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

Okay. Good morning, everyone, and welcome to the 9:40 session on day 3 of the 42nd Annual Goldman Sachs Global Healthcare Conference. My name is Graig Suvannavejh. I cover European and U.S. biopharma names here at the firm. It's my great pleasure to be hosting Zealand Pharma in a fireside chat discussion today. And with us is Emmanuel Dulac, who is CEO of the company; and Matt Dallas, CFO of the company as well. And so with that, Emmanuel and Matt, welcome.

Thanks, Graig.

Thank you, Graig.

Would love for us to start maybe with you, Emmanuel, and for those in the audience that may not know the Zealand story well, maybe it's best just to level set and to start off with a description of kind of Zealand Pharma and where you feel you're focused today and what you feel are your core areas of expertise and perhaps what makes Zealand, in your opinion, a compelling investment idea?

Yes. Well, Zealand was formed 22 years ago and have slowly -- we have slowly established ourselves as a leader in peptide research with one of the richest peptide therapeutic pipeline. Our vision is to transform the lives of patients by pioneering new chemistries and structures to advance the next generation of peptide therapeutics. We're establishing strategic partnership, and we have established strategic partnerships with therapeutic leaders, but we are developing as an independent, fully integrated commercial company. Our aspiration is to have 5 commercialized products by 2025 and a high-value pipeline.

Thank you very much for that. I think there's increasing interest, at least as far as I can tell, in peptide-based drugs. And clearly, as you mentioned, Zealand has been around for 22 years. And so in a time where we're seeing a lot of innovation in terms of gene therapies and bispecific antibodies or cell-based therapies, peptides do seem to make a lot of sense still, and I'd love to get, Emmanuel, your perspective on what makes peptides very good potential drugs, and how might you think about Zealand differentiating from other peptide companies, if there is a way to differentiate amongst different peptide-based companies.

Yes. Yes. Excellent. Again, comparing platforms is complex. I think each platform has good or limiting attributes. And on top you have the human component, which plays an essential role -- part, both on the management but as well on the scientific side. At Zealand Pharma, we have actually -- as I said, over the last 22 years, we have established a very strong research team with great stability. Stability is important for research because what we do is long term. And this team has proven to be highly productive over the last 10 years. I agree with you that peptides are highly relevant because the peptide platform remain highly potent and highly selective. So there is a lot of targets that now with the new therapeutic solutions and the new investments we have made in our platforms, we can explore actually multiple technologies, multiple, to allow for overall peptide therapeutics, for example, and we have as well invested in tools to help us improve our productivity even beyond what we have done in the past with phage display, for example. So that is actually great improvements in the way we conduct our research and develop our platform.

One of the reasons I like the Zealand story is that you've got a fairly broad and deep pipeline of opportunities. And perhaps this is a good transition to go into some of those product opportunities. You've been able to get a very first product approved in -- Zegalogue. And with that, that's probably most in the near term, a topic for investor conversations. So with that, can you remind us the value proposition that you see in Zegalogue and now that it's been approved, what are the next steps?

Yes. So yes. So Zegalogue was approved as a third product and -- but it was actually a market in which there has been no innovations over the last 10 years. So that's actually -- we've been very, very happy with the approval and the label we got. The clinical profile of Zegalogue is strong and has been received very favorably by patients, by payers, health care providers it was designed with the patient in mind, designed to act fast, rescue median time of 10 minutes for recovery. 99% of the patients were rescued in 15 minutes with consistent response, regardless of age, weight or conditions. We've one dose for all to avoid confusion. We have a simple-to-use auto-injector and dual storage as well conditions. So all these attributes, I think, we believe, make Zegalogue a very competitive, attractive and new options for HCPs and patients alike. That's actually the proposal that I think that Zegalogue is offering today.

And maybe just to remind the audience, Zegalogue is approved for the treatment of severe hypoglycemia. As you alluded to, there have been older products that have been on the market for some time. There have been in the past several years, maybe the past 2 years, 2 newer innovative products, and that is an inhaled nasal formulation from Lilly called Baqsimi and then there's another product that is a little bit more similar to yours in terms of it's -- it can come in a pen formulation. How are -- just for our audience, can you remind us how are the newer products doing? And how do you feel relative since you did highlight that you'd be perhaps the third entrant of that newer wave of products. How can you meaningfully differentiate from a product profile perspective, but also commercially, given that you are third, I think investors typically think that if you're not first, that could be a challenge, the fact that you're third could also be a challenge.

Yes. So this market is a market, which has seen no innovation and no investments over the last 20 years, so -- until last year. So it's a market, which has, we believe, a big potential for development. There's 8.4 million insulin-dependent patients in the U.S. and only around 500,000 patients are today taking these and buying these rescue kits, even though all of them are at risk of severe hypoglycemic events. So the good thing, as you mentioned, is that there was 2 innovations, 2 introductions last year. And the market has clearly signaled a shift away from the old legacy product, which is this recombinant powder that you have to put together before using it to these ready-to-use solutions. And the shift is only started. There is plenty of room to convert legacy shares of the innovative products. Additionally, we have seen with the launch of this recently approved product in this category that the market has actually seen like a 6% expansion in late 2019 and 10% expansion in 2020 under COVID situation. So not in an ideal promotional and as well with the absence of the return to school season, which traditionally have accounted for around 60% -- 50% to 60% of the annual volume in this market of parents preparing their kids to go to school. So the launch has recently approved products provide advanced signaling for us that HCPs and patients will likely respond to innovations, which allows us to focus our efforts at launch in the U.S. market. But at the same time, there's no head-to-head studies that have been performed, comparing Zegalogue to these [ high disease ] products. So it is inappropriate to make direct comparative statements. But we believe that the profile of the Zegalogue is really strong.

And I believe you signaled to the market that you will be launching relatively soon officially. I don't know if it's -- I can't remember if it's at the end of this month or perhaps sometime in July. But it is being timed such that it is with the back-to-school season. And so with that said, can you share the audience the importance of launching in a back-to-school season and with that, how should we then think about the progression of perhaps the uptake of the product. Does it peak over the next quarter and then kind of flatten out? Or how should we be thinking about that?

Yes. So the demand, I mean, around this back-to-school season is really like concentrated around July, August, so it's a very high demand. So -- and we are totally on track to actually be there. At this time, we guided that we would be ready to launch in mid- to late June, and we are there. We should think about as well the uptick of the product launch around not only the seasonality of it, but as well around the promotional efforts and our promotional efforts is starting now, but we have been present in the field for the last year, 1.5 years with a team. So we are not a new company. We have established relationships for different products, but calling on the potential prescribers of Zegalogue as well. So we are a known entity now in the market.

And it's hard right now to comment on the quarterization of revenue expectations just on the fact that we haven't launched the drug yet. Ask me -- happy to answer that question next year.

Okay. I'll make a note of that, Matt, when we're hopefully in Southern California next year doing this. You are now a commercial prepared company. I think you kind of built that by acquiring a company called Valeritas. And with that said, what are the key expertise that Valeritas has brought to you? Is it more actual sales reps? Is it more back office? Is it market access? Is it all those things? How did -- how has Valeritas been key to building out your commercial organization?

I think all this. I mean, we were really like looking for a team and we have expertise in the diabetes market, expertise in marketing a product, which is not an easy task nowadays with the complexity of access and patient services and being able to support all this operation with as well the promotional as well as the medical approach and support. So we got pretty much all that in this merger and acquisition of Valeritas. Our analysis showed that it would require a fairly small commercial team to reach around 80% of the volume prescribers, again, which is exactly the right size. We realized as well the number of patients that were equipped with a rescue solution was around 6% only of the entire pool of patients. So because we know that dasiglucagon is not only a product, but it's a franchise, and we have multiple indications in development. We felt that this investment as well as the potential in this market was substantially supporting this development of our team. So we are very, very happy, 1.5 years into this effort, having made this decision and with the development that we have seen since.

Yes. And one thing I'd add is also following that, we hired Frank Sanders to lead the U.S. commercial team and the U.S. operations. And with his -- under his leadership, he's also supplemented the Valeritas team and really built out the sales leadership team to be ready for this drug launch.

Thanks, Matt, for that additional color. Maybe one last question on Zegalogue before we move into your other product opportunities. So theme I've been hearing from some of my commercial stage companies that are in their new product launches, which has been as they have been, over the past year, trying to launch during COVID, while they have been able to be successful virtually touching physicians with digital efforts, the pull-through is not exactly the same versus being in front of physicians. So as you find yourself right now on the cusp of commercialization, any color you can provide in terms of the efforts you've done over the past year and how you think that will necessarily translate in the near-term in terms of what sales might look like. And maybe it's a unique situation for Zegalogue because you are in a back-to-school kind of seasonality?

Yes. No, I think this is something we're still measuring in terms of like what has changed. We know that last year, during the total lockdown, there was definitely like a big -- several waves. I mean, there was this big excitement around virtual engagement and tools. We've used a lot of that. We've used all of it. We've actually developed some innovative approach and techniques as well to engage and educate our prescribers and our partners. The -- and then there was this fatigue -- middle of the year or later during the year, this virtual engagement fatigue and I think we've seen a rebalancing of these efforts in the market. So the team has learned a ton, I think, over the last year. We've put in place the right tools. They have established, actually, this type of discipline with their customers and prescribers using on the other product, which we are marketing the V-Go product and so I think we are -- it helps us prepare ourselves mentally and digitally as well with this next phase. But the next phase is interesting because I think it's going to be a more balanced phase. There will be actually a restart of this face-to-face engagements and complementary support with these digital tools. So that's -- I think we will see less of the bumps than we saw in 2020, but it's difficult to predict how the evolution will totally be. But again, I think what reassures us is that we are really ready for it.

Okay. Now Zegalogue is dasiglucagon and there are other applications of dasiglucagon. We're about halfway through our fireside chat already. So we may not have as much time as we ideally would like to talk about all of the additional indications. There's also a bihormonal artificial pancreas potential as well. So with that said, maybe I'll leave it up to you, Emmanuel, to highlight perhaps the other potential uses of dasiglucagon and how to rank prioritize them in your own view?

Yes. Difficult to rank your babies by preference. I just want to talk about the development time before limited in time, but we know that in real life, only 12% to 24% of the diabetics are achieving glycemic control defined by the ADA guidelines. We know that pumps and CGM monitoring have helped improve these numbers to the margin by simply taking the day-to-day management away from patients. So we saw in our Phase IIb results that dasiglucagon have the power to improve glycemic control by allowing patients to be more aggressive on their insulin treatment while experiencing less event -- less hypoglycemic events. So something that today is not only unreachable but as well is counterintuitive to traditional ensuing players. You're actually being more aggressive on your insulin, but you have less hypoglycemic events. So in our Phase IIb as well with the dual-hormone pump, the bihormonal artificial pancreas powered by dasiglucagon, we were able to help 90% of the patients achieve normalization of their glycemia, which is from 12% to 24% to 90%. That's a major gap. So that -- the vision that motivates us today to advance in Phase III as soon as possible is that all type-1 diabetics could improve their glycemic control by being on a bihormonal artificial pancreas with dasiglucagon.

I believe the phase -- I think we're all eagerly awaiting the initiation of the Phase III. And as I'm sure you are as well, I believe the current plan is to see that trial get initiated later this year. It certainly seems like a very potentially large market opportunity, especially given the results that you saw in Phase IIb. I'm wondering the arrangement that you have with Beta Bionics. It's not an exclusive one, if I'm correct. And so as you assess the landscape, is there an opportunity? Or what is the desire by Zealand to try to think about other ways you're going to move this program forward more quickly?

Yes. Yes, maybe, Matt, do you want to talk about the collaboration?

Yes. I mean, it's not an exclusive agreement, but they are our partner, and they're a very good partner for us. And the clinical program is tied with Beta Bionics, right? So this program moves forward as Beta Bionics move forward. As it gets -- following data and commercialization with success, both that -- we want to get both the pump and dasiglucagon to the market in the most -- the broadest way possible, right? Whether that's through additional partners or whatnot. It works for all of those areas. But the clinical program is tied.

Okay. Thank you for that clarification. With that in mind, as we move on perhaps to the pipeline asset that I think a lot of us have been paying attention to for quite some time is glepaglutide. And you're also developing glepaglutide as part of franchise. Where are we in terms of enrollment with glepaglutide. I believe in the last earnings call, you signaled that enrollment seemed to be back on track. Just want to check in to see how you see the progress of the Phase III trials, which admittedly have been going on a little longer than I think we all would have hoped.

Yes. Yes. I think we were all hoping to actually beat expectations on this one. It is true that I think reality is that it is actually challenging to run clinical trials in SBS, just because patients are fragile, patients are very diverse. It's a rare disease. It's a rare condition. So there's not that many as well. And on top of that, we went through this COVID situation, which prevented patients from just going to the hospital. So very, very challenging situation. However, things are going fairly well for glepaglutide. We are not guiding, however, until we can claim back a stable recruitment situation. So we want to see that there is a very clear signal of recovery, and we are happy to -- I would say, to confirm that pending a continued positive development in the enrollment, we expect the results of the trial in 2022. So you know that the result is like 6 months following the last patient included. So there's a follow-up period of the last patient plus 6 months.

Okay. And with that in mind, and I know it's -- there's still some time away in terms of those Phase III data. But how should we be thinking about what would look good from a Zealand Pharma perspective in terms of what that data would look like? And there are obviously some other late-stage SBS assets that use a similar mechanism of action, and we've got GATTEX on the market. But with that said, what would you want to see from that Phase III data?

Yes. Many things. I mean, firstly, we consider the potential of the once-weekly dosing with an easy-to-use auto-injector, a major advantage for the patients in comparison to the existing treatments, which is a once-daily cumbersome -- and products that needs to be mixed. I mean -- and again, secondly, I mean, we are encouraged by the Phase II data. We hope to confirm that the long-acting nature of glepaglutide has been shown -- again shown benefits in the Phase III. On the [indiscernible] side, we have highlighted the notion that we had less abdominal pain in the 2 active arms in Phase II and that -- whereas GATTEX is known to be associated with some abdominal pain. This is clearly also something that we would love to see in the Phase III results. And overall, we expect that the parenteral support volume needed to go down -- could go down significantly in the trial, perhaps in the order of 4 to 5 liters a week depending on the starting volume of the placebo. We have seen as well some patients with total elimination of the need for parenteral nutrition in previous studies. So we expect to -- we hope to be able to replicate some of these findings. Of course, it will be also a significant reduction in the number of hours spent on parenteral support across the trial. So that's -- yes, that's what we expect to see. We know that it's a very [indiscernible] group of patients. So therefore, the outcome will partly depend on the characteristic of the patients enrolled and -- yes. I can say 10x more, but I think we should stop.

Now you also have dapiglutide, which is a dual -- GLP-1/GLP-2 dual agonist. It's in a bit earlier stage of development. But how do you see that product relative to glepaglutide? And how do they fit together as a franchise?

It's very exciting to be able to have a franchise. And so that we can explore more -- and we can build on the knowledge we have accommodated. So dapiglutide was found in Phase Ia to have good safety to our BT profile, but as well, we observed a very long plasma health life, allowing for once-weekly dosing. So based on these results, we have initiated, and we are running a Phase Ib currently. We consider dapiglutide the next generation in SBS treatment. But there is so much medical need in this market that -- and so much variations and interpatient variations that having a pipeline allows us to actually probably find the right drug or the most appropriate treatment for each patient.

And what's next in that program?

So we are actually hoping to complete the Phase Ib this year, initiating Phase II next year. We are actually exploring applications. There is actually a lot more that can be done with this long-acting GLP-1/GLP-2 dual agonist beyond SBS. GLP-1 works on absorption, fat resorption, whereas GLP-2 shows more -- I mean, slows down the gastric motility and so -- and improve visceral circulation. So the combination is expected to improve the fluid and the energy absorption. So we are currently running more research to explore potential benefits beyond SBS. And hopefully, we can talk about it, I would say, early next year.

Okay. You've got also an earlier-stage pipeline that you've been building out, and you have even acquired a company for an asset that would shift the interest for your company to inflammatory bowel disease. What can you tell us about that particular asset? I believe it's ZP 10,000 or 10000. And then you've got another interesting asset, which is an ion channel blocker 9830. So can you tell us about those 2 assets?

Yes. These are early product pipelines. So they are difficult to actually yet associate to disease even though the alpha-4-beta-7, for example, is actually walking the footsteps of an existing and known compound. So we are confident that we are progressing these assets with a very good understanding of the biology and the markers associated so that we can -- we are confident that when we advance these assets, we will advance it knowing that we are actually potentially helping to improve outcomes. But yes, they are extremely exciting assets, very, very early still in preclinical assets, but potentially -- yes, walking to the foots of very big products and highly used products.

And we've got a partnership -- several partnerships as well and one particularly a higher profile Boehringer Ingelheim for a number of unique assets. Can you remind us of the collaboration in itself and which assets within that collaboration are most advanced and when can we expect next data, even though it is in the hands of BI?

Yes. Very exciting assets with BI, which is a dual-agonist GLP-1 glucagon. They have announced earlier this year that they were initiating 2 new Phase II studies on top of the existing one last year in type 2 diabetes. This year, they have initiated obesity and NASH. So each one of these indications in isolation is massive. The 3 combined is probably the 3 -- 1 of 3 largest applications. So we are very excited to be a partner. We've jointly announced earlier last -- earlier this week that this compound was moving at fast speed because it has been given Fast Track in NASH for this condition. So there is a great collaboration on -- based on an amazing products -- product with multiple indications. We have significant milestones and royalties attached to it for us. So yes, we're very, very excited by this compound, which has moved into, I would say, a new dimension.

And what can you say, if anything, about another collaboration you have with Alexion?

Yes. We can't say much right now because the Alexion is going through a merger with AstraZeneca. So we've been asked not to comment. But the collaboration is going well. The compound has a real strategic fit, I would say, in the pipeline for them because it's right in the allay of immunology information. So that's why I think AstraZeneca commented that they were acquiring Alexion for this knowledge and for this franchise. So we are confident that this is a very strong asset, well positioned, but we cannot comment more than that. Matt, do you want to say something on that? Okay.

Yes. Back in March, you did an R&D Day. And I think it outlined what you thought was your R&D strategy. Can you maybe spend a little bit talking about what you hope to achieve in doing that R&D Day? And do you think that at least in the minds of investors you feel that you've been successful in articulating what your near and longer-term R&D ambitions are for the company?

Yes. I think we have actually clarified on our R&D Day the ambitions of the company, which was to become a fully independent integrated company with 5 products commercialized by 2025. And at the same time, we have actually reiterated our interest to keep investing in our productive -- highly productive platform. And so we've actually -- not only we've talked about these improvements and investments we're making on the platform but at the same time, we have disclosed 3 new products, literally, 3 new products in the pipeline. We talked about the ion channel blocker in more detail. We actually, as well disclosed, the progress we've made with the amylin compound in obesity, and we've talked about a GIP compound that we are actually advancing as well. So this was, I would say, new disclosures. I mean, we -- some of these products were on some people radars, but I don't think we provided much detail before. And so I think this is really fantastic expansion of the scope of activity from, again -- with the obesity franchise, adding an obesity franchise and at the same time, information with the ion channel broker.

No, if it isn't becoming apparent to our investors who may be joining us, there's a lot going on at Zealand Pharma right now. You are launching products or at least a product. You do have an additional product on the market as well. And you've got a late-stage and early-stage pipeline that seems to be fleshing out more and more. So with that, perhaps, we can transition to a discussion on financials for the company. And Matt, maybe I could bring you in here. Could you just remind us where the company currently stands with respect to cash. You may have mentioned this before, but I believe you've got a decent runway. But can you remind me what that looks like? And then what's the financing strategy going forward?

Yes. So cash, we ended the quarter 1 at $252 million, did a capital raise in January. It's included with that balance. I don't really comment publicly on cash burn, but our burn for our OpEx for the year is targeted to be about DKK 1.25 billion, another DKK 220 million in revenue. By the way, this is DKK numbers on the guidance side, not U.S. dollars. The cash balances in U.S. dollars, $252 million. Financing strategy. Last June and this January, we did traditional capital raises, ABBs in Europe. We do have -- as you've mentioned today, we have very strong partnerships with BI and Alexion. We have a lot of nondilutive milestones. We haven't disclosed those milestones on an individual basis, but BI is 345 million plus royalty of low single digits -- or high single digits to low double digits. Alexion is over 600 million with additional options with additional similar royalty stream. So we have a lot of nondilutive options as well. We also have -- we have the global rights to our portfolio. And so -- and an unencumbered balance sheet. So as the -- some of the stuff, as the market is progressing as our portfolio progresses, we have the options to look into kind of the -- what I would say, is raise from strength depending on whether it's nondilutive partnerships, whether it's just from recurring milestones of success or whether it's through the traditional capital raises that so many pipeline companies kind of use to finance their operations.

Yes. And we have a lot going on, as you mentioned, Graig, but there is very clear priorities. And besides the launch that we are actually engaging on now in the clinical pipeline, we are actually planning to initiate the Phase III for the bihormonal artificial pump. The other studies are running. So we're running them, and then we're going to hopefully close them as soon as possible. Initiation of the study -- another study is the amylin. We're planning to initiate Phase I for amylin. And then the early pipeline is actually progressing really nicely as well. So it looks a lot, but the focus and the attention is very, very strong.

Thank you for that. We've probably talked about these in some shape or form throughout this fireside chat. But could you just summarize for us again as we look at what the potential catalyst for the company over the 6 the next 12 months, what that looks like in totality, that would be great. And then I'll finish up with one last bigger-picture question for you, Emmanuel.

Over the next 12 months. So in 12 months from now, the projection is that we will be actually running an additional Phase III, an additional Phase I. We would have completed -- we would have initiated an additional Phase II. And again, I'm not going to go through it in detail because I just covered it. In 5 years from now, I think it's very clear that we want to be independent, fully integrated biotech, we have at least 5 commercialized products. I keep saying it again, but I think we want as well to have to exit with a high-value pipeline. So by innovating, by investing in our platform and with multiple strategic partnerships because I think we recognize that there are things that we need to associate with the therapeutic leaders to be able to commercialize some of these assets. We can't take everything ourselves, but we will actually try to become alongside of the product pipeline, development maturity, a stronger and stronger commercial, fully integrated company.

And Graig, just building on that. Launch Zegalogue in a couple of weeks, CHI, Phase III data 2021, bihormonal Phase III initiation 2021, go out with data 2022.

Fantastic. I think that's a great way to wrap up the fireside chat. And so with that, I want to thank Emmanuel and Matt for joining us, and I want to thank you, the audience, for joining us as well on day 3 at the Goldman Sachs Global Healthcare Conference. So with that, thank you very much, and have a great rest of your day.

Thanks, Graig.

Thank you, Graig. Thank you, everyone.