Targeted Biologic Therapies Will Serve An Aging World

Key Takeaways

• Proprietary antibody and ADC platforms, strong partnerships, and AI-driven discovery position Zymeworks for compounding growth in targeted therapies and market expansion.
  
• Multiple high-value assets, strategic deals, and efficient development create sustained upside, superior returns, and resilience in a consolidating biopharma landscape.
  
• Heavy reliance on uncertain external partnerships, early-stage pipeline risks, regulatory and market pressures, and funding constraints undermine Zymeworks' long-term growth and stability.

Catalysts

A clinical-stage biotechnology company, discovers, develops, and commercializes biotherapeutics for the treatment of cancer, and autoimmune and inflammatory diseases (AIID).

• Analyst consensus expects international approvals and commercialization of zanidatamab (Ziihera) to drive robust milestone and royalty revenues, but this view likely understates the potential for outsized, durable cash flows and margin expansion as long-term survival data, label expansions, and market penetration allow Zymeworks and its partners to dominate multiple HER2+ cancer markets well beyond current projections.
  
• While consensus sees the near-term advancement of ZW251 as an important growth driver, the market may be underestimating Zymeworks' ability to systematically advance multiple proprietary ADC assets on accelerated timelines due to strong preclinical-to-clinical translation, allowing for rapid pipeline expansion, follow-on indications, and a compounding effect on revenue growth and R&D leverage.
  
• The company's deep portfolio of wholly owned, innovative multispecific antibodies and ADCs-supported by computational and AI-driven discovery capabilities-sets up Zymeworks to benefit disproportionately as the global shift toward targeted and personalized therapies accelerates, creating compounding revenue streams from multiple high-value, first
• and best-in-class assets targeting large, underserved patient populations.
  
• Zymeworks' differentiated, validated platform technology and proven partnership model are poised to capture significant upside from the continued rise in global biopharma R&D spending and the industry's push for external innovation, making the company a magnet for new licensing and co-development deals that could drive repeated, non-dilutive capital infusions and sustained top-line growth.
  
• As biologics and antibody therapeutics take a larger share of drug approvals, Zymeworks' best-in-class bispecific/multispecific and ADC platforms, combined with an attractive capital allocation policy-including share buybacks-give it a structural advantage to deliver superior return on invested capital, long-term earnings power, and risk-adjusted shareholder returns as the sector consolidates and M&A activity intensifies.

Zymeworks Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Zymeworks compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Zymeworks's revenue will grow by 22.7% annually over the next 3 years.
• Even the bullish 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 17.2% in 3 years.
• If Zymeworks's profit margin were to converge on the industry average, you could expect earnings to reach $38.9 million (and earnings per share of $0.42) by about August 2028, up from $-73.7 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 86.3x on those 2028 earnings, up from -14.4x today. This future PE is greater than the current PE for the CA Biotechs industry at 16.8x.
• 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

• Zymeworks' business model is heavily reliant on fluctuating milestone and royalty revenues from external partnerships rather than consistent product sales, exposing their future revenues and earnings to unpredictable timing and the risk that partners could delay, discontinue, or deprioritize asset development if products underperform or development costs soar.
  
• Most of Zymeworks' internal pipeline remains in early clinical (Phase I) or preclinical stages, with only zanidatamab reaching conditional approval; this exposes the company to substantial clinical and execution risk, as failures or delays in their limited lead assets could sharply reduce projected revenue growth and threaten long-term profitability.
  
• Escalating regulatory scrutiny and payer resistance to high-cost biologics in the US, Europe, and China could restrict market access, limit reimbursement, and compress net margins, especially as Zymeworks' success depends on therapies that may be viewed as only incremental improvements over established treatments.
  
• Increased competition and consolidation within the pharmaceutical industry imperil Zymeworks' negotiating power, meaning future partnership terms could be less attractive and peer innovation may render Zymeworks' technology platforms obsolete, which would directly pressure both revenue and net margins.
  
• Capital-intensive R&D requirements combined with rising interest rates and a tighter fundraising environment could force Zymeworks to raise dilutive capital or cut promising research, undermining cash resources and reducing long-term earnings potential, particularly since much of their cash runway is predicated on uncertain future milestones.

Valuation

• The assumed bullish price target for Zymeworks is $30.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Zymeworks's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• 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 bullish analysts, you'd need to believe that by 2028, revenues will be $227.1 million, earnings will come to $38.9 million, and it would be trading on a PE ratio of 86.3x, assuming you use a discount rate of 6.8%.
• Given the current share price of $14.1, the bullish analyst price target of $30.0 is 53.0% 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.