Zymeworks announced Tuesday a fundamental strategic shift from developing and commercializing its own medicines to pursuing a royalty-driven business model focused on licensing partnerships and milestone payments. The Canadian biotech's decision comes one day after announcing that its partnered drug Ziihera succeeded in a late-stage trial for HER2-positive gastroesophageal adenocarcinoma.
The positive trial results triggered stock surges for both Zymeworks and partner Jazz Pharmaceuticals, with Zymeworks' shares climbing nearly 30%. The success positions Zymeworks to receive up to $440 million in milestone payments from Jazz and another partner, BeOne Medicines, if Ziihera gains approval for gastroesophageal tumors in multiple countries.
Strategic Transformation Driven by Clinical Success
"This was the first time the internal and external conditions aligned — the data, the maturity of our partnered programs, and the evolving market environment," CEO Kenneth Galbraith explained in an email to BioPharma Dive. The company's new strategy "creates more consistent value for shareholders" and "reduces the volatility and capital intensity typically associated with a traditional biotech model."
Zymeworks has been moving toward this partnership-focused approach for years. By the time Jazz acquired rights to Ziihera in 2022, the company had already established several drug partnerships. Galbraith noted that unlike companies "structurally built" to sell their own drugs, Zymeworks intentionally designed deals so larger firms would lead late-stage development "while we retain attractive economic participation."
Ziihera's Market Potential
Ziihera is already approved to treat biliary tract cancer in the United States. The new gastroesophageal cancer results position the drug not only to win clearance in HER2-positive gastroesophageal adenocarcinoma but possibly to "replace" Herceptin and be used "across the spectrum" of patients with the disease, according to Leerink Partners analyst Andrew Berens.
Berens now expects Ziihera to generate as much as $2.9 billion in peak annual revenue. Jazz and Zymeworks plan to file for approval in HER2-positive gastroesophageal adenocarcinoma in the first half of next year.
Financial Profile Transformation
The clinical success, combined with advancement of a drug partnered with Johnson & Johnson into late-stage testing, has created a "fundamentally different financial profile for the company" and given management confidence in the "magnitude" of incoming future revenue, Galbraith said.
"Before now, our potential milestone and royalty streams were still maturing, and the timing and scale of future cash flows were not predictable enough to anchor this strategic initiative," Galbraith wrote.
Future Strategy and Sustainability
Under the new model, Zymeworks plans to acquire additional assets while using internal research to advance "highly differentiated programs" for partnership. By avoiding the high costs and "binary risk" of late-stage development and commercialization, the company expects to extend its cash reserves and operate with greater financial stability.
This "repeatable framework" should help Zymeworks "operate with significantly greater financial stability than a traditional biotech structure," Galbraith added. The approach represents a third path for biotechs beyond seeking pharmaceutical acquisition or building internal commercialization capabilities, instead leveraging partnership payments and sales royalties to sustain growth and reduce development risks.
