Zymeworks Mulls $733 Million Bid from All Blue Capital

Vancouver, B.C.-based Zymeworks received an unsolicited, non-binding acquisition offer from global investment firm All Blue Capital. All Blue is offering $10.50 per share for a total of $773 million in cash.

Zymeworks focuses on next-generation multifunctional biotherapeutics, with an initial focus on cancer. Its lead product candidate is zanidatamab, a HER2-targeted bispecific antibody the company is developing leveraging its proprietary Azymetric technology platform. The drug is currently in Phase I, Phase II and registration-enabling trials as a best-in-class treatment for HER2-expressing cancers. These include biliary tract, gastroesophageal adenocarcinomas and others.

The company’s second candidate is ZW49, also a HER2-targeted therapy, although in this case, it is an antibody-drug conjugate (ADC), utilizing the company’s Azymetric and ZymeLink technology platforms. The drug is in a Phase I trial for HER2-expressing cancers.

In the letter from All Blue sent to Zymeworks on April 28, All Blue stated, “All Blue proposes to acquire 100% of the outstanding common shares of the Company for $10.50 per share in cash. The All Blue Group has access to sufficient equity capital to finance the proposed acquisition and related fees and expenses. In addition, All Blue has entered into discussions with potential co-investors and financial partners that have expressed interest in providing financing for the proposed acquisition. Accordingly, our proposal does not include any financing contingency.”

They then zinged the company with their rationale, writing, “We believe that the Company has suffered from severe value erosion due to a number of serious missteps by an unfocused leadership with no clear strategy for improving performance. Over the past 12 months, stockholders have witnessed the Company miss a number of important deadlines publicly announced in press releases, endured poorly executed earnings calls and experienced confusing and damaging public messaging, all of which has led to a significant loss of credibility and investor confidence in the Company and its management team.”

In January 2022, Zymeworks appointed Kenneth Galbraith as chair and chief executive officer, who succeeded co-founder Ali Tehrani, Ph.D. Not long after coming on board, Galbraith announced plans to cut a quarter of the company’s workforce as part of a “streamlined” R&D strategy. It also raised $100 million in a public offering in the same month, pricing shares at about $8. That was dramatically lower than the $50 per share the company had been trading for in early 2021. The goal was to raise about $100 million.

All Blue Capital is based in Dubai and presently owns about 5.5% of Zymeworks’ shares. Other investments include Pinterest, SpaceX, Peloton and Lyft.

According to a Reuters report, the company previously shopped for buyers with no bites. After the report, company shares popped by more than 45% in after-market trading.

In Zymeworks' fourth-quarter and year-end 2021 financial report on Feb. 24, the company noted that its revenue was primarily due to non-recurring upfront fees, expansion payments or milestone payments from collaboration and licensing deals, including payments for R&D support. For the year, it reported $26.7 million, which included an $8.0 million developmental milestone from BeiGene, $8.0 million from Janssen, a Johnson & Johnson company, for two development milestones, $5 million from Iconic for partner revenue and $5.7 million in R&D support under cost-sharing arrangements from its partners.

R&D expenses for the year were $199.8 million, up from $171.2 million the year before. The increase was associated with higher salary and benefit expenses and additional headcount, as well as the costs of the zanidatamab clinical trials.

Zymeworks indicated the board will “carefully review the proposal to determine the course of action that it believes is in the best interest of the Company and all Zymeworks shareholders.”