Zealand Pharma A/S (ZEAL) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to Zealand Pharma's conference call to discuss the U.S. FDA's approval of Zegalogue for the treatment of severe hypoglycemia. [Operator Instructions] Today's call is being recorded. At this time, I would now like to turn the call over to Matt Dallas, Senior Vice President, Chief Financial Officer. Matt?

Thank you, operator. Welcome, and thank you for joining us today to discuss Zealand's U.S. FDA approval of Zegalogue. 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; Chief Medical Officer, Adam Steensberg; and Frank Sanders, our President of the U.S. -- Zealand Pharma U.S. The team will respectively provide an overview of the approval of Zegalogue label and indication data and the commercialization strategy. After the prepared remarks, we will open the call to take your questions. You can find the related company announcement and additional supporting information on our website at zealandpharma.com. I would 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 up them -- 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 your CEO, Emmanuel Dulac.

Thank you, Matt, and thanks to everyone for joining today. Please turn to Slide 3. We are very excited to provide more detail around our U.S. FDA approval of Zegalogue for the treatment of people with diabetes who are at-risk of severe hypoglycemia. Zegalogue, now indicated in the U.S. for the treatment of severe hypoglycemia in adults and children with diabetes aged 6 or older, is our first approval in the dasiglucagon franchise. We have other indications currently under investigation and is also our first FDA approval as a company. We are extremely pleased with the U.S. label for Zegalogue, which reflects its safety and benefit profile. Adam Steensberg, our Head of Research and Development, will add more detail about the U.S. label in just a moment. Zegalogue has been shown to be safe and well tolerated, and the label reflects the clinical meaningful benefit in adults and children with diabetes. Please turn to Slide 4. On Slide 4 for your reference, we have the indication and important safety information for Zegalogue. A copy of the full PI is available at zegalogue.com/prescribing-information. Please turn to Slide 5. The U.S. FDA approval of Zegalogue is an exciting achievement. We are offering people with diabetes an important new choice for the management of their disease. We look forward to introducing 2 self-injection options, both an auto-injector and a prefilled syringe to the U.S. market with a full launch in late June. This will include a market access program as well as comprehensive patient support services as part of our commitment to helping patients with diabetes manage the risks of their disease. With this approval, we have taken another important step in pursuing our ambition as a fully integrated biotech that will have 5 marketed products by the year 2025. Throughout the last year, we have continued to advance the commercial organization in the U.S. through our acquisition of Valeritas and the V-Go wearable insulin device. And by optimizing our U.S. commercial organization under the leadership of Frank Sanders, President of Zealand Pharma U.S. Through established relationships with KOL and HCP, as well as high prescriber coverage, we are on track with our launch readiness operations, and believe this initial launch will put us in a strong position to further build out our commercial organization. I take the opportunity to thank the patients, their families and caregivers, the investigators and their staff and our employees who made the Zegalogue clinical study and this resulting approval possible. This is truly a great day for Zealand. I would like to now turn the call over to Adam Steensberg, our Head of Research and Development, to review the U.S. prescribing information in more detail, including data that supported the FDA approval. Adam?

Thank you, Emmanuel. And if you could turn to Slide 6, please. So first, I'm truly delighted to join Emmanuel in expressing my excitement about this significant milestone and I'm truly proud of what we have accomplished. So our chemistry and biology teams have devised how to stabilize glucagon, creating the first and only glucagon analog, and our clinical and regulatory teams who designed and carried out an efficient development and regulatory plan to allow us to gain U.S. FDA approval. In preparation for the Zegalogue launch, we have established a commercial infrastructure that we plan to build on and evolve for subsequent drug launches. Dasiglucagon is currently being developed in 3 additional distinct indications. The bihormonal artificial pancreas pump opportunity has automated diabetes management, dasiglucagon for congenital hyperinsulinism and dasiglucagon in an adjustable mini-dose pen for treatment of post-bariatric hypoglycemia and for use in type 1 diabetes. In that, Zegalogue is just the beginning of Zealand's planned commercial rollout and underscores our continued commitment to bring innovative treatment options to patients. Please go to Slide 7. Here, we will turn to our recent FDA approval. Severe hypoglycemia is an acute life-threatening condition resulting from a critical drop in blood glucose levels, associated primarily with insulin therapy and is one of the most feared complications of diabetes treatment. Children and -- with diabetes on insulin are particularly affected with 7 out of 100 children up to the age of 18 having reported a severe hypoglycemic event within the previous 6 months. While patients have the ability to monitor and adjust their blood glucose levels to remain in proper glycemic control, it's not always possible to prevent a severe hypoglycemic event. And we believe that there is a significant unmet medical need for treatment of severe hypoglycemia despite currently available options as well as an under appreciation of the risk of severe hypoglycemia in adults. With an estimated 4 million patients on multiple daily injections of insulin, only about 11% are being prescribed glucagon to manage severe hypoglycemia. New and innovative therapies can potentially serve to improve this disparity. As you look at Slide 8 and 9, today's -- yesterday's approval is based on the results of 3 randomized double-blinded placebo-controlled multi-center Phase III studies of Zegalogue in children aged 6 to 17 and in adults with type 1 diabetes. The primary efficacy endpoint for all 3 studies was time to plasma glucose recovery, defined as an increase in blood glucose of 20-milligram per deciliter from time of administration. The primary endpoint was successfully achieved across the adult and pediatric studies with a significant faster median time to recovery of only 10 minutes following Zegalogue administration compared to placebo. The magnitude and the consistency of effect seen in all 3 pivotal studies is clinically meaningful, as just a few minutes can make a difference when it comes to severe hypoglycemia. In addition to the positive efficacy results, we are also pleased with the safety profile of Zegalogue. The most common adverse events reported were nausea, vomiting, headache, diarrhea and injection site pain. Please turn to Slide 10. As shared by Emmanuel, Zegalogue is indicated for the treatment of severe hypoglycemia in pediatric and adult patients with diabetes 6 years of age and above. The recommended dose for all 8 groups is 0.6 milligram provided either by the auto-injector that you can see to the right or via prefilled syringe. The product has a shelf life of 36 months at refrigerated temperatures, of which 12 months can be at room temperature. And we believe that the U.S. FDA approval of Zegalogue will help enable children and adults with diabetes to address the sudden and severe hypoglycemia, and it represent a new and attractive choice for people with diabetes to manage the potential consequences of that disease. And with that, I will now pass the call to Frank Sanders, our President of Zealand Pharma U.S. to discuss our plans for the commercial launch of Zegalogue in the U.S. Frank, please.

Thank you, Adam. Please turn to Slide 11. With the approval of Zegalogue, our commercial and medical affairs organizations are well prepared and highly motivated to partner with the diabetes community to bring this new treatment option for severe hypoglycemia to people with diabetes. It is our belief that Zegalogue will launch at the right time in a growing market that is driven by innovation. First, a bit about the market. We see strong potential to expand the current glucagon market. With improved treatment options, the glucagon rescue therapy market could reach greater than $1 billion in the U.S. market alone. Key drivers include an increasing number of insulin-treated people with diabetes, greater awareness about severe hypoglycemia as well as the recent market entry of several newly approved therapies. The market has clearly signaled that its shifting away from legacy rescue therapy pits to innovative new products for patients and caregivers. Based on these trends, we anticipate ample opportunity to convert users of these kits, which is currently 60% of users to new products like Zegalogue. We saw this with recent launches of products in this category, innovative primary launches drive incremental market growth. Specifically, the market grew by approximately 10% in 2020. We plan to execute a full product launch in late June, coinciding with the annual market opportunity in the back-to-school season. Our sales team is in place and present with customers today through the promotion of V-Go, and will pivot in late June to begin to execute the launch ahead of the back-to-school market lift. Please move to Slide 12. We believe that Zegalogue will be an attractive new option for both HCPs and people with diabetes. In addition to the median time to blood glucose recovery of 10 minutes in adults and children, we saw strong consistency across the data with all pivotal Phase III studies reporting the same median time to recovery, and 99% of patients in the main adult Phase III trial recovered within 15 minutes. Moving to Slide 13. We have 4 strategic objectives to ensure a successful launch of Zegalogue: the first is to establish clear and distinct product positioning with HCPs, patients and caregivers that will break through the competitive clutter; second, we will leverage the back-to-school season to execute a focused launch that targets and prioritizes high-volume customer segments; third, we are working closely with top national and regional payers, PBMs and health systems to establish market access early on to make it simple for patients and health care providers to acquire the product; and fourth, we are committed to providing a patient support program to ensure education and access for patients and caregivers. Please move to Slide 24 -- excuse me, Slide 14. As I mentioned, our launch preparations will ensure readiness for a full launch in late June and our time to target the back-to-school season market. As such, we have completed the hiring, onboarding, training of the entire commercial organization. This includes an experienced sales force and an established market access team. Moving on to Slide 15. We are structured and resourced to cover over 80% of the glucagon prescriber base. This includes a mix of live and virtual sales professionals as well as a strong omni-channel and digital marketing presence. Additionally, our commercial team has a long-standing presence and established relationships in endocrinology practices today through the promotion of V-Go, which has been tested in the current COVID-challenged environment. This presence provides us with an entry point for the launch of Zegalogue. Based upon the clinical value that Zegalogue will bring to the market, we plan to offer parity pricing. This pricing strategy is supported by extensive research with drug formulary decision-makers at national and regional payers, PBM and health systems. Our market access team is actively engaging national and regional payers and PBMs around the clinical value of Zegalogue. Discussions with the drug formulary decision-makers have been favorable and we expect broad market access at launch, which will continue to build over the first 2 quarters in the market. I look forward to providing commercial updates on Zegalogue in our Q1 earnings call on May 12, which precedes the launch. Now I will return the call back to Emmanuel.

Thank you, Frank. Thank you for shedding light on our go-to-launch strategy and launch readiness. Thank you, Matt. Thank you, Adam. Turning to Slide 16. While the purpose of today's call is to discuss the Zegalogue approval, I want to take a moment to share a snapshot of our future. I believe the focused efforts and investments in the launch of Zegalogue will play out for additional value potential. While our immediate commercial priority is executing on a strong launch for Zegalogue in the U.S., we are, in tandem, focused on advancing our clinical programs with the goal of 3 additional U.S. launches by 2025. We are thrilled with the news of today's FDA's approval. 2021 has started out a strong -- on a strong pace, and we expect continued news flow as you can see on this slide for the remainder of the year. It is very gratifying to work every day towards fulfilling the significant potential of Zealand. And I am confident that our first U.S. commercial launch will put us in a position of strength as we continue to execute our strategic objectives of adding 5 products on the market by 2025. Thank you for joining us on today's call, and thank you all for your continued support. We hope that Zegalogue is the first of many new drugs to come from Zealand, and we look forward to keeping you all informed on our progress. With that, we will open the call up for questions now. Operator?

[Operator Instructions] And your first question comes from the line of Graig Suvannavejh from Goldman Sachs.

Congratulations, team, on the earlier-than-expected approval. My apologies, I dialed into the call a little late. But I'm wondering if you could highlight for me, at least, where you think the key areas of differentiation are with the label versus some of your competitor products, the Xeris or the Lilly product? And if you could also provide for us what your view is in terms of -- on the commercialization side, like as you think about what's your how-to-win strategy in terms of being effective in getting this product off the ground and into the marketplace? And I'm just wondering, maybe as a last question, how should we be thinking about perhaps the cadence of sales and whether you expect this to be a more gradual uptick curve or if there's something that you think that could make this perhaps a more rapid uptick curve relative to what we've seen with other products?

Thank you, Graig. Yes. On your first question, so I will direct to Adam for more detail on our label. And then Frank will take for the forecast and sales ramp up. I just want to say that there are no head-to-head studies that have been performed comparing Zegalogue to the other products. Therefore, it's impossible to make direct comparative statements. The clinical profile, though, of Zegalogue is strong. And there have been already some discussions with payers and health care providers. So I think we have received strong feedback. But maybe, Adam, you want to take actually some of the highlights of the label.

Yes. I can do that, Emmanuel. So thanks for the question, Graig. And of course, one of the things which we are extremely excited about and that we have highlighted since we saw the first Phase III data and -- is the consistency of response. And this consistent median of 10 minutes to recovery, which we think is -- has obviously a very, very strong profile for dasiglucagon. And it's clearly something that we are extremely excited about. So that consistency and the fast onset of 10 minutes is something we find exciting. And also, if you look into the label, you can see that the majority of the patients will have this fast response. So that's something we think is important. And then you can say, based on prior market research, we also think that an injection and auto-injector offers significant benefit for patients and caregivers, something we have repeatedly also seen in our market research. And then I will mention lastly, this ability to store the product, both in the refrigerator and at room temperature, we believe that, that provides some upside as well for patients as it provides flexibility. So we are -- as we also communicated during the call here, extremely excited about the label that we ended up with, and we believe it represent very well what we have also seen in the studies.

So next -- I think the next question was actually on the sales potential and ramp of the product. And I guess, Frank, you should take this one.

Thank you, Emmanuel, and thank you, Graig, for the question. As Adam said, the clinical profile of Zegalogue is strong and has been received very favorably by payers, patients and health care providers alike. I would say that we're launching at the right time in the market. The market has clearly signaled a shift away from legacy products to innovative new products for both patients and caregivers. And this shift is still very much underway. Based on current trends, there will be plenty of room for us to be able to convert legacy share over to innovative products like Zegalogue. For example, we'll be launching at a time where the share of the legacy rescue kits will still be approximately 60%. And additionally, we've seen that the launch of recently approved products in this category has triggered growth or generated incremental growth. Specifically, the market is growing by 10%. And that's despite the fact that endocrinology visits are down last year due to COVID as well as the back-to-school season being muted. So we believe that Zegalogue will be an attractive new option for HCPs and patients alike. And the other advantage that we have is that the recently approved products provides us advanced signaling around the segments of HCPs and patients that will be -- that will most likely be responsive to innovation, and this enables us to really focus our efforts at launch, so [ best ].

Your next question comes from the line of Thomas Bowers from Danske Bank.

Congrats for the approval. So a couple of questions from my side here. So maybe just sticking a little bit to the efficacy claims and the 10 minutes recovery time. So I'm not sure if I missed this, but is this something that you intend to chase in sort of a future head-to-head trial to sort of -- well, try to demonstrate some sort of superiority? And then maybe in addition to that, looking at the label compare, so nausea, vomiting is somewhat higher with Zegalogue compared to Gvoke, at least. So do you have any color why you actually see this somewhat material difference? And I'm just wondering whether it could be higher receptor occupancy or any connections with what you could say the beta, at least indicated beta, faster glucose recovery timeline, so with the 10 minutes. And then maybe just lastly, just on the ADAs. So the antibody -- sorry, antidrug antibodies. So I know less than 1% is -- in close to 500 patients seems somewhat modest. But is there any concerns or any comments made by the FDA? I'm particularly thinking about the BI-hormone phase free-to-sign meetings. And maybe also, if you could give me a little bit of color on the risk you see with the cross reactivity against the native glucagon. Is this something that we should potentially be concerned about in a sort of a long-term use of dasiglucagon?

Thank you, Thomas. I mean it's a block of questions for Adam, this one. But just wanted to say that while these -- all these studies are not comparative, they are -- all have a comparative arm. So -- but I'll let Adam respond.

Yes. So thanks for the question, Thomas. And I think, first of all, it's important to highlight that you cannot and we should not, of course, compare directly across studies that have not been run -- that has been run as independent studies. And we have not provided any guidance if we plan here to have studies and have no plans to provide such guidance at this moment. On the side effect profile, you will also remember that in our -- at least our first and the larger, the main adult study and in the pediatric study, we actually had glucagon as a comparator. And our assessment is that you can say, the side effects when it comes to nausea and vomiting is on par with what we saw in the comparator study. So it's not -- it's something that we -- you can say, first, this is an expected profile, and we are pleased with it and we cannot really comment on the observations in the competing products. I will just highlight that, of course, in nausea and to some degree, actually -- also especially nausea, but also some degree of vomiting, it's also depending on how you collect these episodes. And the ADA and the message is, as you pointed out, this is a very low rate, what we have observed here. And I would say -- if I should draw a parallel, then to the BI program that you follow in here, I would say, in our CHI programs, we have had [ GLP ] treatment, chronic treatment for more than -- close to 2 years now. So while we always have to, you can say, value-add and carefully monitor antibody antidrugs in -- when you develop peptides or protein drugs, then for dasiglucagon, it's not a program where we have major concerns with what we have seen so far. Actually, to the opposite, I would say, we have observed a low rate of immunogenicity compared to other peptide drugs. So it's not something that caused specific concerns beyond this that you can say the general associates needs to pay attention to when you develop peptide and protein drugs.

Okay. Got it. And then maybe if I may follow-up just sort of a small commercial question here. So again, comparing the labels, so Gvoke and Baqsimi has a case for use of the drug between the age of level 2 and 4 and then you have 6. So can you maybe just -- how much impact or how much of the -- you would say, commercial upside, does that sort of leave the -- for competitors in that? I guess, it's a very small number of patients that are below 6. Is that correct?

Yes. That's...

This is Frank. I can take that question. Thomas, I think you answered the question yourself correctly. Yes, it's a very small number of patients below 6. The vast majority of the market opportunity will be in patients that are age of 6 years and greater.

Your next question comes from the line of David Lebowitz from Morgan Stanley.

What type of expectation should we have for overall market growth of the hypoglycemia market given these new therapies coming on board?

Frank, you can take this one. You actually touched it during your presentation.

Yes. Yes. And yes, thank you. I'll summarize it again. So what we've learned from the launch of new products in this marketplace over the last 1.5 years is that the market is growing by approximately 10% with the launch of these new and innovative products. What we really don't know yet is what this market will do in an environment that is not held back by COVID. As you know well that office visits were down to endocrinologists substantially last year and this year as well as the back-to-school season has been substantially muted with children not returning to school. So we'll learn more as we move forward in this market, but we expect that the floor is most likely at 10%. And with the launch of Zegalogue adding to the category of new and innovative products, we expect to have incremental growth over and above what we've seen last year.

And what's generally the replacement cycle with a lot of the supply purchased patients going unused and the expiration, I believe, being 36 months, do patients typically hold the product for -- will they typically hold it for 2 or 3 years before replacing?

Yes. I think our estimates and our knowledge in this field is that it's a mix. It's really a mix of patients equipping themselves with various solutions, which all have a different shelf life and different use. And at the same time, there's different incidents within patients. Our -- despite these change variations, we know that there is around 1 to 2 events per patient per year and that's around, I would say, 40% of these patients will have more than that. So I think there is potentially, again, a big interpretation variations in this market. Frank, do you want to add anything?

No. Nothing to add. I agree.

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

Great. Congrats on the approval. I guess, first question, how would you characterize the rate of severe hypoglycemia in type 1 diabetics over the last few years? Has it improved with improved insulin? In other words, is the size of the opportunity changing at all? And the second question is with 3 new products on the market for severe hypoglycemia, I wondered if you could provide a little bit more color on your formulary and market access strategy. For example, would you need to step through any of the recently launched products prior to use or anything else that you could kind of provide as incremental color there?

Thank you. Yes. To that, I will pass to Frank, who has a detailed answer. What I would say that it is very difficult over the last 1.5 years to really like read through the market based on -- even though there has been 2 novelties introduced, and we've seen a very nice uptake around these novelties. The fact that we were under this COVID worldwide pandemic lockdown, I think, really potentially impaired the access or the needs for these back-to-school treatments. So it is difficult to actually, I would say, master the size of the opportunity and the attractiveness. What we know -- and maybe, Frank, you can take over and talk about the overall market potential. Yes, sorry.

Yes. Yes. Yes, so I mean, I'll start by saying we believe that there is significant unmet need in the treatment of severe hypoglycemia despite the fact that there are existing options today. One way to look at it is that there are an estimated -- there are estimated 4 million patients that are on multiple daily injections of insulin today. And as you know that these patients on multiple daily injections of insulin are at higher risk of severe hypoglycemia. And despite this, only about 14% of those patients, or slightly over 530,000, have been prescribed glucagon rescue therapies in 2020 to manage severe hypoglycemia. So why I already said that the launch of recently approved therapies has grown the market by 10%, it's clear that there's still significant unmet need in this area. And new and innovative therapies like Zegalogue, we believe, will -- can potentially serve can improve this disparity. So the second question, I believe, was about market access plans. And I'll answer that by saying that our managed care teams are now actively engaging national and regional payers and PBMs ahead of the full commercial launch of Zegalogue in late June. And I -- our ability to engage payers has interestingly not at all been impacted by COVID. Feedback around the clinical profile of Zegalogue from drug formulary decision-makers has been consistently positive. And we do expect broad access to Zegalogue at launch, which we'll continue to build through the second half of 2021 into -- or in 2021 into 2022. In addition to that, we are committed to providing a comprehensive patient support program at launch to address the needs of patients and caregivers, which will include co-pay systems, product acquisition support and other resources. So we're, we believe, well positioned and clearly well prepared. Thank you for the question.

Maybe I can...

Great. Congrats -- sorry.

Maybe I could just add because you also asked a little bit on the newer incidents. And if the risk of severe hypoglycemia were declining, and I would say, as also recommended by American Diabetes Association, then any diabetes patients taking insulin with an increased risk of level 2 and 3 hypoglycemia, they should be prescribed glucagon kits or glucagon solutions. And I would say any of the new insulins, of course, carry these risks as well. And one of the things that at least we have observed over the recent years is that the awareness that hypoglycemia is something that is associated with insulin therapy has actually increased. And you can say, if you are at risk, it's our belief that you should have a product like this around you to serve in -- as in rescue situations.

Congrats, again, on the approval.

Your next question comes from Joseph Stringer from Needham & Company.

Congrats on the approval. Just 2 quick ones for me. One, I wanted to get your thoughts on the dynamics of the prefilled syringe versus the auto-injector and just in terms of how you see the relative percentage of patients being on each of those, at least initially and then over time. And then second, maybe you could comment on the market dynamics, overall market dynamics, given the recent entry of a generic syringe rescue kit in December of last year.

Okay. Well, thank you. 2 questions for you, Frank. I'm good.

Yes. Okay, good. So first question is -- yes, so thank you. So the first question is, where do we see the prefilled syringe sitting in and how may that change over time? So we -- our objective is to offer patients and caregivers the option for both prefilled syringe and auto-injector at launch. There are a number of situations that will influence the form preference of customers. So for example, setting of care will be one of the factors. Again, for example, that if you look at the mix of auto-injector sales versus prefilled sales in the hospital setting, it could be closer to 50-50 initially based on the utilization patterns from recent product launches. But with that being said, we expect 80% or greater at the prescription volume overall to come from the auto-injector presentation based on strong customer preferences. So the second question was around the impact of the launch of the generic from Amphastar. And so what I'll start by saying that although Amphastar has launched a generic, the WACC pricing for Amphastar -- the Amphastar product is at parity for the rest of the market. And to date, the share shift has exclusively impacted, on a one-to-one basis, the Eli Lilly legacy glucagon rescue kit. It has not impacted recent entrants. And we expect that this is likely to continue to be the case and not have a direct impact on Zegalogue.

There are no further questions at this time. Please go ahead. We have no further questions. Please go ahead.

Excuse me, did you say that we have no more questions? Okay, Emmanuel, please?

Do we have -- yes. No, I was saying we have had very detailed questions related to the commercialization and go-to-launch. So maybe we have gone through the vast majority of them now. And if there's no more questions here, we will end this call.

Yes. Thank you for attending. Exit.

That does conclude our conference for today. Thank you for participating. You may all disconnect.

Thank you.