J&J Deal Helps Zymeworks Continue Transformational Year

Vancouver biotech says $50m up front from Janssen reflects clinical validation of its antibody technology platforms. Firm also moved first proprietary candidate into clinic and netted $59m from an IPO in 2017.

Zymeworks Inc. has pursued a strategy of funding its internal development of bispecific antibody therapies for cancer by licensing non-exclusive rights to its technology platforms with six partners now, dating back to 2011, but the $50m upfront payment it is getting from Janssen Biotech Inc. in a deal announced Nov. 13 exceeds the aggregate upfront cash it received up front in its previous deals.

In outlining the six-target licensing agreement around its Azymetric and EFECT (Effector Function and Enhancement Control Technology) platforms with the Johnson & Johnson affiliate, Zymeworks CEO Ali Tehrani explained that early Phase I data with its HER2-targeting bispecific candidate ZW25 has de-risked the Azymetric platform in the eyes of potential partners. The Vancouver biotech presented preliminary safety and anti-tumor activity data for ZW25 – which targets two distinct HER2 epitopes, with potential in breast, gastric and ovarian cancer settings – at the American Society for Clinical Oncology (ASCO) conference in June and the European Society of Medical Oncology (ESMO) meeting in September.

“These more substantial dollar amounts for a discovery-stage deal such as this one only come into play when a platform such as Azymetric has been meaningfully de-risked not from a preclinical standpoint but more importantly from a clinical standpoint,” Tehrani told a Nov. 13 investor call. He believes the data presented at ASCO and at ESMO, on antitumor activity and safety in 22 patients treated with ZW25, contributed to the discussions with Janssen.

Zymeworks says Azymetric enables monospecific antibody candidates to provide dual targeting of receptors and ligands, with immunoglobulin-1 (IgG1)-like biophysical and functional properties and manufacturing and purification protocols. The EFECT technology enables immune modulation – up-regulation or down-regulation of an effect – by antibody candidates through the modification of Fc amino acid sequences

In addition to developing its in-house bispecific candidates for cancer, Zymeworks also has prior partnerships with Merck & Co. Inc., GlaxoSmithKline PLC and Daiichi Sankyo Co. Ltd. encompassing both the Azymetric and EFECT platforms, as well as licensing agreements with Celgene Corp. and Eli Lilly & Co. covering rights to Azymetric technology only. (Also see "Deal Watch: Zymeworks Adds Daiichi To List Of Partners In I-O Cross Collaboration" - Scrip, 30 Sep, 2016.)

Tehrani said Zymeworks intentionally structures its platform licensing deals so that it remains free to investigate the same targets and/or therapeutic indications as its partners. These partners tend to come to Zymeworks with their own antibody candidates that they want to optimize with the Azymetric and/or EFECT technology. The agreements often are broad-based and not limited just to cancer indications, he added.

Zymeworks’ Previous Platform Licensing Agreements
Company	Upfront amount	Total remaining potential earn-outs	Details
Daiichi Sankyo	$2m	$147m	Cross-licensing agreement giving the Japanese firm rights to both platforms. [See Deal]
GSK (two separate deals)	$6m/undisclosed	$2.04bn	December 2016 deal conferring rights to EFECT. [See Deal] April 2016 deal related to Azymetric. [See Deal]
Celgene	$8.6m equity investment	$1.312bn	Specific to Azymetric platform, expires in April 2018, but can be renewed by Celgene for two years for a fee. (Also see "Deal roundup: Zymeworks/Celgene, Curis/Aurigene, MedImmune/NCI" - Scrip, 22 Jan, 2015.)
Lilly	$1m	$474m	Worldwide Azymetric rights for undisclosed cancer targets. [See Deal]
Merck	$1.25m	$186m	Rights to Azymetric for cancer and autoimmune indications. [See Deal]
Source: Zymeworks, Strategic Transactions

“All of our pharma partners come to the table with their unique antibodies, with their unique starting points, which enables them to build a unique bispecific asset,” the exec said. “So there may be a number of pharma partners that are going after the same target class, but because they come to the table with unique binders and unique locations on a target that their antibody binds to, [that] makes it different.”

"There are similarities in these deals, [but] the beauty of it is that in no shape or form does it restrict our hands to do future deals or to work in the same universe,” he continued.

The deal specifies that Janssen can use the two platform technologies against six specific, undisclosed targets, with it being responsible for all research, development and commercial activities related to the targets. Janssen also can add two additional bispecific targets to the agreement in exchange for an additional option fee.

Zymeworks could earn considerable “biobucks” under the deal, with the potential for up to $282m in development milestones and $1.12bn in commercial milestones, along with sales royalties on any product reaching market. The biotech’s previous deals also have offered stratospheric earn-outs, with Zymeworks noting that the various deals carry the potential for up to $5.5bn in total milestones and other payments.

The $50m upfront payment from Janssen is important, however, compared to prior upfronts ranging from $1m to $6m (Celgene made an $8.6m equity investment under the firms’ 2015 deal). [See Deal] Chief Financial Officer Neil Klompas estimated that the cash from Janssen will give Zymeworks financial runway through the end of 2018, enabling it to continue development of ZW25 and continue the effort to bring a second bispecific candidate, ZW33, into the clinic. The deal proceeds add to the $59.2m Zymeworks netted from its initial public offering this past April. [See Deal]

David Poon, Zymeworks’ senior VP for external R&D and alliances, said the Janssen deal could lead to more of the same, due to the relatively easy nature by which partners can apply the Azymetric and EFECT technologies to their work. “The Azymetric and EFECT platforms are truly turnkey technologies and can be easily utilized for rapid and uncompromising development of drug candidates with minimal support,” he said.

In addition, Zymeworks is developing two other technology platforms – ZymeLink for antibody-drug conjugates and AlbuCORE for albumin-based antibody alternatives – which are earlier stage for now but could yield licensing deals down the road, Tehrani said. The company is planning for an R&D day in 2018 to outline its preclinical non-HER2 programs and future business development strategy, he added.

Investors responded positively to the deal, with Zymeworks’ stock finishing the trading day Nov. 13 up nearly 25% to $8.57 per share.