Zymeworks is this decade’s next-generation drug development engine: Paradigm Capital

Ahead of what he sees as a major catalyst event, Paradigm Capital analyst Rahul Sarugaser has raised his price target on Zymeworks (TSX:ZYME).

In October, Zymeworks will host a research day. The analyst explained why he thinks this will be transformational for the company.

“It is this Pipeline that ZYME plans to unveil in October which we believe to be a key value driver of the company,” Sarugaser says. “We estimate this pipeline contains 25 preclinical assets varying in maturity from new drug discovery through animal model evaluation, and further project that this pipeline could grow by five assets annually. As the market gains visibility on this Pipeline and begins to ascribe worth to its assets, ZYME will gain a third valuation tier that should act to significantly escalate the company’s value.”

In a research update to clients today, Sarugaser maintained his “Buy” rating on ZYME, but raised his one-year price target on the stock from $27.00 to $30.00, implying a return of 141 per cent at the time of publication.

The analyst thinks Zymeworks will generate EBITDA of negative $18.0-million on revenue of $72.0-million in fiscal 2018.

Sarugaser says the scope of what ZYME is doing puts it in rare company.

“Zymeworks (ZYME) is a clinical-stage biopharmaceutical company that we see as this decade’s next-generation drug development engine, akin to that of Amgen or Genentech in the 1980s. The company’s lead product candidate—ZW25: a next-generation antibody targeting HER2-expressing tumours—is now engaged in an adaptive Phase 1 clinical trial. ZYME has also secured six top-tier Pharma partners on 41 drug development projects (fetching up to $6B in non-dilutive payments), two of which are likely to enter Phase 1 clinical trials this year. ZYME’s suite of complementary therapeutic technology platforms and its fully integrated drug development engine are fueling the development of a highly differentiated product pipeline that is establishing ZYME as the industry standard for drug targeting technology.”