharm company Zymeworks Inc. (Zymeworks Stock Quote, Chart, News: TSX:ZYME, NYSE:ZYME) is poised to be this decade’s next-generation drug development engine, says analyst Rahul Sarugaser of Paradigm Capital, who in a research note on Friday reiterated his “Buy” rating and $17.00 target price (all figures in US dollars unless noted).

Zymeworks is currently engaged in a Phase 1 clinical trial for its lead product candidate, ZW25, a next-generation antibody targeting gastric, ovarian and breast cancer tumours, which so far has yielded strong results, says Sarugaser.

“Interim data showed cancer-killing and safety results positive enough to warrant expansion of the trial to additional Canadian and U.S. sites, accelerating the trial,” says the analyst, who said that ZYME’s Q4/17 financial results arrived in line with expectations.

“Revenue increased to $50.1M, primarily due to the $50M upfront payment from Johnson & Johnson, bringing cash to $87.8M. R&D costs at $12.9M were slightly higher than expected, which can be attributed to advancing ZW25 through clinical trials,” says the analyst.

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“ZYME’s suite of complementary therapeutic technology platforms and its fully integrated drug development engine are fuelling the development of a highly-differentiated product pipeline that is establishing ZYME as the industry standard for drug targeting technology,” he says.

Sarugaser estimates ZYME’s FY18 revenue, EBITDA and EPS at $9.6 million, negative $51.2 million and negative $2.39, respectively. The analyst’s sum-of-the-parts valuation incorporates current proprietary clinical programs for ZW25 and ZW49, future proprietary clinical programs and current and future pharma partnerships.

The $17.00 target price represents a 45 per cent potential return on investment at the time of publication.

About The Author /

Jayson is a writer, researcher and educator with a PhD in political philosophy from the University of Ottawa. His interests range from bioethics and innovations in the health sciences to governance, social justice and the history of ideas.
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