ZYME: Royalty Model Will Benefit From Positive HER2 Gastric Cancer Data

Analysts nudged their fair value estimate for Zymeworks slightly higher, from $34.20 to $34.50. This reflects growing confidence that the company’s shift toward a royalty aggregator model, coupled with strong HERIZON-GEA-01 data for Ziihera and encouraging early ZW191 results, can drive faster revenue growth and improved profitability.

Analyst Commentary

Analysts are broadly constructive on Zymeworks, highlighting both the de risked nature of its lead assets and the upside from its emerging royalty platform, while still flagging execution risks around the new strategy.

Bullish Takeaways

Bullish analysts are lifting price targets into the mid to high 30s and low 40s, pointing to upside versus current trading levels as HERIZON GEA 01 and early ZW191 data are incorporated into models.
Several models attribute roughly the high 20s per share to existing zani royalties and milestones alone, implying the current share price undervalues both the zani franchise and the broader pipeline.
Positive HERIZON GEA 01 results, with Ziihera showing statistically significant progression free survival benefits in first line HER2 positive gastroesophageal adenocarcinoma, support expectations that zani could become standard of care and expand into additional indications.
Early ZW191 dose escalation data, including an encouraging response rate and a potentially wider therapeutic window, are seen as validating the ADC platform and adding a second value driver beyond zani.

Bearish Takeaways

Bearish analysts, while raising targets, maintain more neutral ratings and question the durability of a royalty driven growth model beyond zani until there is greater visibility on additional partnered assets and deal terms.
There is caution that execution on the strategic pivot from traditional R and D biotech to royalty aggregator will require disciplined capital allocation and partner selection to sustain long term growth.
Some valuation frameworks embed meaningful success probabilities for pipeline expansion and new ADC programs, leaving downside risk if subsequent data sets fail to replicate the strength of the initial ZW191 readout.
Uncertainty around timing and magnitude of future milestone receipts and royalty ramps introduces potential volatility to near term revenue trajectories, which could weigh on multiples if clinical or commercial timelines slip.

What's in the News

Zymeworks announced positive topline Phase 3 HERIZON GEA 01 results for Ziihera (zanidatamab) in first line HER2 positive gastroesophageal adenocarcinoma, building on its existing Breakthrough Therapy, Fast Track, Orphan Drug, and accelerated or conditional approvals across the U.S., Europe, China, and other regions (Key Developments, Product Related Announcements).
The Board of Directors authorized a new share repurchase plan on November 18, 2025, allowing Zymeworks to buy back up to $125 million of its common stock, reinforcing capital return to shareholders (Key Developments, Buyback Transaction Announcements).
Under its prior buyback program announced August 1, 2024, Zymeworks has completed repurchases totaling 3,984,470 shares, representing 5.53% of shares outstanding, for $52.74 million as of November 4, 2025 (Key Developments, Buyback Tranche Update).
Preliminary Phase 1 data for ZW191, an ADC targeting folate receptor alpha, showed a 44% objective response rate across all evaluable patients and a manageable safety profile with no serious treatment related adverse events, supporting further development in advanced solid tumors (Key Developments, Product Related Announcements).
The company highlighted ZW191 at the AACR NCI EORTC Conference via an accepted poster presentation, emphasizing its differentiated ADC design, proprietary topoisomerase 1 payload, and potential to address a high proportion of ovarian and lung adenocarcinomas (Key Developments, Product Related Announcements).

Valuation Changes

Fair Value Estimate has risen slightly, moving from $34.20 to $34.50 per share, reflecting modestly higher expectations for long term cash flows.
Discount Rate has inched up from 6.99% to 7.03%, modestly increasing the hurdle rate applied to future earnings and partially offsetting valuation upside.
Revenue Growth has been revised upward, with the long term assumption increasing from approximately 18.9% to 19.5%, incorporating stronger contributions from Ziihera and ZW191.
Net Profit Margin has improved meaningfully in forecasts, rising from about 2.8% to 3.9%, signaling higher expected operating leverage as the royalty model scales.
Future P/E multiple has been reduced significantly, from roughly 601x to 429x, indicating lower reliance on multiple expansion and greater emphasis on fundamental earnings growth.

Diversified oncology pipeline, proprietary platforms, and global partnerships position the company for sustained revenue growth, earnings upside, and improved margins through a capital-light model.
Advancing clinical milestones, strong R&D productivity, and pharma collaborations increase royalty streams, stability, and long-term asset valuations.
Heavy reliance on milestone payments and early pipeline assets, combined with high expenses and rising competition, heightens risks to revenue stability, market share, and long-term profitability.

Catalysts

About Zymeworks

A clinical-stage biotechnology company, discovers, develops, and commercializes biotherapeutics for the treatment of cancer, and autoimmune and inflammatory diseases (AIID).What are the underlying business or industry changes driving this perspective?

The increasing global incidence of cancer and chronic diseases, driven by an aging population, is expanding the potential market for Zymeworks' oncology and biologic therapies, positioning its diversified pipeline (including ADCs like ZW171, ZW191, ZW251, and zanidatamab) for long-term addressable revenue growth as regulatory approvals, new indications, and commercial launches progress.
The advancing acceptance of personalized and precision medicine is accelerating investment and deal activity in antibody engineering, directly aligning with Zymeworks' core platforms (Azymetric™ and EFECT™), which have already attracted multiple high-value partnerships. This trend increases the probability of further milestone and royalty revenue, providing upside to earnings and supporting healthier net margins via a capital-light partnership model.
Zymeworks' strategic partnership and out-licensing approach with large pharmaceutical companies (e.g., Jazz, BeiGene, BMS, J&J) is generating significant near-term and long-term non-dilutive cash inflows, diversifying revenue streams and reducing the R&D burn rate, thus supporting better EBITDA margins and enhanced cash flow stability as the partnered assets advance.
Expected regulatory milestones and successful late-stage clinical readouts (notably the Phase III HERIZON-GEA-01 trial for zanidatamab) could trigger substantial milestone payments and sustained royalty streams, driving top-line revenue growth while exercising financial discipline to avoid proportionately increasing operating expenses-improving operating leverage and net income potential.
Ongoing demonstration of productivity from Zymeworks' proprietary antibody platforms and the progression of pipeline and partnered programs (evidenced by multi-asset clinical advancement and preclinical innovation) increases the likelihood of expanded future collaborations and transactions in an environment where large pharma seeks external innovation, elevating long-term asset valuations and supporting earnings growth.

Zymeworks Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Zymeworks's revenue will grow by 7.1% annually over the next 3 years.
Analysts are not forecasting that Zymeworks will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Zymeworks's profit margin will increase from -60.0% to the average CA Biotechs industry of 16.1% in 3 years.
If Zymeworks's profit margin were to converge on the industry average, you could expect earnings to reach $24.2 million (and earnings per share of $0.26) by about September 2028, up from $-73.7 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 97.3x on those 2028 earnings, up from -14.4x today. This future PE is greater than the current PE for the CA Biotechs industry at 15.5x.
Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 6.78%, as per the Simply Wall St company report.

Zymeworks Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Significant near-term and medium-term revenues are highly dependent on milestone payments and royalties from partnered assets (e.g., zanidatamab with Jazz, BeOne, and BeiGene), which exposes Zymeworks to the risk of partner execution, regulatory delays, or commercial underperformance-reducing top-line revenue and operating cash flow prospects if any milestones are missed or sales underwhelm.
The wholly owned pipeline is concentrated in early-stage assets (e.g., ZW171, ZW191, ZW251, and ZW1528 are only in Phase I or preclinical development), so any clinical or regulatory failures could eliminate future revenue streams, damage net margins, and heighten the risk of prolonged negative earnings.
Substantial R&D and operating expenses, though currently disciplined, are only offset by irregular milestone payments rather than recurring product sales-if expected milestones or royalties are delayed, Zymeworks may need to raise dilutive capital or cut R&D, impacting sustainable profitability and long-term shareholder value.
Intensifying competition from both established pharma and new entrants in antibody-drug conjugates and multispecific therapeutics, particularly as large players harness AI and next-generation technologies, threatens Zymeworks' competitive moat and could reduce future partnership opportunities, pipeline value, and eventual market share-pressuring revenue growth and valuation.
The international oncology and biologics drug reimbursement environment continues to tighten, with increased regulatory scrutiny on drug approval, pricing, and trial design; any adverse regulatory or payer action (e.g., price controls in the US/EU, stricter trial endpoints) could compress future royalty streams and reduce the earnings potential from both partnered and wholly owned assets.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $21.05 for Zymeworks based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $30.0, and the most bearish reporting a price target of just $12.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $150.9 million, earnings will come to $24.2 million, and it would be trading on a PE ratio of 97.3x, assuming you use a discount rate of 6.8%.
Given the current share price of $14.14, the analyst price target of $21.05 is 32.8% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

How well do narratives help inform your perspective?

Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Analysts Raise Zymeworks Target on Pipeline Progress While Weighing Risks and Valuation Changes