Zealand Pharma A/S

CSE:ZEAL

Earnings Call Transcript 2022-Q3

[Operator]

Good day, and thank you for standing by. Welcome to Zealand Pharma Results for Third Quarter 2022 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Anna Krassowska. Please go ahead.

[Anna Krassowska, executive]

Thank you, operator. Welcome, and thank you for joining us today to discuss Zealand's third quarter results for 2022. I'm Anna Krassowska, Vice President of Investor Relations and Corporate Communications at Zealand.

With me today to review the items on Slide 2 are the following members of Zealand's management team. Adam Steensberg, President and Chief Executive Officer; Henriette Wennicke, Chief Financial Officer; and David Kendall, Chief Medical Officer.

You can also find the related company announcement and supporting information on our website at zealandpharma.com.

I would like to point out, as described on Slide 3, that we will be making forward-looking statements that are subject to risks and uncertainties.

With that, I will turn the call over to Adam Steensberg, President and CEO. Adam?

[Adam Steensberg, executive]

Thank you, Anna, and thanks to everyone for joining today. I'll begin on Slide 4. This has been another busy quarter for Zealand. I'm very happy with the progress we've made to deliver on the key priorities that we set in March when we announced our decision to prioritize investment in peptide research and development, which is our core strength.

In September, we completed our objective of partnering our marketed products. We are very pleased to announce a global license and development partnership with Novo Nordisk, a global leader in diabetes to commercialize Zegalogue. Beyond the financial terms, there are 2 key elements of this agreement for us. The first is that we have a commercial partner with a global reach that has the potential to bring this product to many more patients around the world.

The second is that we'll continue to contribute and support Novo. Under the agreement, we are responsible for certain planned development, regulatory and manufacturing activities to support approval of Zegalogue outside U.S.

As you can see, the further partnerships for other pipeline assets, one important element for us is our ability to continue to contribute across the value chain. We have core strength as a peptide R&D company, and we have unique expertise and insights gained through our development programs. We will therefore seek to maximize the value of our assets by our fully and strategically leveraging those strengths.

In the last 6 months, our rich pipeline has delivered 2 positive Phase III trial readouts in 2 separate programs. aimed at changing the lives of people living with rare and severe diseases.

The first was dasiglucagon in congenital hyperinsulinism. The results from the Phase III trial of dasiglucagon in infants with CHI were presented in December, we believe these results support the potential for dasiglucagon to be a novel, effective and well-tolerated treatment for children with this rare and severe condition.

The second was for glepaglutide, our long-acting GLP-2 analogue designed for subcutaneous delivery by an auto-injector in patients with short bowel syndrome. In September, we were excited to report positive top line results from this pivotal Phase III EASE-1 trial. The robust results represent a tremendous milestone for Zealand Pharma and people living with short bowel syndrome. We now look forward to engaging regulators regarding both programs as we prepare for potential submissions of new drug applications with the U.S. Food and Drug Administration.

Our Obesity portfolio has continued to advance. Boehringer Ingelheim presented results from the Phase II clinical study of BI 456906, the GCGR/GLP-1 receptor dual agonist into type 2 diabetes at both EASD and the recent obesity week. We're extremely encouraged by the early data from this program and look forward to seeing the results of the ongoing Phase II trial in obesity expected next year.

We are also pleased to note that the Phase II trial of BI 456906 in people with non-alcoholic steatohepatitis or NASH has completed enrollment in the last quarter. For our long-acting amylin analogue, ZP8396, we have completed dose escalation in the Phase Ia single ascending dose trial in the last quarter and expect to dose the first subjects in our Phase Ib multiple ascending dose studies later this month.

So building on the positive momentum, we were happy to announce a raise of almost DKK 800 million in October, which significantly strengthened our cash position as we progress towards yet another pivotal year for Zealand Pharma.

Finally, I'm excited to welcome Henriette Wennicke, our new Chief Financial Officer, to Zealand. She will join us on the call today. Henriette brings broad finance and business experience from large organizations, including in health care, and I look very much forward working with her.

Before Henriette reviews the financial results for the period I will turn over the call to our Chief Medical Officer, David Kendall, to discuss our pipeline. David?

[David Kendall, executive]

Thank you very much, Adam. Turning to Slide 5. I would like to begin with glepaglutide, our long-acting GLP-2 analogue currently being studied for the potential treatment of short bowel syndrome or SBS. As Adam has already mentioned, in September, we were extremely pleased to release positive top line results from the EASE-1 pivotal Phase III trial of glepaglutide in SBS patients.

As we reported in this randomized, double-blind, placebo-controlled study, glepaglutide treatment significantly reduced the volume of parenteral support required compared to placebo when administered to patients with SBS and intestinal failure. From baseline, the glepaglutide twice-weekly treatment resulted in both rapid and continued reductions in parenteral support with an average reduction of 5.13 liters per week at the end of the 24 weeks of study as compared with a reduction of 2.85 liters per week for those treated with placebo.

While there was also a numeric reduction in the total parenteral support required among patients treated with the once-week glepaglutide, this reduction was not statistically different as compared to placebo.

Importantly, approximately 1 in 8 patients treated with glepaglutide over the course of study were able to completely wean off parenteral support. This included patients from both the twice-weekly and once-weekly glepaglutide dose groups as well as SBS patients with stoma and colon incontinuity. No placebo-treated patients were weaned off parenteral support.

Glepaglutide was assessed to be safe and was well tolerated in the trial. The most frequent reported adverse events were injection site reactions and gastrointestinal events. In total, 102 of the 106 participating patients completed the trial, of which 96 continued into the ongoing extension trials, EASE-2 and EASE-3 where efficacy and safety will continue to be assessed in an ongoing fashion for up to 104 weeks of treatment.

We anticipate interim results from EASE-2 before the end of the year and from EASE-3 in the first quarter of 2023 and we look forward to engaging with regulatory authorities as we plan for submission of our new drug application with the FDA.

I would like to now turn to Slide 6 and our second Phase III program, investigating dasiglucagon treatment in patients with congenital hyperinsulinism. CHI is an ultrarare pediatric disease in which patients suffer from recurrent and persistent hypoglycemia due to excess insulin release. We previously announced top line results from Part 1 of the Phase III trial of newborns and infants up to 12 months of age who required IV glucose for maintenance of normal glucose levels.

As shown on the left panel, in Part 1 of this study, dasiglucagon treatment over 48 hours significantly reduced the requirement for IV glucose to maintain glycemia when compared to placebo. We recently presented detailed data from both Part 1 and Part 2 of this trial at the 2022 European Society for Pediatric Endocrinology Meeting.

In addition to the results in Part 1 and the primary endpoint just discussed, additional data from Part 2 of the study showed that dasiglucagon reduced time in hypoglycemia, enabled periodic or permanent discontinuation of IV glucose infusion in a majority of patients. And overall, 7 of the 12 individuals who did not require pancreatectomy were completely weaned off IV glucose at the completion of the trial, all of this shown on the right side of the slide.

Dasiglucagon was observed to be well tolerated and those serious adverse events were reported in either part of this trial.

The positive findings of our second Phase III trial needs additional data to deepen our understanding of dasiglucagon's potential as an innovative treatment for CHI patients who have significant unmet need managing this challenging disease. We anticipate the data from this Phase III trial, along with data from the previous Phase III trial in older children as well as the information derived from the safety extension trial will form the basis of an NDA for dasiglucagon in CHI.

We look forward to engaging with regulatory authorities and submitting a new drug application for dasiglucagon in CHI in the first half of 2023.

Turning to our obesity portfolio. We are excited to continue to advance a number of novel and exciting assets. On the pipeline chart on Slide 7, you can see that the most advanced of these assets is the long-acting dual-glucagon GLP-1 receptor agonist, BI-456906, which is being developed in partnership with Boehringer Ingelheim. Our wholly owned obesity assets in clinical studies include a first-in-class GLP-1/GLP-2 receptor dual agonist, dapiglutide, which will be advanced into Phase II early next year; and the long-acting amylin analog, ZP8396 currently in Phase I. We recently completed dose escalation in the Phase Ia single ascending dose trial, ZP8396 with the maximum tolerated dose reached.

ZP8396 delivered subcutaneously appears to be well tolerated with no unexpected side effects and demonstrates a PK profile suitable for once weekly dosing.

We have received regulatory clearance and have initiated participant screening in the Phase Ib multiple ascending dose trial, and we expect the first participants to be dosed in the coming weeks.

Moving to Slide 8. Positive clinical results from Phase II studies of BI 456906 in type 2 diabetes were reported at 2 recent scientific meetings. The results presented at EASD in September demonstrated that treatment with BI 456906 led to dose-dependent lowering of hemoglobin A1c by up to 1.88% at 16 weeks, while treatment with open-label semaglutide used in the same trial resulted in a reduction in A1c of 1.47%. More recent results of the weight chain observed with BI 456906 treatment in this type 2 diabetes cohort were presented over the past week at the Obesity Week meetings, which you can see on Slide 9.

In the same study, treatment with this novel glucagon GLP-1 receptor agonist for 16 weeks resulted in dose-dependent reductions in body weight of up to 9% after treatment with BI 456906 while those treated with open-label semaglutide had a 5.4% decline in body weight.

In addition, there were dose-dependent reductions in waist circumference observed in those treated with the BI compound, with decreases of up to nearly 13 centimeters at 16 weeks in the highest dose group compared with the decrease in waist circumference 1.95 centimeters seen with placebo.

Treatment with open-label semaglutide at 1 milligram led to a decrease of 3.63 centimeters.

The safety and tolerability profile were consistent with that anticipated with the GLP-1 receptor agonist with gastrointestinal side effects being the most commonly reported. This anticipated that slower dose escalations over a longer duration will mitigate both the frequency and severity of GI adverse events and longer follow-up beyond 16 weeks will be needed to more formally assess the full impact on body weight.

This is an exciting time for our pipeline and the strong push towards potential NDA filings and advancement of our obesity portfolio assets, and we look forward to continuing to build upon this momentum for the remainder of 2022 and into 2023.

I will now turn the call over to our CFO, Henriette Wennicke, to review the 9-month financial results.

Henriette?

[Henriette Wennicke, executive]

Thanks, David, and hello, everybody. Great to meet you all virtually today. I am truly excited to join the Zealand team, and I look forward to working with all of you and my colleagues at Zealand to fully leverage the value of Zealand's rich pipeline and contribute to the strong momentum the company is building.

Let's move to Slide 10 and the income statement. Revenue for the first 9 months was DKK 80 million, driven by the development agreement with Alexion and a new agreement with Novo Nordisk. Zealand received an upfront payment of DKK 25 million from Novo and is eligible also to receive up to DKK 45 million in development milestones. Zealand is also eligible to receive up to DKK 220 million in sales-based milestones and royalties.

The operating expenses for the period were DKK 676 million. This is slightly above last year due to progression of our research and development activity, especially our late-stage clinical program.

The sales and marketing expenses and the administration expenses are decreasing compared to last year following the announced restructuring.

Net financial items for the period resulted in a loss of DKK 53 million compared to DKK 22 million for the same period last year. These costs are primarily related to the loan with Oberland.

As a result of the announced restructuring, all income and expenses related to the commercial activities for V-Go and Zegalogue are counted as discontinued operations.

Net results from discontinued operations for the 9 months -- first 9 months in 2022 was a loss of DKK 250 million.

Let's move to Slide 11 and the cash position. Cash, cash equivalents and securities was approximately DKK 1.5 billion after the third quarter and the successful private placement, which was done early October. The private placements of almost 5 million new shares at a price of DKK 158 per share resulted in nice cash addition of almost DKK 800 million, as Adam also mentioned.

Let's turn to the financial guidance on Slide 12, and let me keep this short as this guidance is unchanged from our updated guidance issued on March 30 this year. We still expect net operating expenses in 2022 to be DKK 1 billion plus/minus 10%, excluding discontinued operations.

And with these brief remarks, I would like to turn the call back to Adam.

[Adam Steensberg, executive]

Thank you, Henriette. The third quarter has delivered several important milestones, and we believe Zealand is well-positioned to continue to build momentum and leverage the value of our pipeline.

So with that, I would thank all of you, and I will now turn over the call to the operator for questions.

[Operator]

[Operator Instructions] Now we're going to take our first question. And the first question comes from the line of Joseph Stringer from Needham & Company.

[Joseph Stringer, analyst]

Two from us. Wondering if you could comment on both the regulatory and also the commercial risk of a broad label for glepa in SBS in terms of differentiation between stoma-only patients versus PICC patients. How do you see that playing out from regulatory perspective, but also commercial? Do you think that payers would need to see sort of the effect in both of those types of patients for commercial success?

And then the second question is on EASE SBS 4. Can you remind us again of the goal of this trial? And is it possible that the data from this trial could be sufficient or used to expand the glepa SBS label to include patients without or who are not on parenteral support.

[Adam Steensberg, executive]

Thank you, Joseph. I will just -- I'll start and then maybe David want to add something.

So on the first question on the regulatory and commercial risk regarding stoma and PICC It's, of course, something that gets a lot of attention due to the history of both the development of the assets, but -- and then also, you can say there's been a lot of discussions on these 2 patient groups over the years.

As David reported, we have actually seen and as we have reported before, we have seen robust changes with the twice-weekly dosing in both patient groups, both the stoma and the PICC patients. And David also mentioned here on the call that we saw patients with stoma and the PICC weaning off completely.

So we do think we have a strong dataset to address the potential benefits of glepaglutide in both patient groups.

We think that, overall, they are actually quite similar. We think some of the findings from prior programs have not been over exaggerated a little bit and this is the base that we look at, then we feel very comfortable that we can argue across potential benefits in both patient groups.

On EASE SBS 4, I think that the main purpose of this product is we to address mechanistic differentiators of glepaglutide in this patient group. And of course, it will be interesting to potentially as we develop this molecule further also consider expanding into the SBS patient segments who are not on parenteral support. But that would not be the primary purpose of this study but we could get additional information around the potential benefit of glepa in these patients as we allow inclusion of such patients in the study actually. David, do you want to add something?

[David Kendall, executive]

Yes. Thank you, Adam. And Joseph, thanks for the question. I think Adam has clearly described what we see -- we believe the EASE-1 population kick in stoma, a variety of etiologies of their shortfall is a very representative population of a group with SBS and intestinal failure.

Obviously, the study was powered primarily to demonstrate the reduction in parenteral support needed across the population, not in specific subgroups. But to Adam's point, we feel we have robust data that obviously will be part of the submission to the FDA for them to consider what does this population represent and how might that be represented ultimately in the label.

I learned long ago not to speculate as to what may be the regulatory response to that. But suffice it to say that both stoma and etiologies of SBS, we feel we have a very important and broad representation of the disease state.

And to add to Adam's comment on expanding the label, I think we now have clear evidence from this trial, we believe, that this is an effective GLP-2 agonist and where it may play beyond those with documented intestinal failure, like those who entered this trial is exciting to consider. But first and foremost, our goal is to bring this forth for the intestinal failure patients and population with, again, the encouraging finding that a number of individuals on active glepaglutide treatment, we're able to completely discontinue that parenteral support, which we believe is a significant part of this data set. So I hope that touches on each of your questions, Joseph. Thanks.

[Operator]

Now we're going to take our next question. And the next question comes from line of Brian Balchin from Jefferies.

[Brian Balchin, analyst]

I just have the one. Just maybe you can speak to the differentiation between your glep/glu..

[Adam Steensberg, executive]

I think we lost the connection. Operator, can you hear us?

[Technical Difficulty]

[Operator]

I believe Brian has been disconnected. [Operator Instructions] Dear speakers, there are no further questions at this time. Please continue.

[Adam Steensberg, executive]

Yes, we will follow up on that. But I think if there are no further questions, then we will thank all the attendees for your questions. We look forward to connect. And I would also say the follow-up questions after this call, please feel free to reach out to us and we will address them. My sense is that there is a technical issue with dialing in here. So -- but please follow up directly with us afterwards.

[Operator]

That does conclude our conference for today. Thank you for participating. You may now all disconnect. Have a nice day.