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Six for sixth: Zymeworks lures J&J to potential $1.45B bispecific deal

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By Marie Powers
News Editor

Zymeworks Inc. nailed down its sixth strategic partnership, luring Johnson & Johnson unit Janssen Biotech Inc. to a potential $1.45 billion global license to research, develop and commercialize up to six bispecific antibodies directed to Janssen therapeutic targets using Zymeworks' Azymetric and EFECT (Effector Function Enhancement and Control Technology) platforms. The deal – the largest yet for Zymeworks – came with an up-front payment of $50 million, up to $282 million in development milestones and the remainder in commercial milestone payments, plus tiered royalties on potential sales. Janssen gained the option to develop two additional bispecific programs under the agreement, subject to a future option payment on similar terms.

The size and scope of the deal, facilitated by Johnson & Johnson Innovation, lifted shares of Zymeworks (NASDAQ:ZYME), which closed at $8.57 for a gain of $1.70, or 24.8 percent.

"I wish I could tell you there's some crazy secret sauce, but honestly the deal came down to the technology," Ali Tehrani, the company's president and CEO, told BioWorld. "These folks have been around the block. They are some of the world's best drug developers. We are not their first foray into the world of bispecifics. They've done deals before us, and they've gotten a taste of everything that is out there. Bispecifics are very hot, but not all bispecifics were meant to go into the clinic."

Azymetric, Zymeworks' most advanced platform, enables dual targeting of receptors and ligands and serves as the backbone technology in the company's own bispecific HER2 asset, ZW-25, the subject of an ongoing phase I study that continues to enroll patients with unresectable and/or metastatic HER2-expressing cancers. The open-label study is evaluating maximum tolerated dose or optimal biological dose and overall safety and tolerability, with progression-free survival and objective response among the secondary endpoints.

Many other bispecific developers have "amazing" technology for preclinical research, Tehrani observed, "but when it comes to having something that is meant to go into patients, when it comes to having something that is addressing a disease other than in rats or in test tubes, you need more than just something that looks good on paper or at the benchtop."

Clinical validation was a theme that Tehrani cited repeatedly on a call with analysts.

"Why did we do this deal?" he asked rhetorically. "First, it provides us the opportunity to work with the stellar group at Janssen and J&J, a team with a long history of successful biologics research and development across many indications and, specifically, in the development of bispecific antibodies. We view this as a great opportunity to further showcase the unique benefits of the Azymetric platform."

Despite an instant attraction between the companies, terms of the deal took close to a year to negotiate. Janssen gained access to the Azymetric platform as well as EFECT, which enables up- or down-regulation of antibody-mediated immune cell interactions, providing a broad set of tools so it can "worry less about the technology" and "focus on the biology and mechanisms of actions necessary to develop first and best-in-class biologics."

Zymeworks, in turn, retained the flexibility to apply the Azymetric and EFECT platforms to other high value targets without exclusivity, to control its wholly owned therapeutic pipeline and to advance its preclinical candidates unencumbered. In addition to ZW-25, Zymeworks is advancing ZW-33, a bispecific anti-HER2 antibody-drug conjugate based on the same antibody framework as ZW-25 but armed with a cytotoxic payload. The agent is completing preclinical studies and Tehrani strongly hinted that it will enter the clinic by year-end, as previously projected.

The company also has a number of internal assets in discovery, according to Cortellis Competitive Intelligence, including bispecific Azymetric antibodies targeting autoimmune and neurological diseases and a checkpoint modulating bispecific antibody.

'Every deal will be looked at strategically'

The company's partnerships – all active "and delivering drug candidates nearing clinical evaluation" – also include Merck & Co. Inc., Eli Lilly and Co., Celgene Corp., Glaxosmithkline plc and Daiichi Sankyo Co. Ltd.

"When folks come to us and want to use our platforms, they usually have broad objectives," including the oft-cited desire to look at indications across and beyond oncology, Tehrani said. "We believe they want to use the technology to its fullest potential."

As to how the deals differ, "our pharma partners come to the table with their unique antibodies – with their starting points – which enables them to build unique bispecific assets," he said. "Different epitopes or different locations on the target make a difference."

The up-front payment from Janssen, which Tehrani said reflected clinical validation of the Azymetric platform through the progress of ZW-25, extended the runway for Vancouver, British Columbia-based Zymeworks "well beyond fiscal 2018," when the ZW-25 trial is expected to report top-line results. "The data that we presented at [the American Society of Clinical Oncology] this year and subsequently at [the European Society for Medical Oncology], where we did discuss that the 22 patients have been treated with ZW-25 with antitumor activity and also, safety, we believe contributed to our discussions here," he said. "We've had a great year so far. That said, we're not done yet."

Because Janssen assumed R&D and commercialization costs for the projects, the nondilutive capital will go almost entirely to pipeline development, not to overhead

"Our technology has become very much plug and play," Tehrani said. "In the early deals, we had to provide support. We had to be part of the protein engineering. Today, we essentially tech transfer these things without any support."

The six Zymeworks partnerships are so far limited to the company's Azymetric and EFECT platforms. Zymeworks also is advancing Albucore, a family of multivalent scaffolds based on human serum albumin, or HSA, and Zymelink, its next-gen drug conjugate platform, which encompasses customizable linkers, a suite of proprietary toxins, site-specific conjugation and a wide therapeutic window compatible with antibody and protein therapeutics. Although Albucore and Zymelink haven't yet attracted their own deals, existing partners are able to kick their tires.

"As we innovate, our partners automatically – through our [business development] team and our alliance management team – get a first look," Tehrani said. "We're not obligated to do so, but we want to. Now, with six deals being the Who's Who of big pharma and big biotech, we have our own little network. If we develop a new asset or technology that we want to license, naturally we'll go to our existing partners first."

As to whether Zymeworks could continue to command potential billion-dollar deals in a manner equivalent to the number of conceivable bispecific combinations, Tehrani said that even the Janssen/J&J deal wasn't just about the money but also about the quality of the partner.

"If some random other entity would have offered the same cash, would we have done the deal?" he asked. "Probably not. When you look at what comes along with the cash, which is a world-class pharma and its resources, it was double the win."

In the same token, this latest deal raises the bar for evaluating future prospective partners.

"For us, from now on, every deal will be looked at strategically," Tehrani said.

"I want Zymeworks to be remembered as a company that promises and delivers," he added. "There is a lot of talk out there – a lot of commotion and noise. But we do what we say we're going to do. And we have even more to offer. We've just scratched the surface."