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Zymeworks gets a target trim from Paradigm

Paradigm Capital analyst Scott McAuley lowered his target a notch on biopharma developer Zymeworks (Zymeworks Stock Quote, Charts, News, Analysts, Financials NASDAQ:ZYME) in a Sunday note to clients. McAuley kept a “Speculative Buy” rating on ZYME while moving his target price from $15.50 to $15.20, saying the company’s strong balance sheet will fund its clinical efforts through to 2026.

Vancouver’s Zymeworks is a clinical-stage biotech company developing next-gen multifunctional biotherapeutics for cancer treatment. Zymeworkds has developed zanidatamab, a HER2-targeted bispecific antibody using Zymeworks’ proprietary Azymetric technology, and the company has agreements with BeiGene and Jazz Pharmaceuticals to develop and commercialize zanidatamab in different territories, with the antibody currently in Phase 1, 2 and Phase 3 clinical trials.

Zymeworks reported its first quarter 2023 financials on May 8, showing a net loss of $24.4 million, down 66 per cent from a year earlier. Revenue was $35.6 million compared to $1.9 million  year ago, with $34.4 million coming from Jazz as development support and drug supply payments. (All figures in US dollars.)

“Looking forward, we will continue to work on development and commercialization of zanidatamab with our collaborators, Jazz Pharmaceuticals and BeiGene, while progressing and prioritizing the development of our early-stage pipeline of ADC and MSAT product candidates under our ‘5 by 5’ strategy, which outlines our goal of having five novel therapeutics in the clinic by 2027,” said Kenneth Galbraith, Chair and CEO of Zymeworks, in a press release.

On the quarter, McAuley said the negative $22.7 million EBITDA compared to his estimate at negative $28.0 million and EPS at negative $0.36 per share compared to his forecast at negative $0.47. The analyst said cash and equivalents at the close of the Q1 of $412 million should last until at least 2026, with the opportunity for either new payments under the Jazz deal or its technology licensing agreements to extend the runway.

Up ahead, McAuley said Jazz and BeiGene will be presenting two zanidatamab datasets at the upcoming ASCO conference from June 2 to 6, saying that while neither will be totally new both should highlight the positive data zanidatamab is generating across multiple indications.

“We believe investors see zanidatamab as out of ZYME’s hands and are discounting any future value the company can generate from its pipeline with its current balance sheet. However, any future success of zanidatamab by JAZZ will continue to generate value for ZYME, and with a cash runway until at least 2026, the company is in the enviable financial position for a biotech company in this market,” McAuley wrote.

“Global commercial agreements with Jazz Pharmaceuticals and BeiGene reduce the commercial risks and a strong balance sheet with runway out to 2026 mean that the company can turn its focus to its other clinical candidate, ZW49 (zanidatamab zovodotin), and its preclinical pipeline of multi-functional antibody therapies and antibody-drug conjugates,” he said.

ZYME has fallen a long way over the past two years but has picked it up more recently. At press time, McAuley’s $15.20 target represented a one-year projected return of 54 per cent.

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