Zealand Pharma A/S

OTC:ZLDPF

Earnings Call Transcript 2021-Q2

[Operator]

Good morning and good afternoon, everyone, and welcome to Zealand Pharma's First Half 2021 Financial Results Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Matt Dallas, Senior Vice President and Chief Financial Officer. Please go ahead, sir.

[Matthew Donald Dallas, Senior VP & CFO]

Thank you, operator. Welcome, and thank you for joining us today to discuss Zealand's First Half Results for 2021. I'm Matt Dallas, Senior Vice President and Chief Financial Officer of Zealand. With me today are Zealand's President and Chief Executive Officer, Emmanuel Dulac; and Chief Medical Officer and Head of Development, Adam Steensberg. After the prepared remarks, we will open the call to take your questions. Our President of Zealand Pharma U.S., Frank Sanders, will also be available to take your questions during the Q&A session. You can find the related company announcement and additional supporting information on our website at zealandpharma.com. I'd like to point out that we'll be making forward-looking statements that are subject to risks and uncertainties. These statements are valid only as of today, and the company assumes no obligation to update them, except as required by law. please refer to recent filings for a more complete picture of risks and other factors. With that, I will turn the call over to President and CEO, Emmanuel Dulac.

[Emmanuel Dulac, CEO & President]

Thank you, Matt, and thanks to everyone for joining today. Please now turn to Slide 3. This first half of 2021 was transformational for Zealand. The FDA approval followed by the Zegalogue commercial launch in the treatment of severe hypoglycemia for people with diabetes, age 6 and above were 2 historical milestones and 2 firsts for the company. In parallel, during the same period, we continue to drive sustained progress across our pipeline and toward our vision of becoming a fully integrated independent biotech company. Turning to Slide 4. Adam Steensberg, our CMO, will detail the progress made on the pipeline in a minute. While I will discuss now in more detail the improvements made to our organization and strategy. This progress allows us to focus our attention on key strategic priorities for the second half of the year and reinforces our confidence in the goal of having 5 commercialized products by 2025. Regarding the launch of Zegalogue. Let me start with Slide 5, which illustrates some of Zegalogue's key attributes. Research indicates that diabetes patients face the challenge of avoiding hypoglycemic events. And that they and their loved ones often live in the fear of one of these events materializing. Rescue solutions such as Zegalogue provide an attractive treatment option for patients and providers alike who can feel confident that they are prepared to address a potential severe hypoglycemic events. Throughout the summer, a commercial team in the U.S. has worked tirelessly with national and regional payers, pharmacy benefit managers and health systems to ensure that patients across the country have access options for Zegalogue. We have established a strong presence and presented new data at several medical meetings, we are launching more than a drug with Zegalogue. We are also launching a company, and all our employees are excited and highly engaged behind the challenge. Slide 6 is for your reference on the indication and important safety information for Zegalogue. A copy of the full PI is available on www.zegalogue.com/prescribing information. And I am delighted to show you on Slide 7, some background related to the patient support capabilities deployed by Zealand to ensure patient access with Zegalogue at the point of launch. In support of our commitment to patient access, we initiated Zealand Pharma Connected Care, a comprehensive patient support program designed to offer affordability, reimbursement and educational resources to help address the diverse needs of patients and caregivers. The program includes components such as an evitable co-pay saving cards for eligible commercially insured patients and the opportunity to receive home prescription delivery. We believe Zegalogue is an important treatment option for people with diabetes to manage potential severe hypoglycemic events. And we look forward to continuing this work to ensure that Zegalogue is available to the people who need it. Finally, Slide 8 is showing how profound and rapidly the company is continuing its growth. In the first half of the year, we have seen strong momentum within our pipeline and progress across multiple clinical development programs. For those familiar with our pipeline, they will appreciate the continued progress of pipeline candidates shown on this slide. We now have 4 pipeline focused areas, which makes our potential reach wider and allows us to improve the depth of our expertise in each therapeutic area and help us better manage our portfolio. The 4 areas of focus are Type 1 diabetes with 2 marketed drugs and 2 mid- late-stage programs; rare disease with 2 late-stage and 1 mid-stage programs; our newly defined obesity franchise, which includes the collaboration with BI and our Amylin and GIP programs. We're expecting to see data readouts and initiation of new clinical activities in obesity in the second half of this year; and finally, our inflammation franchise, which with early but potentially promising assets. The acceleration in the build of our pipeline within these 4 focus areas is a reflection of how productive our research is and clearly shows how we plan to prioritize our investments going forward. I'll now turn it over to our CMO and Head of Research and Development, Adam Steensberg, to discuss our pipeline in greater detail. Adam?

[Adam Sinding Steensberg]

Thank you, Emmanuel. And I'm really pleased with the progress we are making across the pipeline programs that you see here, and I look forward to share more updates on the next slide. So please go to Slide 9. Our medical affairs organization has been busy engaging with the medical community ahead of the launch of Zegalogue, and I'm pleased with the early feedback building further confidence that Zegalogue is well positioned to allow more people in need to be equipped with rescue solutions for severe hypoglycemia. The introduction of Zegalogue, however, only marks the beginning of our mission to create a paradigm shift in Type 1 diabetes management. While we have seen many improvements over the last decade, with the introduction of insulin CGMs and insulin pumps, studies suggest that, on average, only 20% of patients achieved a glycemic target in the U.S. and the burden of disease management remains very high. And we believe that the unique features of dasiglucagon allowing its use in either a Low-dose pen or all in the bihormonal artificial pancreas system, holds a great potential to help patients achieve these glycemic goals and also improve their quality of life. In our view, it is now time to start looking at the other end of the glycemic equation, [ in lows ], which drives a lot of anxiety among patients and can be addressed by dasiglucagon. In the last quarter, we initiated an outpatient Phase II trial with dasiglucagon Low-dose pen and at investigating exercise-induced hypoglycemia, which we believe represent an area of significant unmet medical needs. On the bihormonal artificial pancreas front, we completed the in-use compatibility test of dasiglucagon in the iLet pump last quarter, and we are happy to see that Beta Bionics remains on track for initiating the Phase III trial program later this year. Following our end of Phase II meeting, for this program, we have continued the positive dialogue with FDA and believe we have a good alignment on expectations. Altogether, we look forward providing further updates on our efforts in diabetes as we progress into the next quarters. Please turn to Slide 11. And our rare disease programs in congenital hyperinsulinism and short bowel syndrome. Both indications represent areas of large unmet medical need and reflect Zealand's commitment to make a difference in the lives of people suffering from these conditions. For both programs, we are concluding the Phase III development. If you go to Slide 12, you can see the Phase III program investigating dasiglucagon in CHI is on track to generate results from the trial in neonates later this year. If this study meets its primary endpoint, we expect to utilize the results from the full Phase III program to support a potential NDA submission to the FDA. Slide 13 provides an overview of our ongoing Phase III program for glepaglutide with results from the pivotal Phase III trial abstract to read out in 2022. In the second quarter of this year, we initiated EASE SBS 3, where we have utilized the auto-injector pen for once-weekly dosing. This study in those patients who have already completed EASE SBS 1 and 2, and as a result, up to 4.5 years glepaglutide safety and efficacy data will be generated from the 3 trials. Later in this quarter, we expect to dose the first patients in EASE SBS 4, which will evaluate long-term effects of glepaglutide on intestinal absorption of fluid and energy. On Slide 14, you can see our long-acting GLP-1 and 2 dual agonist dapiglutide, which is being investigated as a potential treatment for SBS as well as a wider range of gastrointestinal diseases. In the last quarter, we completed dosing of the fourth and last cohort in the Phase Ib trial. And results from the study remains on track for later this year. At that time, we also expect to announce the next development steps for the molecule. Please go to Slide 16 and our efforts to address obesity, which is a growing and global condition. While medical treatments for obesity have lagged far behind, people's aspirations for weight loss and what surgical intubations can provide, we are now seeing a change with recently approved medical treatments that achieved weight loss into the mid-teens percentages. However, since obesity is a complex metabolic disorder, we believe that combination of multiple targets are needed to take weight loss treatment to the next level. At Zealand, our approach centers around building 2 functions into a single molecule like BI 456906, all by designing single-acting peptide agonist that may be co-formulated with other peptide agonists. On Slide 17, we are excited to announce that our partner, Boehringer, has completed enrollment into the first of 3 Phase II trials, supporting our shared and strong commitment towards metabolic diseases, and we look forward to the Obesity Week conference in November, where BI will present the outcome of the Phase Ib trial. We believe this molecule, which acts on both the GLP-1 and the glucagon receptor is a strong candidate to potentially address future medical needs in obesity, NASH and Type 2 diabetes. Please go to Slide 18, where we changed our focus to Amylin as a promising new target in obesity. We expect to bring our Amylin analog ZP8396 into Phase I clinical development later this year. This molecule has been designed with a [ PFM ] ban that allows for co-formulation with a number of known GLP-1 and GIP containing molecules. It has a long plasma half-life and have shown weight loss potential in preclinical models. In this regard, we have been excited to see the weight loss potential of another Amylin analog Cagrilintide in Phase II and I trials both as a monotherapy and as combination therapy with semaglutide as presented to the left of this slide. I will now turn over to our CFO, Matt Dallas, to go over through our first half financials. Matt?

[Matthew Donald Dallas, Senior VP & CFO]

Thanks, Adam. On Slide 20, you will see Zealand's income statement for the first half of 2021 and how it compares to the same period in 2020. Total revenue for the half was DKK 132.1 million or USD 21.1 million. This is driven primarily by net product revenue, the V-Go wearable insulin delivery device as well as partnership revenue from our collaboration with Alexion and Sanofi. The net operating result of the half was a loss of DKK 550.8 million or USD 88 million. The sales and marketing costs mainly related to the commercial infrastructure in the U.S. to support the Zegalogue and V-Go commercial programs, while R&D costs primarily related to our late-stage clinical programs. Slide 21 illustrates our strong financial position and ability to support our growing businesses through continued investments. Net operating expenses for the first half were DKK 616.6 million or USD 98.5 million. At the end of the quarter, we had cash, cash equivalents and marketable securities of DKK 1.3 billion or USD 205 million, funding the company through several key upcoming milestones. Turning to our financial guidance on Slide 22. For 2021, there are no changes to our financial guidance from what was announced in March. Net product revenue from the sales of our commercial products is expected to be DKK 220 million, plus or minus 10%. Net operating expenses in 2021 are expected to be DKK 1.25 billion, plus or minus 10%. We expect revenue from existing license agreements. However, since such revenue is uncertain because of size and timing, we do not intend to provide guidance on such revenue. With that, I will now turn it back to Emmanuel.

[Emmanuel Dulac, CEO & President]

Thanks, Matt. Thanks, Adam. Before talking -- taking your questions and looking ahead, I want to reiterate that we are confident that we are well positioned to build on the momentum we established in this first half of the year. As we continue to bring Zegalogue to the patients, we need it most, advance our pipeline of next-generation peptide therapeutics across metabolic and gastrointestinal indications and work to achieve our goal of offering 5 commercialized products by 2025. Thank you all. I will now turn it over to the operator for questions.

[Operator]

[Operator Instructions] Your first question today comes from the line of Joseph Stringer from Needham & Co.

[Joseph Robert Stringer, Associate]

A couple of questions for me. First one on Zegalogue. I know it's early on in the launch, but just curious if you could give us some initial insight in terms of patients that are switching from marketed products? Are they switching from the syringe kits or from other auto-injector products? And then the second question is on -- sorry, second question is on CHI. Just wondering if you could kind of outline what your current thinking is based on your discussions with regulators on -- Emmanuel, you mentioned if the trial is positive in this data trial that could be considered a core registrational trial in conjunction with the prior trial. Is that still your thinking? Or is it a situation where you're doing some additional analysis from the previous Phase III trial? Would you need to run any additional studies? Or what's your current thinking on this?

[Emmanuel Dulac, CEO & President]

Thank you, Joseph. Maybe for the first question related to Zegalogue launch, we have the opportunity to have Frank Sanders online, who is President of the U.S. operation. And so Frank will take these questions and then Adam will actually take the CHI related questions related to discussions with the regulators. Frank?

[Frank Sanders, President of Zealand Pharma U.S]

Thank you, Emmanuel. Joseph, thank you for the question and giving us the opportunity to talk about the launch. As you had said, I mean, it's early days. We're just 1.5 months in, but we're very pleased with where we stand. I mean I wanted to start by saying that we're very proud of the teams here at Zealand for doing what they said they would -- we said we would do, which is executing a full launch in late June. And your question, in particular, was around -- a bit around the sources of business, and I wanted to start by saying that the feedback from HCPs and patients across the board around the clinical profile, Zegalogue has been consistently favorable as it relates to the rapid, reliable recovery and meaningful across all segments of patients. And while it's very early, we are seeing the source of business coming from several areas, and some of these are bringing new patients into the rescue therapy category. And some of these patients are also coming from conversions of legacy rescue therapy kits over into newer products like Zegalogue. And there's a lot of room to continue to grow in maneuver there. Just a data point that's important is that the total prescription share of legacy kits is still 55% in the market as of the second quarter of 2021. So there's plenty of room to continue to much -- establish Zegalogue within the broader market, but to continue to convert share from legacy kits. We're off to a strong start. Pleased with where we are and look forward to be able to report more data as we move forward with the launch.

[Adam Sinding Steensberg]

Okay. And then maybe I will -- this is Adam. I will follow up on your question on CHI. And you can say -- my comment to this is that our confidence in this approach has actually increased our confidence that we can utilize the data from the first study support a full NDA if we need the primary endpoint in the second Phase III trial -- is very strong as we speak right now. We, of course, need to see the data, how they come out in the second Phase III study. But at this moment, we do not anticipate that we would need additional trials if it comes out positive. And I would also say we would expect the data from the first Phase III trial to contribute to as a meaningful data set.

[Operator]

Your next question comes from the line of Graig Suvannavejh, from Goldman Sachs.

[Nicholas Hallatt, Research Analyst]

It's Nick Hallatt on for Graig. Just a quick one for me on glepaglutide. Are you able to offer us any update on trial progress there? And how are you seeing current enrollment rates versus what you're seeing in 1Q, bearing in mind the ongoing COVID environment? And perhaps then when may we expect to hear an update on that program for the balance of the year.

[Emmanuel Dulac, CEO & President]

Adam, you can take a chance.

[Adam Sinding Steensberg]

Yes. Thanks, Graig (sic) [Nick], this is Adam again. So we -- with regards to the recruitment, then we are where we also discussed at the last call, we are back to pre-COVID recruitment, so we're really pleased with this. And you can expect to have updates on the program data in the year. And then we basically just maintain our guidance for results next year, which we are confident in. But that is -- but you can expect, again, updates later in the year, which will be more precise.

[Operator]

Your next question comes from the line of Etzer Darout from Guggenheim.

[Etzer Darout, Senior Analyst]

Just, Adam, if you could help a little bit on sort of the GLP-1 glucagon. We saw some recent data from a different program that looked pretty and/or encouraging for weight loss. And I know this is going to be presented in November with partner BI, but just if you could comment at all on, on the data that you've seen, any read-throughs that you see to sort of the partnered program that we'll get data on in November.

[Adam Sinding Steensberg]

Thanks for the question. And I wish I could give you a very straight answer, but I can't. As you know, it's a partnered program. BI will release the data at the Obesity Week. What we can reiterate here is that we see a lot of excitement with BI. We see a very strong commitment with the 3 ongoing Phase II studies with -- one which they basically completed enrollment earlier in the quarter. And if you can say -- we also noticed the data from this earlier competing program, which, of course, is encouraging to see, but we remain very encouraged on our own approach. So that's -- I cannot share more, unfortunately, but you have to hang in and then look forward to November.

[Operator]

[Operator Instructions] Your next question comes from the line of David Lebowitz from Morgan Stanley.

[David Neil Lebowitz, Vice President]

When you look towards the glepaglutide data for next year, you gave 2022 as timing. Is there lack of visibility at this point? And what time of year in 2022, it would be? Or could you possibly steer us to when and during the year it might come?

[Adam Sinding Steensberg]

We just maintained the year of '22 because we want to have absolute clarity before we specify that even more. So...

[David Neil Lebowitz, Vice President]

Later this year?

[Adam Sinding Steensberg]

Later this year, you will have more clarity when in '22.

[David Neil Lebowitz, Vice President]

Okay. That's helpful. And when we look at the launch of dasiglucagon, are there any comps that we should look at to help guide us and what the cadence might be going forward?

[Frank Sanders, President of Zealand Pharma U.S]

Yes. This is Frank Sanders. Emmanuel, if I could take that one.

[Emmanuel Dulac, CEO & President]

Yes. Yes, please take it.

[Frank Sanders, President of Zealand Pharma U.S]

Yes. So I'm assuming specifically, the question is around Zegalogue. So -- and I think that there's a couple of things that -- obviously, to look at. First of all, we believe that we are launching a unique and well-positioned product in the market that stands along with a strong profile. That said, there are a couple of things that provide leading signals of the performance of Zegalogue. And one of those is the recent launch of other products in the category -- in the rescue therapy category.So I think it's important to be able to look at the performance of other recent launches in the category. But it's also important to watch here the progression of the market share growth as we emerge the overall market volume growth as we emerge from COVID. For example, recent Symphony MED data suggests that the TRx market continues to grow by approximately 10% year-over-year as we emerge from COVID. So I think there's a combination of factors that will be important to look at. And one is the progressive performance of recent second-generation launches as well as how the market growth continues to progress quarter-over-quarter as we emerge. But the big picture here is that there are approximately 4 million patients in the U.S. that are on multiple daily doses of insulin. And despite that, only 540,000 or 15% are on rescue therapies. So there is plenty of room in this category for us to be able to enter a market that's growing, but with a lot of opportunities. So much is in play and to watch, and we'll be able to report more as we progress throughout our first quarter of launch.

[Operator]

Thank you. As we have no further questions at this time, I would like to hand the call back to Emmanuel Dulac for any closing comments. Thank you, sir.

[Emmanuel Dulac, CEO & President]

Thank you. And with that, we would like to thank you all for attending and for your insightful questions. If you have any follow-up questions, please don't hesitate to contact us. We will make sure to reply to you quickly. And I want to finish by saying that I am really proud of the team and to the commitment of the execution of the launch. We are actually on track with our HiFi strategy, which shows confidence in progress in our launch, in our partnerships with BI and AstraZeneca with the ongoing Phase III for CHI and glepaglutide and with the partnerships we have as well with Beta Bionics on the bihormonal artificial pancreas. So Again, thank you for coming in today, and we look forward to connecting on future announcements and update, and thank you again. Talk to you soon.

[Operator]

Thank you. Ladies and gentlemen, that does conclude your call for today. Thank you all for participating, and you may now disconnect.