Zealand Pharma A/S

OTC:ZLDPF

Earnings Call Transcript 2018-Q1

[Operator]

Good day, and welcome to the Zealand Pharma Interim Report for the First 3 Months of 2018 Conference Call. Today's conference is being recorded. [Operator Instructions] At this time I would like to turn the conference over to Britt Meelby Jensen, President and CEO. Please go ahead.

[Britt Meelby Jensen, CEO & President]

Thank you, Keith, and welcome, everyone. Apologies for the slight delay due to technical reasons. Joining me on the call today, I have our CFO, Mats Blom; and Adam Steensberg, Chief Medical Officer and Executive Vice President Clinical Development. So on Page 2, before starting I would like to remind everyone that today's discussion will include forward-looking statements and that these are subject to risks and uncertainties that could call -- cause actual results to differ materially for those expressed in the forward-looking statements. Moving on to Page 3. I'll -- we have the agenda. I'll begin today's call with an update on our programs, and then I will turn over to Mats for a quick summary on our financials and operations for the first quarter of 2018, and I'll conclude with our 2018 outlook before opening up for questions. So please move to Page 4, where we have a quick overview of Zealand's pipeline that shows a company with a late-stage clinical pipeline as well as 2 products marketed by our partner, Sanofi. During 2018, we expect continued progress in our clinical programs, both with results from our pivotal Phase III on dasiglucagon HypoPal rescue pen for severe hypoglycemia, and we also expect 2 additional product candidates, so glepaglutide for short bowel syndrome and dasiglucagon for congenital hyperinsulinism to move into Phase III development. I'll come back on the status and plans on these later in my presentation. Well, please turn to Page 6. The momentum in our business continues to build from the beginning of 2018. And during the quarter and the period hereafter, we reported progress across most of our portfolio, both marketed and clinical novel based -- novel, peptide-based candidates. So we are accelerating our late-stage programs with glepaglutide and dasiglucagon as the most important short- and long-term value drivers, and we have 3 fully owned program -- product candidates in Phase III studies by the end of the year. Also, the penetration of Soliqua, the combination of Lyxumia and Lantus continues to increase. So I want to take a minute to run through a few of our clinical programs that recently reporting meaningful and important use, including glepaglutide for short bowel syndrome, dasiglucagon HypoPal rescue pen and dasiglucagon for congenital hyperinsulinism. But before doing so, I'll touch on a few additions to the team that has -- that have strengthened the company. First, Ivan Møller has joined our management team as our new Senior Vice President of Technical Development and Operations. Ivan previously worked for Novartis in its generic and pharmaceutical manufacturing as well in strategy, quality insurance, contract manufacturing and supply chain leadership in Germany, U.S. and Switzerland. Next, we are -- we were fortunate to welcome Dr. Francois Nader, as our strategic advisor for the company. He holds a number of board positions in the bio pharma industry and was previously President and CEO of the NPS Pharmaceutical and prior to NPS being acquired by Shire for $5.2 billion. We are also pleased to have a new board member Kirsten Drejer, Dr. Drejer. She's a cofounder and a previous CEO of Symphogen, which is a privately held Danish biotech company dedicated to development of monoclonal antibodies, focusing on serious diseases including oncology. And she brings more than 30 years of international experience in the industry to our board. So overall these new members provide us with tremendous experience, and this speaks highly of the pipeline and the potential that our company offers. So turning back to our clinical development programs and moving on to Page 7. As you see on this page, we conducted a Phase II trial with our long-acting GLP-2 for short bowel syndrome, which concluded last year. And in January, we presented the Phase II data at the ASPEN conference in -- which is a Nutrition Science & Practice Conference in Las Vegas. We tested 3 different daily doses and had 18 patients in the trial, who each got different doses of the glepaglutide with the 3 days collection of all intake and output, both before and after each dosing period. So what we saw was that glepaglutide was shown to be safe and well tolerated. But we -- and we also saw indications of a longer half-life, which I'll come back to. So moving on to Page 8 for some efficacy measures. Glepaglutide is an agent that increases the intestinal absorption and this is -- and this was demonstrated in the Phase II trial, which met its primary endpoint for 2 of the therapeutic active doses, the 1 milligram and 10 milligrams of reducing fecal wet weight output. So after 3 weeks of dosing, we saw reductions of 592 grams per day and 833 grams per day, corresponding to a relative reduction of, respectively, 23% and 30%. So on Page 9, we see the results of an important secondary endpoint, which is increase in urine production, where an increase -- with an increase of 40% and 32%, respectively, within the 2 therapeutic active doses. All in grams, this was 530 and 338 grams. This is an important and significant result, and the importance is due to that the increase in urine production is directly linked to the reduction in parenteral support, which will be a primary endpoint in the upcoming Phase III trial. So please move to Page 10. As mentioned earlier, the Phase II results gave an indication that our half-life of glepaglutide is significantly longer than the 13 to 17 hours previously assumed. So based on this, we initiated, during the fall of 2017, a PK trial, evaluating the potential for less frequent dosing than the daily dosing in Phase II and also the daily dosing of the marketed GLP-2 treatment. So we tested in the trial, glepaglutide once and twice weekly at 2 different doses, and in January this year we reported that the results support moving into Phase III with both a once-weekly and a twice-weekly dosing regimen. So with the ready-to-use liquid formulation, this can make this a very easy-to-use product for patients. So finally, on Page 11, you see that the reason we completed the end of Phase II meetings with the U.S. Food and Drug Administration, FDA, and the outcome of this meeting confirms the path forward for glepaglutide moving into Phase III. The Phase III trial that we are planning to initiate will, as you can see here, be a double-blind, placebo-controlled study in 130 short bowel syndrome patients. We'll be evaluating both the safety and the efficacy of once- and twice-weekly dose of glepaglutide as well as the placebo arm over 24 weeks at multiple sites both in Europe, U.S. and Canada. So the primary endpoint of -- for the Phase III trial is number of patients having at least a 20% reduction in parenteral support at 6 months, and the key secondary endpoints are relative reduction in parenteral support and also the fraction of patients achieving 1 day off parenteral support. So our plan is to initiate this pivotal Phase III trial in the second half of 2018, and we are on good track for this now.So on Page 12, we move to one of our other late-stage product candidates, our ready-to-use dasiglucagon HypoPal rescue pen for severe hypoglycemia. So we are very excited to have reported top line results from the first Phase III trial where dasiglucagon successfully met both its primary and key secondary objectives, basically confirming its safety profile with no treatment induced or treatment boosted antidrug antibodies. So additional results from this trial, I expect it in second quarter of 2018 and the full results will be published and -- in appropriate scientific conference. So as a quick recap, the trial evaluated the immunogenicity of repeated single doses of dasiglucagon at 0.6 milligram following subcutaneous administration and it was compared to native glucagon powder that requires immediate reconstitution in an aqueous buffer before injection with a syringe and it was done in 90 patients, all with type 1 diabetes. So the primary and secondary objectives in the trial were to evaluate the risk of treatment-induced and treatment-boosted antidrug antibodies following the 3 repeat doses of the dasiglucagon or GlucaGen. So the planned data review of the trial demonstrated that it did not induce or boost antidrug antibodies, so that was a very promising results. These results from the Phase III trial is a major step forward in the development of HypoPal rescue pen for treatment of severe hypoglycemia and as you might be aware, hypoglycemic event remains one of the biggest fears among insulin-dependent diabetics and it leads to approximately 300,000 hospitalizations every year in U.S. alone. So looking ahead, we look forward to completing the ongoing pivotal Phase III trial later this year, and we remain fully committed to offer this easy-to-use solution to treat a life-threatening condition. So on to Slide 13. We are also developing basic glucagon for congenital hyperinsulinism, which is a rare disease affecting mainly newborns and toddlers. CHI is caused by a defect in pancreatic cells which results in an insulin overproduction, which cause -- which causes both persistently and also severely low blood sugar levels, which is also referred to as hypoglycemia. So in Q1, FDA approved our IND applications for initiation of 2 Phase III trials of dasiglucagon in CHI. And just last month, we entered a collaboration with Roche Diabetes Care, who's a global leader in integrated diabetes management solutions for the Phase III trial. So while Zealand is responsible for conducting the Phase III trials, Roche Diabetes Care will provide its Accu-Chek Combo pump system for the trials on the terms of agreement that we have. So we are currently looking into initiating these trials in the second half of 2018. And the aim of the Phase III trials is to evaluate the potential for new nonsurgical treatment for children with congenital hyperinsulinism, and during the trials neonates and children with CHI will be given low doses of dasiglucagon infused with the Accu-Chek Combo pump system, and we're excited about the opportunity to pursue the development of this severe and rare disease that affects both neonates and children. So moving on to Page 14. When it comes to our products marketed by Sanofi, we continue to see growing weekly prescriptions of Soliqua in the U.S., with an average of approximately 3,300 in Q1 -- weekly in Q1 2018, and these numbers continue to grow, and in the last week the prescription numbers exceeded 4,200, which is a 27% increase over the Q1 prescription numbers. And in addition to this, the formulary coverage is also continues to increase and is expected to be broader as we move further in the year. So with that, as an update on our clinical programs and our marketed programs, I'll turn the call over to Mats to discuss our financials.

[Mats Peter Blom, Executive VP & CFO]

Okay, thank you, Britt, and good afternoon, everybody. If you look at Page 16, we can see a summary of our Q1 financial results. And the net loss for the first quarter of '18 was DKK 91.4 million compared to DKK 26.3 million for the same period last year. And the increase in net loss is mainly consequence of decreased milestone revenue of DKK 69.6 million and increased research and development expenses of around DKK 25 million. So starting with revenue, the revenue for the first quarter amounted to DKK 10.8 million, as I said compared to 76 -- DKK 7.6 million the same period last year. In '17, Q1 revenue included a milestone revenue of DKK 69.6 million from Sanofi in connection with EU approval of Soliqua. If we look at royalty revenue, there is an 35% increase in Q1 2018 versus the same period last year. Our research and development expenses for the first quarter increased by 41% to DKK 85.7 million compared to DKK 60.7 million the same period last year, and this increase consist mainly of cost related to our late-stage clinical programs glepaglutide and dasiglucagon but as well as some preclinical research activities. As of end March, we had a cash and cash equivalents of 56 -- no, DKK 566.8 million, including DKK 5.7 million that are held as collateral for our royalty bond. I will turn back the call to Britt, and I will take any questions you might have on the financials later in the Q&A session.

[Britt Meelby Jensen, CEO & President]

Thank you, Mats. So we are excited by the progress that we have made across our pipeline during the past several months. And as you can see on Page 18, there are several upcoming, important milestones and updates, which we expect to build in greater excitement around our business. So specifically, we look forward to announcing the initiation of our Phase III trials for glepaglutide and dasiglucagon congenital hyperinsulinism in the coming months as well as to receive the results from the pivotal Phase III on the dasiglucagon HypoPal program. So we will continue to keep you up-to-date on our progress with these and other programs and events that we have. So with that I'll -- I'd like to turn to Page 19, and to hand over to the operator to open up the call for questions.

[Operator]

[Operator Instructions] We'll now take our first question from Alan Carr of Needham & Co.

[Laurence Alan Carr, Senior Analyst]

A couple of them. Can you tell us how you're thinking about you're going to handle commercialization of HypoPal? I know the primary goal is to partner it, but I'm wondering if there's -- what your expectations are for timing around finding a partnership. And if you might commercialize it yourself, if the right partnership isn't found? And then also can you give us a bit of an update on your regulatory discussions with glepaglutide and SBS? I know you finished your meeting with the FDA, maybe you can tell us little bit about that and where things stand with your EMA discussion.

[Britt Meelby Jensen, CEO & President]

Thank you, Alan, for goods question. I'll answer the first one and hand over to Adam Steensberg for the glepaglutide regulatory question. So on the HypoPal, it's correct that we have previously also communicated that we are looking for partner to commercialize the program with main focus on the U.S. initially. And you can say that we are currently in discussions with multiple partners. And how we see this is basically that we could engage in a commercial partnership right now, if the right partner is ready now. We are also not obliged to do a partnership now, as -- I mean we might as well do a partnership upon approval. So we are working on multiple fronts on that one now, we do think it makes sense to partner with others in line with our strategy to commercialize this, because it is a product that is prescribed by a broad prescriber base, and it's also a market that is severely underpenetrated today. So we do have some exciting progress and interesting partner discussions that we will update you on when we get a little further into the year. On the glepaglutide question, I'll hand over to you, Adam, to comment on both U.S. and Europe.

[Adam Steensberg]

Okay, thanks for the question. And as we reported, approximately a month ago then we had a very successful meeting with the FDA on the glepaglutide Phase III program. So you can say, most aspects of the program was discussed with FDA. We had already clarified some key issues before the meeting, but overall, I mean the ambition with this interphase II meeting was to reach an agreement on the Phase III trial design and program. And I think, we were very satisfies -- satisfied with the outcome, and as we also reported in the press release then you can say that we continue as planned. So of course there were trial design -- smaller trial design issues that were discussed and modified, but the overall plan with regards to primary endpoint, number of patients, the extent of the study, et cetera, were as we had hoped for. As we also reported then, we do expect to have the outcome of the discussions with the FDA, the minutes from those meeting within the -- a month or so. And the -- sorry with EMA, and so they are also -- our pre-expectations to this that we will continue as planned, and a long -- the study outlined, that Britt presented here in the presentation. So we are very encouraged and we are having full speed now on getting our CRO up to speed, getting the trial centers signed in and then hope they will have the patients to enter this study later this year.

[Laurence Alan Carr, Senior Analyst]

To clarify, did you say that you had a meeting with the EMA and you're waiting for the minutes? Or are you still waiting to have the meeting with the EMA?

[Adam Steensberg]

We have had the meeting very recently. And we will have the meeting minutes in a month or so. The way it works with EMA it's a little bit different, it's a scientific advice where you have an informal discussion, where you have a chance to kind of discuss key aspects, and then they will provide you with minutes within a month after that meeting. And we have just had that meeting and it looks also very positive.

[Operator]

[Operator Instructions] We'll now take our next question from Peter Welford of Jefferies.

[Peter James Welford, Senior Equity Analyst]

Just a brief one, actually which is have you yet initiated for the HypoPal a study bridging to the new rescue pen device? And can you give us I guess any sort of update on that? And also the pediatric study that I think is required for filing? Any update on the conduct of that study? Is that so far in your plan?

[Adam Steensberg]

Okay, thanks. I will also answer this. So on the pediatric study, we actually have made good progress there in the sense that we have managed to reach an agreement between both the Europe and U.S. on the study so that we can -- I mean so there's agreement on how that study is going to be designed. So we are also fully ready now to get that study up to -- running, and that will also happen within the second half of this year. So we have full speed now on the operational aspects of getting the pediatric study up and running. On the -- your first question regarding to the study with the auto-injector, you're correct. Currently we have done the immunogenicity study and also the ongoing Phase III trial with the pre-filled syringe and the auto-injector study is anticipated to also be initiated later this year. So -- and that will be a much smaller study just, again, to confirm efficacy of dasiglucagon versus placebo. So I think things are very much on track here for the HypoPal rescue program.

[Britt Meelby Jensen, CEO & President]

And maybe to add from my -- from our side, this is -- it's not required that we do a pediatric trial, it is a decision that we have made to do that -- to get approval, and hopefully, also, from the beginning get an indication in children.

[Operator]

[Operator Instructions] We'll now take our next question from Thomas Bowers of Danske Bank.

[Thomas Schultz Bowers, Analyst]

Just a sort of a follow-up on the whole submission plan for HypoPal for U.S. When do you actually plan to be able to submit for approval? And also with that in mind, the CHI studies, I sort of had in mind those study would start in mid-'18 and now you're saying H2, so is there anything here that may conflict also with the fact that you could be beginning a voucher for the CHI? Of course if the rescue pen is not approved prior to that.

[Britt Meelby Jensen, CEO & President]

Yes, so, first of all on the HypoPal and submission, so what we basically -- I mean we report the pivotal Phase III trial later this year then we initiate also this year the pediatric trial focusing on U.S. and Europe. And then we have the bridging study, which leads us to a filing in the second half of next year for that one. Then I think it's important to note that the formulation for the HypoPal and the congenital hyperinsulinism it's essentially 2 different formations that we have. And it's correct that we said that the start of the Phase III trial for CHI was mid this year. And you can say, we have essentially changed our reporting to first half and second half, which is why we're saying second half. But we are in full preparations to start the trial right now after we have the go ahead and clear guidance from the FDA on the trial.

[Adam Steensberg]

Yes, maybe I can add, and Thomas you also know this there's actually 2 trials that we anticipate to run in congenital hyperinsulinism. And as you also reported just earlier this month, we are actually collaborating with Roche using their insulin pump. And it's a little bit back to what we discussed before. We are fully ready now to get the studies up running. And we do anticipate that these plans will hold true also I mean in the sense of getting this study -- the 2 studies started this year. With regard to recruitment and the voucher that you elucidated to, these are of course things that we will have to monitor when we have the studies up running, how fast we can recruit in the studies and then potentially take decisions at that time point. But for the -- so far I mean, I think, the strategies and the plans are as we have communicated onto -- also in the last half year months.

[Thomas Schultz Bowers, Analyst]

Okay, so I can still put a PRV in my expectations?

[Britt Meelby Jensen, CEO & President]

At your own cost, I mean we have no confirmation that we have priority review vouchers so that's...

[Thomas Schultz Bowers, Analyst]

Oh, yes. But I mean for you maybe to if the CHI study gets delayed also -- well with the -- with some uncertainties on recruitments, so is that -- are you still considering any ways that you would maybe hold back on the HypoPal submission?

[Adam Steensberg]

Yes. And I think what you are alluding to is that of course that in order to be eligible for one of these vouchers it has to be the first submission with a new chemical [indiscernible]. And of course everything depends and it is highly attractive to get this voucher. So if we get slight delays in recruitment, meaning that we have to postpone things with a few months then of course these are strategic decisions that we will take as a company when we approach. I think currently, our ambition is to have full speed on the programs, and we will update when we get further. But we are -- again I can just say that we have actually managed to get a lot of excitement on -- in the CHI community and getting a few more centers that we anticipated into these studies. So once we get the studies up running, we also expect to be able to recruit with a good speed.

[Britt Meelby Jensen, CEO & President]

But while we're talking about it, a total of 50 patients in the 2 trials maximum.

[Thomas Schultz Bowers, Analyst]

Yes, yes, yes. That was actually my follow-up question, you have you say 50 patients and then is that split into 2x, 25 in -- or how should I see this?

[Adam Steensberg]

There are more patients in the older children. So the 3 months up to 12 years there we will have more children. And then in the neonates, there will be few. And it's also the older ones -- the older children is the one area where it's easier to recruit since they are existing patients you can see. So...

[Operator]

[Operator Instructions] It appears there are no further questions at this time.

[Britt Meelby Jensen, CEO & President]

Okay, then if there are no further questions in the call this afternoon, I'd like to thank everyone for participating and wish you a good day -- rest of day.

[Operator]

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. You may now disconnect.