Ladenburg starts Zymeworks at buy; PT $25

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Ladenburg Thalmann initiated coverage of Zymeworks (NYSE:ZYME) with a “buy” rating and $25 price target. The stock closed at $15.84 on May 14.

Zymeworks is developing bispecific/multifunctional biotherapeutics initially focusing on oncology and has developed four core platforms, which are validated by six Big Pharma partnerships with nearly $6-billion in total deal size, writes analyst Wangzhi Li. The company also has developed a deep internal pipeline, including bispecific antibodies, ADCs, T-cell engagers and checkpoint modulators.

Lead product, ZW25, is a bispecific anti-HER2 antibody combining Herceptin and Perjeta, and could “potentially provide a single drug equivalence to a Herceptin- Perjeta combo, which had sales of $9.2-billion in 2017,” he added.

While Herceptin and Perjeta are approved for HER2-high patients only, Mr. Li said ZW25 showed strong anti-tumor activity against preclinical HER2-low breast cancer models, and has “potential to capture the much larger untapped HER2- intermediate/low breast cancer market.”

The company’s second product, ZW49, is an ADC drug combining ZW25 with ZymeLink linker-toxin, and “showed compelling preclinical data with more than a 13 times increase in therapeutic window over 1st-generation ADCs, and high activity in HER2-low breast cancer models,” he added. The company expects to file an IND for ZW49 in 2018.

Stephen Kilmer