On Thursday, Leerink Partners adjusted its outlook on Zymeworks (NASDAQ:ZYME) shares, increasing the price target to $26 from $25, while maintaining an Outperform rating.
The revision follows the U.S. Food and Drug Administration's (FDA) accelerated approval of Zymeworks' drug Ziihera for the treatment of biliary tract cancer (BTC) with a specific HER2+ (IHC3+) expression. This approval came before the expected Prescription Drug User Fee Act (PDUFA) date of November 29, 2024.
Zymeworks, which had previously outlicensed Ziihera to Jazz Pharmaceuticals (NASDAQ:JAZZ) (JAZZ, Goodman, Outperform) in 2022, is set to receive a $25 million regulatory milestone payment from Jazz Pharmaceuticals. Additionally, Zymeworks is eligible for up to $500 million in regulatory milestones and $862.5 million in commercial milestones, along with royalties ranging from 10% to 20% of net sales.
The FDA's decision was influenced by the results of the HERIZON-BTC-01 trial, which demonstrated a 52% objective response rate (ORR), a median duration of response (mDoR) of 14.9 months, and a median overall survival (mOS) of 18.1 months in BTC patients with IHC3+ HER2 expression. Ziihera's label has been restricted to IHC3+ patients, which represent 14% of the population, as they showed a greater benefit compared to IHC2+ patients.
The approval of Ziihera is seen as a validation of Zymeworks' internal research and development capabilities. The drug is also under evaluation for gastroesophageal cancer (GEA), with a topline readout for the HERIZON-GEA-01 trial in first-line GEA expected in the second quarter of 2025. A trial for breast cancer has begun enrollment as well.
Leerink Partners' updated model reflects the Ziihera approval and the $25 million milestone payment, leading to the raised price target. The firm estimates Ziihera's peak sales could reach approximately $2.3 billion across BTC, gastric, and breast cancer indications. Leerink suggests that Zymeworks might consider monetizing the BTC and GEA indications following the GEA pivotal trial read-out, with additional potential for the breast cancer indication.
In other recent news, Zymeworks Inc (NASDAQ:ZYME). has announced significant milestones, including the U.S. Food and Drug Administration's accelerated approval of Ziihera (zanidatamab-hrii) for HER2-positive biliary tract cancer.
The approval, based on a promising 52% objective response rate from the HERIZON-BTC-01 clinical trial, validates Zymeworks' proprietary Azymetric™ technology. The company also secured a $25 million milestone payment from Jazz Pharmaceuticals and is anticipating up to $500 million more in regulatory milestones.
In addition to the FDA approval, Leerink Partners upgraded Zymeworks' stock rating from Market Perform to Outperform, reflecting the company's progress and a valuation model projecting worldwide peak revenues exceeding $4 billion.
Zymeworks reported a Q3 2024 net loss of $99.2 million, an improvement from the previous year, and plans to file Investigational New Drug applications for two promising antibody-drug conjugates, ZW220 and ZW251, in 2025.
These recent developments underscore Zymeworks' commitment to advancing novel therapeutics for difficult-to-treat cancers and its openness to future business development opportunities, including collaborations and licensing deals.
InvestingPro Insights
Zymeworks' recent FDA approval for Ziihera aligns with several key financial indicators from InvestingPro. The company's market cap stands at $1.02 billion, reflecting investor optimism about its future prospects. This positive sentiment is further supported by InvestingPro Tips, which highlight that two analysts have revised their earnings upwards for the upcoming period, suggesting growing confidence in Zymeworks' financial outlook.
The approval of Ziihera and the subsequent milestone payment from Jazz Pharmaceuticals are likely to bolster Zymeworks' already strong financial position. InvestingPro data shows that the company holds more cash than debt on its balance sheet, and its liquid assets exceed short-term obligations. This financial stability provides Zymeworks with the flexibility to continue investing in its research and development pipeline.
Despite recent successes, it's worth noting that Zymeworks is not currently profitable, with a negative P/E ratio of -10.01 for the last twelve months as of Q3 2024. However, the company has shown strong market performance, with a 77.01% price total return over the past year and a 63.3% return over the last six months. These figures suggest that investors are betting on Zymeworks' long-term potential, likely influenced by developments such as the Ziihera approval.
For investors seeking more comprehensive analysis, InvestingPro offers 11 additional tips for Zymeworks, providing a deeper understanding of the company's financial health and market position.
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