Is Zymeworks Stock A Buy?

Zymeworks Inc (NYSE:ZYME) is a biotechnology company that develops protein therapeutics to treat cancer, along with autoimmune and inflammatory diseases. It uses a proprietary molecular modeling platform to optimize protein structures. It’s a promising medical technology in clinical stages of trials to determine efficacy.

Artificial intelligence (AI) is the future of technology for a lot of reasons: it exponentially increases overall productivity and quality, while reducing overhead and boosting research and development.

Much like computers and the internet allowed companies to far surpass analog operational efficiency, AI enables automation that could certainly inevitably boost market caps.

Being in the right market at the right time isn’t enough though, so is Zymeworks stock a buy? The answer whether it can leverage its cures and technologies to beat the market lies in its financials and business strategies.

Zymeworks Treats Illness Via AI Modeling

Zymeworks is a biotechnology company using an AI-backed molecular modeling platform to test and develop therapeutic treatments at a fast pace. It was founded in 2003 and is based in Vancouver, Canada with an initial focus on cancer treatments.

Its Zanidatamab is in clinical trials around the world for HER2-expressing cancers, like breast cancer and other tumors. It also has a second candidate, which is an HER2-targeted antibody drug conjugate (ADC) in earlier Phase 1 trials.

The company’s pipeline is developed using its proprietary Azymetric and ZymeLink platforms. This allows it to drastically reduce testing times through intensive computer modeling that can somewhat predict outcomes in clinical trials.

The FDA fast-tracked its leading candidate, and if it proves effective, the company will have revolutionized cancer treatment.

But just because its treatment works doesn’t necessarily mean the company is a Buy. 

Is Zymeworks Stock A Buy?

Zymeworks stock has recently reached a market capitalization of between $2 billion and $2.25 billion.

That makes a full recovery in valuation from when it dipped alongside the rest of the market – a correction that shaved 50% off its value. Still, the 52-week low of $20.33 had a slow recovery that didn’t pop back up until September.

But it did rebound in spite of R&D spending increasing to $53.5 million in the third quarter 2020. Its revenue also dropped from $7.9 million in the same quarter of the prior year to $2.6 million. Operational expenses also increased due to the pandemic.

Still, the company has a pipeline many bulls believe will pass clinical trials in the United States, Canada, Europe, and the Asia-Pacific region. This means it could be a value Buy for investors, even at its recovered market cap. At the very least it offer upside optionality, much like a call option.

The company also has $8.6 billion worth of agreements with major pharmaceutical companies like Merck (MRK) to assist in researching efficacy of new antibody treatments.

COVID-19 aside, cancer is still the leading cause of death around the world. Developing new treatments is a high priority, and Zymeworks could be sitting on a miracle cure factory that adds decades to the average human’s lifespan.

It does carry risks though.

Could Zymeworks Share Price Tumble?

Although it shows a lot of promise, Zymeworks operates in a competitive and expensive industry. And it’s bleeding cash while pushing to generate enough revenue to expand.

It faces exponential gains in the long term, but short-term prospects could be limited, especially as the economy enters a shaky 2021.

The company’s small size means it will need to depend on bigger partners like Merck (MRK) for long-term contracts to gain revenue. This could limit its growth potential as large healthcare companies eye its proprietary technology for their own internal use.

If proven effective, even the U.S. and Canadian governments could be interested in a takeover. Efficacy testing in clinical trials is a lengthy process, and this technology could optimize it to shorten lead times.

Curing cancer is great, but it may even be possible that these AI models solve everything from diabetes and heart attacks to mental health issues and more.

The market would be a much safer place with healthcare more cheaply and readily available to the masses. But that depends on whether biotechnology companies like Zymerworks license their technology to government agencies that so desperately need them.

Otherwise, they’re working for their own competition.

Will Zymeworks Competitors Eat Its Lunch?

Zymeworks is on the bleeding edge of healthcare technology, but it’s not alone.

Companies like Apogenix GmbH, Complix, Apitope, Minerva Biotechnologies, and Immune Therapeutics (IMUN) have similar goals. However, their treatments aren’t the core of the company’s business model – it’s the technology.

This means it’s also competing in the general pharmaceutical and healthcare markets with the very giants it’s assisting.

At its core, Zymeworks’ platform boils down to an R&D company. Once it achieves widespread regulatory acceptance, its revolutionary cancer treatments are just proof of a much bigger concept.

This means it’s going to gain the attention of companies with big pockets, like Merck (MRK) and Johnson & Johnson (JNJ).

Even governments will be interested in AI-driven molecular modeling, which puts a big target on ZYME stock’s back to be bought up by acquisitive sharks.

Is Zymeworks Stock A Buy? The Bottom Line

Zymeworks is a growing biotechnology company with a proprietary AI platform that enabled it to develop two cancer treatment candidates. Cancer causes more deaths than any viral infection, so this could be a boon to mankind. While this sounds like a revolutionary breakthrough, the cancer treatment is just the tip of the iceberg.

The company’s real bread and butter are its proprietary AI-driven molecular models. This high technology drastically reduces R&D time, and the company is betting all its chips on the two candidates it currently has in global clinical trials for treatments of specific cancers.

Should they prove successful, this company will be a darling of the pharmaceutical industry for the next decade and can easily outperform the general market. 

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.