gk(CSAC2500) Fundamentals of Financial Accounting - Full-Time final

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Fundamentals of Financial Accounting (CSAC2500) - Full-Time Winter 2024 -Group 4 Project (Section 2) _______________________________________________________________________________________ Submitted to: Prof. S. Fahmida Habib Ratio Analysis of Zaymeworks Inc. Group Members Details Sr.NO Name Student ID 1. Kiran Chetan Kumar Gohil 220953246 2. Viraj Dhrumeshbhai Amin 220987608 3. Krinali Kamleshbhai Patel 220924775 4. Nese Kaplan 220169330 Company’s Selected The team has decided to consider and evaluate the “Zaymeworks Inc.” as our group project, we believe that this project holds a great potential and will bring better understanding of the accounting concepts. Context  Company’s Overview  Strength and Weakness  Competitors and Competing Strategies  Ratios  Trend Analysis with graphs (Horizontal and vertical analysis)  Recommendations  Overall Performance and Future Potentials  Appendix

ABOUT ZAYMEWORKS INC:  Zymeworks Inc. is a publicly held biotechnology company based in Vancouver, British Columbia, that develops protein therapeutics for the treatment of cancer as well as for autoimmune and inflammatory diseases. Founded in 2003 by Dr. Ali Tehrani and Dr. Anthony Fejes in Vancouver, Canada.  Zymeworks Inc. Is a publicly traded company, so its ownership is divided among various shareholders who hold shares to company’s stock.  The average employee at Zymeworks makes $129,924 per year, which is quite competitive for its location and industry. In comparison, some of its highest paying competitors, like Gilead Sciences , Vertex Pharmaceuticals , and Cubist Pharmaceuticals , pay $99,828, $95,952, and $91,725, respectively.  Some of the largest institutional shareholders of Zymeworks Inc. Include fidelity management &research company, The Vanguard Group, and BlackRock inc. These institutions investors collectively hold a significant portion of the company’s outstanding shares.  Additionally, Zymeworks Inc’s executive officers and board members also own a portion of the company's stock, aligning their interests with those of the shareholders. This ownership stake can incentivize the company's leadership to work towards the long-term success and growth of the business.  The Company’s complementary therapeutic platforms and fully integrated drug development engine provide the flexibility and compatibility to precisely engineer and develop highly differentiated antibody-based therapeutic candidates. Zymeworks engineered and developed zanidatamab, a HER2-targeted bispecific antibody using the Company’s proprietary Azymetric™ technology.  Zymeworks has entered into separate agreements with Bei Gene, Ltd. (Bei Gene) and Jazz Pharmaceuticals Ireland Limited (Jazz), granting each exclusive rights to develop and commercialize zanidatamab in different territories. Zanidatamab is currently being evaluated in multiple global clinical trials as a potential best-in- class treatment for patients with HER2-expressing cancers.  Zymeworks is rapidly advancing a deep pipeline of product candidates based on its experience and capabilities in both antibody drug conjugates and Mult specific antibody therapeutics across multiple novel targets in indications that represent areas of significant unmet medical need. In addition to Zymeworks’ wholly owned pipeline, its therapeutic platforms have been further leveraged through strategic partnerships with global biopharmaceutical companies.  Overall, Zymeworks Inc. Is owned by a diverse group of institutional investors, company executive s, and individual shareholders who have invested in the company through the purchase of its stock. HISTORY OF ZAYMEWORKS INC.  Zymeworks developed a proprietary platform called Azymetric™ , which enables the creation of bispecific antibodies. These antibodies can simultaneously target two different proteins, enhancing therapeutic efficacy.  2003: Zymeworks is founded by Dr. Ali Tehrani and Dr. Surinder Sall.  2012: Zymeworks collaborates with Merck to develop bi-specific antibodies for the treatment of cancer.  2014: Zymeworks enters a strategic Partership with Eli Lilly to develop bi specific antibodies.

 2017: The company goes public on the New York stock Exchange under the ticker symbol ZYME. Dr. Sacks has served as a member of our Board of Directors since August 2017. Dr. Sacks is a trained oncologist, and has served as the Chief Medical Officer of Harpoon Therapeutics, Inc.  2018: Mr. Dex joined Zymeworks in September 2017, and currently serves as our Vice President, Legal and Corporate Secretary. Mr. Dex brings 25 years of diverse legal experience to Zymeworks, having worked in private practice at prominent law firms in both the U.S. and Canada, in-house with Avigilon Corporation (a Motorola Solutions company) and the New York Public Library, and with the U.S. federal district court for the Eastern District of Pennsylvania. Mr. Dex received a J.D. from the University of Pennsylvania Law School and a B.A. from Brown University. He is a member of the bars of both New York and British Columbia.  2019: Zymeworks receives FDA approval for a phase 1 clinical trial of its lead candidate, ZW25, in patients with HER2- expressing cancers. Dr. Josephson joined Zymeworks in April 2019 and currently serves as our Chief Medical Officer. Prior to joining Zymeworks he was a Vice President in Clinical Development at Seattle Genetics where he worked on multiple early and late-stage programs from 2013-2019, including leading the first line approval of ADCETRIS® in Hodgkin Lymphoma. From 2002-2013  2020: Zymeworks announces a collaboration with Daiichi Sankyo to develop bi-specific antibodies targeting cancer. Dr. Neu has served as a member of our Board of Directors since March 2020. Dr. Neu was a Partner at Baker Bros. Advisors LP, a registered investment adviser, from April 2004 until January 2021.  2021: Dr. Wilde has served as VP of Clinical Operations since March 2021. Dr. Wilde is a global clinical research management professional with over 25 years’ experience in Clinical Development, including Oncology and the development of cell therapy products.  2022: Mr. Galbraith has served as Zymeworks’ Chair & CEO since January 2022. Mr. Galbraith has over 35 years’ experience in biotechnology and venture capital having acted as an executive, director, investor as well as an advisor to companies in the biotechnology, medical device, pharmaceutical and healthcare sectors across North America and the UK in the growth of both private and public companies from an early stage through regulatory approval and commercialization. Throughout its history, Zymeworks has focused on leveraging its proprietary Azymetric and EFECT platforms to develop novel therapeutic candidates with the potential to improve outcomes for patients with cancer and other diseases.

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STRENGHTS AND WEAKNESS OF ZYMEWORKS INC. Strength Weakness Financial Stability: Evaluate the company's financial statements to determine its profitability, liquidity, and overall financial health. Financial Challenges: Identify any financial issues, such as high debt levels, low profitability, or cash flow problems. Market Position: Assess the company's position in the market, considering factors such as market share, brand recognition, and competitive advantages. Market Challenges: Assess the impact of competition, market saturation, or changing consumer preferences on the company's performance. Innovation and Technology: Identify any innovative products, services, or technologies that contribute to the company's competitive edge Technological Gaps: Determine whether the company is lagging in terms of technology, innovation, or digital transformation. Product or Service Portfolio: Examine the diversity, quality, and uniqueness of the company's products or services. Brand Perception: Examine how the brand is perceived in the market and whether there are any negative associations. Operational Efficiency: Evaluate the effectiveness of the company's operations, including supply chain management, production processes, and cost efficiency. Operational Inefficiencies: Identify any weaknesses in the company's operations, supply chain, or production processes. Customer Loyalty: Consider the level of customer satisfaction and loyalty through reviews, surveys, or customer feedback. Customer Complaints: Evaluate customer feedback and reviews to identify common issues or complaints. Strategic Partnerships: Analyse any strategic alliances or partnerships that may enhance the company's capabilities. Dependency on Suppliers or Customers: Assess whether the company is overly dependent on a few suppliers or customers. Competitors and Competing Strategies Zymeworks Main Competitors Are Gilead Sciences, Vertex Pharmaceuticals, And Cubist Pharmaceuticals. Area Zymeworks Novo Cure Business focus: Zymeworks is known for its work in the field of biopharmaceuticals, particularly in the development of antibody-based therapeutics. Novo Cure is known for its innovative oncology therapies, particularly its Tumer Treating Fields (TTFields) technology. Product pipeline: Assess the diversity and stage of development of Zyme works' product pipeline, including any key candidates in clinical trials. Assess Novo Cure's product pipeline, with a focus on the development stage and therapeutic areas. Technological Platforms: Understand the technological platforms Zyme works employs in drug discovery and development. Explore the unique technology behind TTFields and how it differentiates Novo Cure's approach. Strategic Partnerships: Investigate Zyme works' partnerships, collaborations, or licensing agreements and their impact on its strategic position. Investigate any collaborations or partnerships that Novo Cure has established and their significance.

Financial Performance: Examine recent financial statements for insights into Zyme works' revenue growth, profitability, and financial stability. Examine Novo Cure's financial performance, considering revenue growth and profitability. Comparison Based on Financials:  The sales of Novo cure are higher of Zaymeworks Inc., mainly because Novo cure have a strong hold in USA and compete with Novo cure in Canada. The annual sales of Zyme works Inc are 412$ millions and NoVo cure has 538 $ million.  The net earnings to Sales ratio of Zaymeworks Inc. is better compared to Novo Cure. The net-earning to sales of Zyme works Inc. is 30.14% and Novo cure. is -29.45%. .  The total assets of Novo cure are 1073526 while Zaymeworks Inc. Has 544706 so it's almost half of the novo cure. Novo cure employed 1326 Zyme works Inc. With 450. The same is reflected in number of stores Novo cure has more numbers of stores as compared to Zymeworks Inc.  The earning price per share of Novo cure is almost half of the Zymeworks Inc., Novo Cure have 0.88 and zyme work Inc. have 1.91.  The market cap of Novo cure is 1.599$ billion and Zyme works Inc. have 780.52$ Million. Ratio and Trend Analysis For the project, we have considered the following ratios: Sr.no Particulars 2022-23 2021-22 Increase/Decrease a) Test of Profitability: Net Profit Margin Ratio 30.14 -12.53 40.47% Return on equity Ratio 25.09 -39.83 162.61% Return on Assets Ratio 17.43% -29.04% 159.99% b) Test of Liquidity: Cash ratio 5.15% 3.52% 46.31% Current ratio $5.70 $4.01 42.14% Quick Ratio 5.66% 3.73% 51.75% c) Test of Solvency: Interest coverage Ratio 11.41% -412.55% 2.77% Debt To Equity Ratio 0.32 0.56 -42.86% d) Market tests: Earnings per share Ratio 1.91% -4.13% 146.49% Price Earnings Ratio 6.13% -2.85% 315.44% A) Test of profitability:  Net profit margin:

Net profit margin is the percentage of revenue remaining after deducting all operating expenses, interest, taxes from company’s total revenue. Any profit margin ratio above 10% is considered as a good net profit margin ratio and highest being 30%. Zyme works Inc has around –12,53 as net profit margin ratio which is very bed.  Return on equity Ratio: ROE is calculated by dividing a company's net income by its shareholders' equity. Generally, ROE is 20% or high for Company. In case of Zymeworks Inc., the ROE is around –39.83% which is way lower than the usual ROE. However, the ROE for the FY 2022-23 is positive due to sales of shares and it was 25.09 which is almost higher than the usual ROE.  Return on Assets Ratio: Return on Assets which is known as total return on assets, helps investors understand the return a company generates return on its assets. Higher the return on assets ratio, the more efficient a company’s management is in generating value for its investors. Usually, ROA for a Company is between 5-20 %. Where a Company is generating ROA of more than 20 %, Signals attractive investment opportunities. Here Zymeworks Inc. has –29.04 % in AY 2021-22 and 17.43% in AY 2022-23 B) Test of Liquidity:  Cash ratio: The Cash Ratio is a liquidity ratio that measures a company's ability to cover its short-term liabilities with its cash and cash equivalents. Cash ratios hear is 5.15 for 2022-23 and 3.52 for 2021-22. This indicates that the company has more than twice the amount of cash and cash equivalents compared to its current liabilities.  Current ratio: A current ratio will be calculated to find out whether the Company will be able to repay the current liabilities with the current assets or not. A good current ratio is anywhere between 1.5 to 2. However, in case of Zymeworks Inc., the current ratio is 5.70 in FY 2022-23 and 4.01 in FY 2021-22. It can be said that Zymeworks Inc. must increase in current ratio because if the liabilities increase due to inflation, then it might not be able to repay with the now available current assets.  Quick ratio: Quick ratio is a more conservative one to decide whether the liquid cash can be used to repay the current liabilities or not. Quick ratio does not involve inventories because it might take some time to liquidate the inventories. An ideal quick ratio is 1:1. However, Zymeworks Inc. must work on the quick ratio since liquidity position will be affected. This might also be the reason for repurchasing of shares from a market at a premium . C.) Test of Solvency:  Interest coverage Ratio: The times interest earned ratio is a company's earnings before interest and taxes divided by a company's interest payable on bond and debt obligations. It is often referred to as the interest coverage ratio, the times interest earned ratio depicts a company's ability to cover the interest owed on debt obligations. An organisation that has at times interest earned ratio greater than 2.5 is considered as acceptable risk. Zyme works Inc. has around 11.41% which may be due to high earnings. The Company is doing good in this area and can continue to maintain the same.  Debt to Equity ratio :

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The Debt- Equity ratio is one of the financial ratios that compare the owner's equity or capital to debt, or funds borrowed by the company. Sometimes it is referred to as a financial leverage ratio. Usually, a ratio of less than 0.40 is considered strong, with a 0.40 to 1.0 as satisfactory and more than 1.0 is considered weak. Zymeworks Inc. has debt equity ratio of o.32 in FY 2022-23 and 0.56 in FY 2021-22. D)Market Test:  Price Earnings Ratio: P/E ratio is the ratio of the share price of a company’s stock to its earnings per share (EPS). Most FMCG companies have P/E ratio between 25 to 50. Thus, Zymeworks Inc. also has P/E ratio of 6.31 in FY 2022-23 and –2.89 in FY 2021-22. This P/E ratio makes the company not attractive for Investment in secondary market sue to which there is a high chance of price drop.  Earnings per share Ratio: Earnings Per Share (EPS) is a financial metric that represents the portion of a company's profit attributable to each outstanding share of common stock. It is a key indicator of a company's profitability and is widely used by investors to evaluate a company's financial performance EPS of Zyme works Inc. For 2022-23 is 1.91 it means that the company earned $1.91 per outstanding share during that fiscal year and similarly for 2021-22 EPS is –4.13 it indicates a loss of $4.13 per outstanding share during that fiscal year. Recommendation of Change: The net profit margin has increased by 40.47%, Return on Equity increased by 162.61% which is due to sales of shares from market and return of assets has increased by 159.99%. In case of liquidity tests, cash ratio increased by 46.31%, current ratio increased by 42.14%, quick ratio increased by 51.75%. In case of tests of solvency, times interest earned increased by 2.77%, debt to equity ratio decreased by 42.867% and in case of Market tests P/E ratio increased by 315.44% and EPS increased by 146.49%. It is to recommend to the Company that ideal current ratio is 2:1, however the Company has ratio is more than 1. The Company must decrease the current assets in order to be in a safe situation in case of liquidation. Though the quick ratio is also way less compared to a good quick ratio i.e. 1:1, Zymeworks Inc. Has more ratio. Even though the earing per share is less, the company is aiming for a higher market price which is lucrative for any investor. The same technique of re-investing is now a day used for attracting any investor. Overall Performance and Future Potentials: Zymeworks Inc. has been growing earnings at an average annual rate of 17%, while the other company saw earnings growing at 7.63% annually. Revenues have been growing at an average rate of 527% per year. Zyme works Inc. return on equity is 162.61%, and it has net margins of 30.14%. During its 2023 fiscal year, regained full development rights for zanidatamab zovodotin (ZW49) with plans to conduct a Phase 2 study in NSCLC in 2024. Based on current operating plans and including the recent private placement with EcoR1 Capital, Zyme works Inc. expect to have cash resources to fund our R&D programs and business operations into the second half of 2027,” In the first half of Fiscal 2024, Zyme works Inc. look forward to providing further updates on their collaboration agreements and our progress towards regulatory filings and potential approvals, new clinical studies, and future data releases, including the anticipated announcement of top-line clinical data from the ongoing pivotal study, HERIZON- GEA-01, in first line HER2-positive GEA. Zyme works Inc.’s scientific strategy supports our goal to build a broad and differentiated product pipeline of ADCs and Mult specific antibody therapeutics (MSATs) to be developed from our technology platforms, targeting five new INDs by 2026 (‘5 by 5’ program). We expect to submit INDs for ZW171 and ZW191 in 2024, and INDs for ZW220 and ZW251 in 2025. During 2024, Zyme works Inc. expect to nominate the final ‘5 by 5’ product candidate for preclinical development with an expected IND filing in 2026.

Competitive Advantage: Zymeworks is developing a multifunctional pipeline of novel biotherapeutics. These include antibody-based therapeutics, antibody-drug conjugates (ADCs), and other innovative approaches. This diversity allows them to address a wide range of diseases and unmet medical needs Zymeworks has clearly differentiated products in the market. This distinction enables them to command a slight price premium compared to competitors in the Biotechnology & Drugs industry.The company maintains a strong financial position, with cash resources of approximately $455 million as of December 31, 2023. This financial stability allows them to invest in research and development (R&D) and innovation. Growth plans: The company confirmed its prior guidance in 2023 operating cash burn, estimated to be between $90 million and $120 million  Their cash runway is projected to extend through at least 2026, and potentially beyond.  Zymeworks presented 11 posters at the American Association for Cancer Research (AACR) meeting, showcasing their preclinical antibody-drug conjugate (ADC) and Mult specific antibody therapeutics (MSAT) pipeline.  They also announced an oral presentation of pivotal data from the Phase 2b study of zanidatamab in previously treated HER2-amplified biliary tract cancers (BTC) at the upcoming Annual Meeting of the American Society of Clinical Oncology (ASCO).  Zymeworks aims to make a meaningful impact for patients through innovation while delivering results for stockholders.  They continue to work on the development and commercialization of zanidatamab in collaboration with Jazz Pharmaceuticals and Bei Gene.  The company prioritizes the development of their early-stage pipeline of ADC and MSAT product candidates under their ‘5 by 5’ strategy. This strategy aims to have five novel therapeutics in the clinic by 2027.  In April, Zymeworks presented eleven abstracts at the AACR meeting, highlighting new preclinical data across their early-stage pipeline.  Zymeworks’ scientific team and technology platforms demonstrate the capability to produce differentiated medicines for patients with difficult-to-treat cancers.  Their focus on next-generation ADCs and MSATs represents important steps in building an emerging product portfolio with wholly owned opportunities for future growth. Appendix:  The group consists of four members and each member was assigned a certain market  Professionalism, Spelling, Format and Grammar of the report  This Group project consisted of 4 members and each member was assigned a certain task to conduct their research and analysis.  I Kiran Gohil have taken the responsibility of the all the professional, spelling and other formatting part including the competitor part along with managing of everything.  Second, it was assigned to Viraj to conduct the entire task related to description, strength and weakness of the organization.  Thirdly, it was decided to assign Kiran Chetan Kumar Gohil to determine the entire ratio and its computation part along with the excel sheet preparation, horizontal and vertical anayalsis and graphs for the same.  Then, Nese Kalpan was assigned the responsibility of identifying the trend in the ratios and discusses its impact on the corporation.  Krinali Patel was tasked with investigating the ratios areas and indicating a challenge along with this she has also worked on the overall performance if the company and its potential in the future.

 Overall, the task was evenly distributed, and each team member gave a precise and timely contribution of their results. We were able to explore and compare the Zyme works Inc. with its competitors through our teamwork and solitary efforts, which improved our knowledge and comprehension of the topic. References: https://ir.zymeworks.com/ SEC Filings | Zymeworks Inc. https://en.wikipedia.org/ https://ir.zymeworks.com/financial-documents/sec-filings https://dcf.fm/blogs/blog/zyme-history-mission-ownership

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