This High-Growth Biopharma Stock Just Got Some Great News

Zymeworks Inc. (TSX:ZYME)(NYSE:ZYME) just saw a top product candidate hit a milestone. This is a growth stock to hold onto into the 2020s.

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Zymeworks (TSX:ZYME)(NYSE:ZYME) is a Vancouver-based clinical-stage company focused on the development and commercialization of next-generation multi-functional biotherapeutics. The company currently has two lead products candidates: ZW25 and ZW49.

Shares of Zymeworks had climbed 11.4% week-over-week as of close on May 1. The stock was up 27% in 2019 thus far. In early January I explained why Zymeworks was one of my favourite growth targets to start the year. The company carries huge potential looking forward, and recent events show that it is progressing well with one of its top product candidates.

On April 15 Zymeworks announced that it had opened Phase 2 clinical trials for ZW25 in first-line HER2-expressing metastatic gastroesophageal cancers. ZW25 will continue to be evaluated in multiple expansion cohorts in the ongoing Phase 1 trial as a single agent in gastrointestinal, gynecological, and other HER2-expressing cancers, in combination with chemotherapy in breast and gastroesophageal cancers.

The market had somewhat of a delayed reaction to the good news, but Zymeworks stock surged into late April and now early May. The Phase 2 trial is part of “a two-part open-label study.” The primary objectives of the trial will be to confirm the safety, tolerability, and anti-tumour activity of ZW25 in combination with the global standard of care regimens. ZW25 has posted impressive results in Phase 1 trails so far.

A January 2018 paper out of MIT aimed to estimate clinical trial success rates. The study found that the median clinical trail durations are 1.6, 2.9, and 3.8 for trials in Phases 1, 2, and 3, respectively. The median time in the clinic ranged from 5.9 to 7.2 years for non-oncology trials. The median duration for oncology trials was 13.1 years. There is higher risk in oncology trials, and these consistently posted a lower approval rate.

This should give investors an idea of the kind of timeline we are looking at. Early results have been very promising, but Zymeworks is a stock for the patient growth investor. However, the company still carries solid value as it currently stands. The company boasts a deep pipeline of bispecific partnerships and assets.

In 2018 Zymeworks posted revenue of $53 million compared to $51.8 million in the prior year. This primarily consisted of non-recurring upfront fees, expansion payments, and milestone payments from Zymeworks’ licensing and collaboration agreements. As at December 31, 2018, Zymeworks had $200.2 million in cash and cash equivalents and short-term investments. Its research and development costs rose to $56.7 million compared to $41.7 in 2017. Investors should expect more aggressive investment into the next decade.

Zymeworks is back trading at the high-end of its 52-week range, but a flurry of positive news means the stock can challenge its all-time high of $30.36. The stock had an RSI of 74 as of close on May 1, putting it in technically oversold territory.

Zymeworks is a fantastic target for growth investors looking at the long term picture. Its product candidates carry multibillion-dollar potential if they make it to market, which is reason enough to jump in after the big news for ZW25.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned.

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