Zymeworks Inc. (ZYME)·Q2 2025 Earnings Summary

Executive Summary

• Q2 2025 delivered a clean beat: revenue of $48.7M and diluted EPS of $0.03, driven by BeOne’s $20M China milestone, $18.3M deferred revenue recognition tied to that milestone, a $7.5M BMS option payment, and royalties; management emphasized capital discipline and runway into 2H 2027 .
• Versus Wall Street consensus, ZYME materially outperformed: revenue vs $16.9M* and EPS vs -$0.47*, reflecting partner milestones and royalty traction; target price consensus remained $34.2*.
• Strategic catalysts tightened: HERIZON‑GEA‑01 topline PFS now expected in Q4 2025 (vs prior “2H 2025”), and ZW251 IND clearance with Phase 1 initiation planned in 2025 enhance near‑term visibility .
• Management reiterated a royalty/milestone‑anchored model and explicit caution not to scale OpEx with inflows; potential for additional non‑dilutive milestones from partner programs (J&J KLK2 TCE; Daiichi) persists .

What Went Well and What Went Wrong

What Went Well

• Revenue quality and breadth: $48.7M total, including $20.0M BeOne milestone (China conditional approval for zanidatamab BTC), $18.3M deferred revenue recognition, $7.5M from BMS option exercise, and $0.6M royalties; net income of $2.3M vs loss last year .
• Pipeline execution: FDA cleared IND for ZW251 (GPC3 ADC) with Phase 1 initiation in 2025; active Phase 1 enrollment for ZW171 and ZW191 progressing to plan .
• Partner momentum: EC conditional authorization for Ziihera (EU BTC), China conditional approval (NMPA), and J&J KLK2 TCE Phase 1 results signal future milestones/royalties; Jazz Q2 net product sales of $5.5M underpin royalty stream .
  • Quote: “Expected growth in royalty and milestone income does not necessarily trigger an increase in operational expenditures… we’re prioritizing the protection of our current cash runway” .

What Went Wrong

• Limited organic product revenue at ZYME; royalty income was modest ($0.6M) despite approvals, highlighting dependence on partner execution timing .
• R&D cost mix rose YoY as ADC/TCE programs advanced (R&D $34.4M vs $29.2M), partially offset by lower G&A; other income fell on lower interest income (macro rate/asset base) .
• HERIZON‑GEA‑01 timing refined to Q4 2025 (from “2H 2025”), elevating event‑timing sensitivity; management framed it as guidance refinement, not delay, but investors may perceive schedule risk until topline .

Financial Results

Core P&L vs prior year/quarter

Operating expense mix

KPIs and liquidity

Q2 2025 revenue composition

Consensus vs actual (Q2 2025)

Estimates marked * retrieved from S&P Global.

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• Strategic posture: “Expected growth in royalty and milestone income does not necessarily trigger an increase in operational expenditures… we’re prioritizing the protection of our current cash runway” .
• Business model: “Long‑term success in biotech lies at the intersection of platform‑driven innovation and strategic execution… combining proprietary technology platforms with targeted partnerships to unlock asset value and deliver durable returns” .
• Pipeline confidence: “IND clearance of ZW251… we expect to have three product candidates in active Phase 1 trials in the second half of 2025” .
• Clinical design rigor: For ZW171, “subcutaneous step‑up dosing regimen… mTPI design to establish the MTD and recommended dose for expansion” .
• Partner validation: “Pasritamig demonstrated preliminary anti‑tumor activity… favorable safety profile with very low rates of cytokine release syndrome” (J&J KLK2 TCE) .

Q&A Highlights

• HERIZON‑GEA‑01 timing: Management characterized Q4 2025 guidance as refinement, not delay; event‑driven design dictates unblinding after reaching required events .
• ZW191 program: Encouragement on early progress; potential for non‑small cell lung cancer expansion based on FRα expression subset and bystander payload design .
• ZW251 dosing/tolerability: Preclinical primate data support higher tolerated doses; plan to be less conservative at start while maintaining safety in HCC populations .
• Partner economics: Remaining $500M Jazz development milestones unspecified across indications; royalties tiered up to 20% in partner territories .
• J&J KLK2 bispecific: Noted target selection and tolerability enabling outpatient dosing and combination potential .

Estimates Context

• Q2 2025 results beat consensus: revenue $48.7M vs $16.9M* and EPS $0.03 vs -$0.47*, driven by milestone/deferred revenue recognition and emerging royalties .
• Prior quarter (Q1 2025) also outperformed: $27.1M revenue vs $20.7M* and EPS -$0.30 vs -$0.70*, reflecting GSK/Daiichi milestones and Jazz support revenues .
• Target price consensus mean: $34.2*; estimate count for Q2: 6 for EPS, 6 for revenue*.

Estimates marked * retrieved from S&P Global.

Key Takeaways for Investors

• Near‑term setup favorable: a catalyst‑rich 2H with Q4 HERIZON‑GEA‑01 topline and ZW251 FIH initiation; partner milestones and royalties can augment non‑dilutive cash inflows .
• Operational discipline: Management explicitly avoids scaling OpEx with incoming royalties/milestones, preserving runway and optionality for shareholder returns .
• Pipeline breadth: ADC/TCE platform execution (ZW171/ZW191/ZW251) with translational alignment increases probability of value‑creating data disclosures at peer‑review venues .
• Partner leverage: J&J KLK2 TCE and Daiichi programs provide external validation and milestone optionality; monitor associated readouts for incremental value .
• Estimate recalibration likely: Street models should reflect milestone cadence (BeOne/BMS) and EU/China BTC royalties; Q2 beat indicates variability tied to partner events .
• Trading lens: Stock should be sensitive to HERIZON‑GEA‑01 narrative (timing/PD‑L1 subgroup disclosures at topline) and initial clinical signals from ZW191/ZW171 program updates .
• Risk factors: Modest organic royalties to date, timing‑dependent milestones, and macro interest income drift; balance with clear spend discipline and diversified partner base .