Jazz Pharmaceuticals, which has a goal of bringing at least five novel medicines to the market by the end of the decade, is adding another contender to its pipeline by striking a deal for a Zymeworks drug in pivotal testing as a treatment for two cancers of the digestive system.

According to the terms of the agreement announced Wednesday, Jazz is paying Zymeworks $50 million up front for exclusive rights to develop and commercialize the drug, zanidatamab, throughout the world except for certain Asia-Pacific markets where BeiGene has licensed rights to the drug. The deal comes ahead of a data readout expected later this quarter. Depending on the outcome of that readout and the progress of the drug, Jazz could end up paying Zymeworks up to $1.76 billion more.

Zanidatamab is a bispecific antibody, a type of therapy designed to bind to two different targets. Typically, such drugs simultaneously bind to one target on a cancer cell and another target on an immune cell. Zymeworks designed its drug to bind to two distinct parts of HER2, which the company calls biparatopic binding. This approach enables the drug to bring multiple mechanisms of action that the company says could address cancers that are resistant to HER2-targeting drugs such as Roche’s Herceptin.

The Zymeworks drug is currently being evaluated in a Phase 3 clinical study testing it as a second-line treatment for biliary tract cancer (BTC) that expresses HER2. There are no FDA-approved HER2-targeting therapies in this type of cancer. A separate Phase 3 clinical trial is testing zanidatamab as a first-line therapy for HER2-positive gastroesophageal adenocarcinoma (GEA).

Additional payouts from the Jazz deal are tied to clinical trial progress. If Jazz decides to continue the collaboration following the readout of preliminary data from the BTC study, it must pay Zymeworks an additional $325 million. Regulatory progress could bring up to $525 million in additional milestone payments. If the drug reaches the market, Jazz could pay Zymeworks up to $862.5 million more. Zymeworks is also eligible for royalties from Jazz’s sales of the product. Rob Iannone, Jazz’s executive vice president and global head of research and development, said in a prepared statement that the Zymeworks drug offers “the potential to transform the current standard of care in multiple HER2 expressing cancers.”

“This agreement reflects Jazz’s strategic focus on opportunities where we can not only apply advanced technologies to address critical unmet patient needs, but where we can also leverage Jazz’s existing integrated capabilities and global infrastructure to commercialize efficiently,” he said.

For Zymeworks, the Jazz deal gives the company some financial breathing room as well as flexibility to turn its focus to another drug in its pipeline, zanidatamab zovodotin, previously known as ZW49. Part of a class of cancer therapies called antibody drug conjugates (ADCs), this drug targets cancer cells with the zanidatamab antibody, which is chemically linked to a toxic drug payload. At the annual meeting of the European Society for Medical Oncology last month, Zymeworks reported encouraging preliminary results from a Phase 1 study enrolling patients with a wide range of HER2-expressing cancers. In addition to posting safety and tolerability data, the company reported an objective response rate of 31% and a disease control rate of 72%.

With zanidatamab zovodotin, Zymeworks has a drug with a chance to compete against Enhertu, an ADC from AstraZeneca and Daiichi Sankyo that won a landmark regulatory nod in August as the first FDA-approved therapy for treating breast cancers that express low levels of HER2. Zymeworks contends its antibody’s biparatopic design enables it to address a range of HER2 expression levels from low to high, according to an investor presentation. The company aims to bring zanidatamab zovodotin into a potential registrational clinical trial by 2025. But Zymeworks does not intend to develop this ADC on its own. It’s looking for a partner for that drug before this pivotal study starts, the presentation said. Zymeworks also aims to land additional partnerships for its other drug candidates, both ADCs and multi-specific antibodies.

The Jazz/Zymeworks agreement is the second bispecific antibody pact announced this week. On Monday, Gilead Sciences struck a deal with MacroGenics, gaining an option to license to that biotech’s drug in early clinical development for blood cancers. The MacroGenics drug, MGD024, is designed to bind to the CD123 protein on cancer cells and the CD23 protein on T cells. The economics of the deal are similar to those of the Jazz/Zymeworks agreement, with Gilead paying $60 million up front and up to $1.7 billion more depending on the progress of the molecule.

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