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

Good morning, and welcome to the second day of the 19th Annual Morgan Stanley Healthcare Conference. Before I get going, let me just read the requisite disclosures. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. And with that, I'm one of the biotech analysts here. My name is David Lebowitz. I'm happy to have with me from Zealand Pharma, CEO, Emmanuel Dulac; and CFO, Matt Dallas. I guess before we get into it, could you offer an overview of the company and tell us about what the company's overall mission is?

Yes. Thank you, David. So Zealand Pharma is actually a 22-year-old company formed on the foundation of advancing peptides. So we have -- we are a platform company. We have harnessed long-acting, stable-in-solution peptides, but we're actually advancing now a new generation of oral peptides in research. We are actually -- we've made actually the commitment to have 5 commercialized products by 2025. We're commercialized 2 now. And our goal is to develop as an independent fully integrated company. So we've established a foot in the U.S. with a fully fledged commercial team last year. And we've launched our first product this year.

So why don't we start there? You had approval earlier this year for Zegalogue, also known previously as dasiglucagon, the generic name. What unmet need currently remains for the treatment of this -- of hypoglycemia and how could Zegalogue address it?

Yes. There's actually -- in the U.S. only, there's 8 million insulin-independent patients. Around 50% of these patients are multidosing every day, and they are the one who are at risk of facing a severe hypoglycemic events. So either because they overdose insulin or they underappreciate the food intake or they exercised too much or -- and/or they have this daily variations that everyone is facing. And so every patient, these 4 million patients around are experiencing several hypoglycemia every year. And severe hypoglycemic events is defined as when the patient is requiring an outside help, a third-party help. So we have developed this auto-injector, which is with -- powered with dasiglucagon solution, and helps rescue patients in 10 minute. So we have -- we've introduced this. There is actually -- there are solutions available as well. The historical solution was dry powder glucagon, which you had to recombine before this emergency intervention, which didn't necessarily fit the exact situation, the acute situation that the patient was facing and the surrounding of the patients. So the unmet medical need is that very few patients in the past just acquired these devices because they were unfit for the acute response. And today, around 500,000 patients only in the U.S. would buy these rescue solutions out of 4 million patients. So the large unmet clinical need is primarily on the fact that these patients are not even -- were not even fetching a solution for the rescue. We hope that with this introduction of the new generations of products, the rescue is basically much more affordable and easy for the patients to acquire. And so we hope to see this market developing. And we have seen that in the past few months. Since the introduction in 2019 of these new solutions, the market has actually expanded. The U.S. market has expanded by 6% in '19 and 10% in '20, and so it looks like this is accelerating again in '21. So we are very, very happy to see that patients are taking ownership of these solutions.

So in the past, I mean, certainly, when I talk clients, there's often this feeling why can't people have a chocolate bar or something like that to handle a hypoglycemic situation. And I guess how do you explain to people about why this is a better solution? And how do you change patient practice who might have been approaching in this way for many years?

Yes. I think -- I mean let's not confuse low blood glucose where you can manage actually yourself with effectively intake of pastries or chocolate or glycogen tablets -- glucose tablets. I think you can manage that. I think hypoglycemic event triggers is triggered by a very low blood glucose. It can actually drop pretty fast. And as well, it is actually preceded by confusions, for example. So most of the patients who actually are fainting didn't really see it coming. And there -- and that's actually pretty abrupt. So that's a severe hypoglycemic event. That's defined like the patient is requiring a third-party to help them. And that's why we have these very simple to use auto-injectors so that anyone around someone, a patient fainted, can actually use and inject the product to these patients.

So in the population that would need them, there's -- they have to actually create their own inventory to maintain them in preparation for such an event. And some of them might not have an event. So what's the turnover of how long they need to actually replace a pen? And in the case of those that have events, how frequent are they?

So again, what we know from the current past use, I mean, the not so long ago, there's around 500,000 patients who are buying these kits. And on average, they were buying 2 kits annually. So you have actually -- you have these potentially high event population who's facing 2 events a year. And so these are constant, I would say, fillers of these type of prescriptions. You have potentially a less severe population in the 4 million who is only facing once a year, these events. And that's probably a growth curve. So that's probably where the majority of the patients would be. And I think that's where the growth of the market will be. And then you have the rest of the population, which is probably more rare as well, but facing an event every other year or something like that. So yes, that's -- there's a spread of needs, of course.

How does Zegalogue compare with some of the other newer therapies? I know there's inhaleds. Where does it fit?

So I think there's no comparison, head-to-head comparison in this device. So I think it's unfair to compare them. I think what Zegalogue stands for is that we have 3 Phase III studies. They all demonstrated a rescue in 10 minutes median time. So regardless of your age, your weight, your conditions, your comorbidities, we delivered rescue in 10 minutes. And so consistency is very important. And we have 1 dose for all patients. So regardless, again, of age and weight, this is 1 dose. So in an emergency situation, in an ambulance or at school, you have no confusions that can arise from the use of Zegalogue because you will be using the right dose and the right instrument for the patients. So that's what we think we have as a big advantage, we -- which meets the requirements for the patients. We are as well, we have a very long storage. And we can actually -- we can -- you can keep the device up to 3 years in the fridge, in refrigeration. Along with your insulin, you can put your pen and keep it to 3 years there so...

So when we look forward, what type of sales ramp should we envision with the therapy?

So we're not guiding on individual product launch. And again, Matt, you want to talk about it?

Yes. I mean we've -- it's pretty early for us right now to be providing those levels of guidance. That drug's been out for about 2.5 months. As we get more data, more analytics and over time, we'll be able to disclose more about the performance.

Okay. Now outside of hypoglycemia, dasiglucagon is being studied in other areas. Could you tell us about them such as CHI and these other indications?

Yes. We're advancing 3 other indications currently with dasiglucagon. So in these ultra conditions, CHI, where patients are born with these hyperactive pancreas, it's a genetic disorder. And so we're offering a continuous infusion of dasiglucagon with a pump and to try to -- from newborn to later in life to try to maintain these kids with -- and try to normalize as much as possible their blood glucose. We are developing a dual-hormone pump. So it's like an insulin pump but with a cartridge for glucagon, which will allow -- which should allow patients to get to goal more aggressively and as well avoid hypoglycemic events. So that's actually, for us, that's the largest indication and probably the biggest potential in this franchise in terms of number of patients' adoption as well as transformative treatments for the type 1 diabetic patients, this dual-hormone pump. And then we're developing in combination a pen, a multidose pen of dasiglucagon, which can be used for exercise-induced hypoglycemic events as well as -- and then we're exploring other type of use. But we believe that this multidose pen is very complementary to the pump. Because you look at the insulin market today, around 50% of the patients are using pumps. And the other 50% are using multidose pen of insulin, multidosing themself. And so in, I would say, parallel to this development, we would have a pump with dual hormones. And we would provide a pen for the people who are not necessary adopting pumps so that we can, again, tackle the entire market of type 1.

Could you quantify what type of opportunity the dual-hormone pump ultimately offers?

Yes. I mean the -- and again, I think I only referred to the Phase IIb results that were issued in late 2019. So it showed actually that the patients that were being put on this pump were able to achieve around 90% of the ADA goals, the American Diabetes Association goals of, I would say, that would qualify you as normalized in terms of blood glucose. So whereas we know that in real life, around 20% of the patients only are reaching this level, this goal. So patients in real life, despite the solutions and the advancements of insulins that have been offered, are still facing this difficulty to integrate their full treatment and compliance with the treatment in their real life. That's why we only see 20% of them reaching goals. The promise of this dual-hormone pump is that it's a fully-automated system, closed-loop system, which is connecting to this CGM, and the CGM informs the pump. So the CGM is not only a gimmick that tells you if you're high or low. It's actually the brain. It becomes really like complementary to the pump. And then the pump will inject on demand microdose of insulin or glucagon whether or not you are high or low. Because the promise of that is that you are actually staying really at goal, and your time to range will improve -- should improve. But at the same time, the exclusion of this time in range will be less dramatic. So you should have less kicks when you go out. And so as a result, we advanced that you should then improve your HbA1C and ultimately, the outcome that goes with it, so for type 1 patients with no human interventions.

What is the dollar opportunity do you believe overall?

Yes. They -- I mean diabetes is a big market. So I think we want this solution, of course, to be developed, to be registered and approved. So that's still a long way to that. But we -- the vision is that it should be adopted by the vast majority of type 1 patients. And so if you look at the market today, the device market is $4 billion in the U.S. annually. The insulin market is so big that it's surreal to even mention. But it's close to $50 billion annually. So I think it's complementary to insulin. It's not replacing insulin. Insulin is required. The good thing that insulin price are dropping annually due to genericization of this market. And so if we can bring 20% patients, up to 90% patients being normalized on a dual-hormone pump, then I think at the end, the vision is very bold, but I think the value for dasiglucagon very big as well. So we have to do the pricing and the valuation and all that, but this is a very big, big market in which we are about to play.

Now I guess my last question on the pump is how does the partnership actually work with Beta Bionics? What are the financials? Do you basically just get paid for dasiglucagon? Or is there ultimately going to be more that comes from the partnership?

We sell dasiglucagon. They'll sell the pump. There's no shared economics beyond that.

Got it. Okay. Let's go on to glepaglutide. The Phase III trials are ongoing with data expected next year. Could you run us through the study design?

Yes. We are running this Phase III, and we want to actually release the data next year. The Phase III is actually a 3-arm study. We have actually a once-a-week injection, twice-a-week injection and the placebo. We're looking at 6 months end point. And the measure of efficacy in this field is actually a reduction of parenteral nutrition dependencies. And you see in other clinical trials as well as in the previous Phase II, and you see for some patients, the total remission from their dependency on parenteral nutrition. And this is what we are really looking at with this improved longer-acting agents. So that's what the study is about.

Now due to COVID-19, there was certainly some disruption in the enrollment of this study, and delta variant has been becoming disruptive once again overall. How has the trial been proceeding more recently?

Yes. So there was actually disruptions at the beginning of the COVID crisis, where we could see that some states or even countries were totally going offline, which is now, I would say, over. We're back to pre-COVID recruitment rhythm. And the reason for that is that the vast majority of patients, which are fairly severe patients are vaccinated and as well as staff in the hospital. So we are seeing some impact in some countries where they have not regained access to their full staff because some staff have been allocated to, still, the emergencies or some of these management of COVID patients but -- ICUs. And -- but the -- but in terms of recruitment of the study, we're back to before COVID. And so -- and the delta variant has not really affected that yet I think just because patients are vaccinated.

Now I guess when looking forward to data next year, should we be expecting it more first half or second half?

Yes. We haven't guided on that. And again, we keep saying 2022 because we want to see -- as you know, from the last patient, there's a 6 months follow-up. And then there's -- there will be 6 weeks to look at antibodies as well, associated. So I think we wait for, really, to have like a good understanding of when we include the last to the least patient so that we can actually give you a more precise guidance. Otherwise, again, we'll make -- we'll have to change or evolve. So we'd rather say it once, let's say, for good.

And I guess if we look at the market right now Gattex is the one real treatment out there. How does this compare with Gattex?

So Gattex is out there growing around 15% annually, reaching $650 million annually in the U.S. only. And I think this is -- Gattex is actually -- was the first product GLP-2 introduced. It's a short-acting GLP-2 recombinant that you have to recombine. Glepaglutide is actually either twice-a-week or once-a-week subcu injection of 2 ml. And then it's actually -- yes, it's a ready-to-inject auto-injector, so no recombination required. And we hope, in the clinical study, to be able to demonstrate it's not comparative to Gattex. So again, there would not be like comparison to it. But we hope to potentially have some numerically better outcomes. But again, it's a different times. Gattex was introduced years ago on the market, and it has the benefit to be the first. So we can improve upon on these products, but I think it did a lot in the lives of SBS patients.

Could glepaglutide expand the market to patients who were not willing to go on Gattex because of inconveniences or other therapy?

Yes, that's a very good point. I mean the -- around 50% of these patients, and again, this is not like casting stone, 50%. But now when you go to SBS, in the department, you can see that a lot of the patients are actually elderly patients who actually had either a progression of their chronic disease or they had like intestinal infarct. And so they are actually SBS patients who are very fragile, 65, 70 years and older, very, very lightweight. And for them, it's very difficult to actually manage their own treatments. You can see some videos on patients who are doing extremely well at managing a very complex treatment with parenteral nutritions and their nutrition as well as GLP-2 on top. But it's not easy for everyone. And some of the other patients would benefit from having like an auto-injector on a weekly basis rather than having like something that needs to be a recombination. And we know that for doctors, treating physicians, they would actually consider that like removing a barrier because they don't prescribe necessary the treatments. They have to as well select the complexity of treatments when they do something for the patients. And what's very, very critical and probably first line is parenteral nutrition. So they'd rather have these patients focusing all their time and attention and focus on parenteral nutrition and not avoiding anything else. So yes, we believe that there is actually huge benefits and potential market expansion from having the auto-injector.

Now there is a follow-on, dapiglutide. How does that compare to glepaglutide?

Yes. That's a very interesting molecule, which has a lot of actually arrows potential to -- and I think it's a molecule that we will communicate about fairly soon, probably around dapiglutide because I think there is potentially some more potential in this dual acting that we need to disclose and as well test in advance. So yes, definitely a very, very good molecule for our short bowel syndrome patients and potentially more.

When could we learn more about this?

Around when we talk about glepaglutide, we will actually communicate dapiglutide.

Excellent. Excellent. Let's go on to BI 456906. Tell us about that molecule and what type of opportunity lies ahead.

Yes. So you're talking about the latest release that was done by Boehringer Ingelheim on this obesity drug, which, I mean, it was obesity data, but they are advancing it today in 3 indications in type 2 diabetes, in obesity as well as in NASH. But their data that was released a week ago is the data that -- yes, 10 days ago, yes. The data that is a Phase Ib in obesity and has shown around 13.7% weight loss at 16 weeks. So it's very, very encouraging because I think it's the first time this molecule is actually showing these results. And it's very -- if you look at other molecules like semaglutide from Novo, I mean, it's 8% weight loss at 16 weeks. Amylin from Novo as well is 8% at 16 weeks. The combination of amylin and semaglutide is showing 12% weight loss at 16 weeks. So 13.7% is actually really, really exciting. It is exciting in terms of weight loss and I think exciting in terms of like the potential as well to -- for the other indications in type 2 and NASH as well because there is more to learn about these molecules in different type of end points as well beyond the weight loss. But yes, we are very excited. And lately has attracted a lot of attention, the rest of the pipeline as well in obesity, the rest of the programs we have.

So how is the obesity market changing now? There's a GLP-1 now actually approved. And do you think this might make it an easier market to go into because it's traditionally difficult to get reimbursement in there. There are a lot of just challenges in that area.

Yes. I think this market is going to transform super fast. In the past, it's true that there were actually a couple of barriers for access. The agents that were available had some side effects attached to it as well. Like amphetamines had very good effect, but of course, you were paying a price on the cardiac side for it. So I think we're seeing a new class of agents which are acting in the metabolism, are very -- have very good safety and tolerability, amazing effect. When you talk about weight loss today, you talk about percentage of the weight. We used to actually have different metrics. In the old products, it was a number of kilos you were losing after a couple of times. But if you are obese and you are losing 5 kilos in 3 months or 6 months, it's not going to move the needle. So the compliance was actually as well affected by that because a lot of patients were discontinuing their treatments due to the lack of perceived efficacy that they had in the past. I think we're moving into a very different era now where not only you have visible effect, good safety tolerability, but at the same time, the power of combinations. You can see that if you combine a deep GLP-1, an amylin, a PYY and a glucagon, and then you have these type of effects. It's for me very comparable to hypertension. You have a different class. You take monotherapies. And then when you combine them, you have actually additional effect. So to your question, I think this market is just nascent and is about to really like transform. In the next 5 years, we will talk about something totally different. That's my belief.

Excellent. I have a question here that comes from the audience. They're asking about pricing for glepaglutide. How will that be priced vis-a-vis Gattex?

Well, it's too early to say. I mean we have to deliver the results before we talk about price. Gattex is actually a rare disease drug, which is fairly high priced. And again, it depends on the weight-adjusted treatment. So I think we have to look at that at the right time. But again, our goal is to have the vast majority of patients adopting glepaglutide when we are introducing to the market. So we will look at that very carefully.

And as far as prepping for a potential launch, it's a different market. It's a rare disease market as opposed to diabetes. What efforts are you going to get ready for that?

Yes. Yes. I mean glepaglutide is, I mean, again, playing into very different markets from dasiglucagon, so yes. So in terms of, again, access, pricing as well as sales force behind, it is a totally different business model. And so yes, we will deploy the right resources at the right time. I don't know. It doesn't mean anything what I'm saying.

We'll still be able to utilize a lot of the infrastructure we've been building for dasiglucagon launch. We're building it to support multiple programs. Obviously, this will require a field force. But it will utilize -- there will be synergies with what we're currently building.

Got it. And as far as other pipeline candidates, we're getting towards the end, would you be able to comment on other things in the pipeline? People are always curious about what you're doing with -- on the complement and things. Certainly, Alexion was acquired. How does that change things, if at all? Like to hear comments on that.

That's a good, good question. Actually, AstraZeneca has committed to keep the Alexion team intact. And so the people that were working on the program are still the same people on our side. We haven't seen changes. So again, it's for Alexion -- AstraZeneca to comment now on their next steps. But we are very happy with the collaboration, the quality of the collaboration. And of course, I think the product trajectory as well showing the potential of the C3 complement inhibition, which is helping a lot for, again, for these assets that we have in collaboration with AstraZeneca now.

And last question, cash position. How are you in -- as far as cash going into the current launch and then in preparation for the future launch?

We called it in [ Q2 ] at $205 million. This will take us into the second half of 2022.

Got it. And thank you very much for your time. We look forward to chatting again soon.

Yes. Thank you, David.

Well, thank you very much for listening.