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

Okay. Good afternoon, everyone. I'm Sarita Kapila, one of the equity analysts on the Morgan Stanley Pharmacy. And we're delighted to have here with us today, Adam Steensberg, the CEO of Zealand. Before we get started, for important disclosures, please see the Morgan Stanley Research Disclosures website at www.morganstanley.com/researchdisclosures.

So thank you, Adam, for being here today. Perhaps we could start with you setting the scene and reminding us about how the year has been progressing so far and the outlook for Zealand.

Yes. It's been a, you could say, from a Zealand's perspective, it's been a very good year. So we have had four extremely busy months since March where we announced the restructuring and refocus of the strategy to become an R&D-focused company again, and we have downscaled U.S. commercial operations, had good clinical data readouts, and now we are awaiting probably the most important Phase III data readout in Zealand's history. In parallel, we have also managed to do two commercial partnerships.

Perfect. And you mentioned with the Q1 results and now that your -- you've got a new strategy to focus more on R&D and less on commercialization of drugs. Could you help us understand the reason for the pivot in strategy? And now with partnerships being the focus, at what stage in the pipeline development will you look to partner these assets? So will it be at the end of Phase II development, for example?

Yes, it's right. We decided to scale back our commercial ambition earlier this year, as I mentioned, and it was really driven by the fact that we have a very, very rich pipeline, and we will -- I'm sure we're going to discuss that later, but especially in the obesity space, we see some fantastic assets, and we wanted to make sure that we have sufficient funds to invest in that and then rather work with industry leaders on the commercial end. Talking about which kind of partnerships we can discuss that more also later in the conversation, but we would be looking for industry leaders. We would be looking for groups who are ready to collaborate with us, where we can share the risks and also the upside.

Okay. And with the new strategy being more reliant on commercial partners and you mentioned your kind of pipeline being quite rich, has there been any preliminary interest ahead of the Phase III glepaglutide data in short bowel syndrome and for the unpartnered obesity assets?

Yes. I think it's no secret that for our long-acting GLP-2 analog in development for short bowel syndrome, there has been very significant interest even when we had an ambition of commercializing ourselves. There were companies who were interested in co-commercialization. And of course, with the new strategy that interest is not less. Also on the obesity front, especially with some of the assets where we have all rights ourselves where there's no modalities, other companies that are issuing them is natural. There's a lot of interest.

Okay. Perfect. So perhaps we start on the pipeline, and I thought we'd go through glepaglutide -- once or twice weekly GLP-2 short bowel syndrome. So we're expecting the Phase III data very soon over the next few weeks. Ahead of this, could you help frame how glepaglutide differs from the current standard of care treatment, Gattex?

Yes. So Gattex was approved in 2012 as a once-daily product that you need to mix before you inject it and also dose it per weight. Our product has been developed as a -- product was designed as a long-acting stable GLP-2. So we are approaching once or twice a week injection. And further, we actually also have it in a solution. So it's a very easy auto-injector that we expect to bring forward. We are, of course, internally extremely excited now about seeing the data from the Phase III study and also see if we will differentiate on the clinical profile, which, of course, there could be benefits of having a long-acting molecule as compared to a shorter-acting molecule, just as you have seen in diabetes with the GLP-1 compounds.

Got you. And it seems as though with Gattex, the vast efficacy appears to be an over 30% of patients achieving a 20% reduction in total parental nutrition. So what's your level of confidence in the glepaglutide trial hitting on the once-weekly dosing? And you mentioned the scope to differentiate on clinical efficacy. So could you talk about why perhaps you think there could be a difference versus Gattex?

Yes. So we have designed the study, so we would be able to identify similar efficacy and the we have conducted a Phase II study where we were really happy with the outcome of that study. We saw good effects, we believe. And we have, as you mentioned, both at once and the twice-weekly dosing, we've seen for the twice weekly, we are very comfortable with regard to exposure, having exposure more than what was used in the Phase II studies. For the once-weekly program, we probably will have a few days a week where we actually have less exposure. We also feel comfortable in that dose because it's a growth factor and normally what you see with these things is that you don't need 24/7 exposure, you actually only need a certain amount of days, but that's the rationale for that. We need to see the data now. And of course, there are several outcomes, one being that each dose, the one that the twice week they're equally effective, one outcome being that one works or one that one of the arms looks to be more effective than the other. And -- but all that, I think we just have to wait for the data.

Okay. That's very helpful. And the last one on glepaglutide before we move on. So that seems as though multiple competitors are also pursuing treatment for short bowel syndrome. So two of note, are VectivBio with their GLP-2 and 9 Meters with their GLP-1 and Phase III data for these are expected, I believe, in 2023 and '24, respectively. So how do you see glepaglutide profile comparing relative to these assets? And I think particularly the 9 Meters asset, which offers the potential for every 2-week dosing.

Right. So First of all, I think we need to see the data, data speaks. And secondly, what we know today is from our product, at least, we have a product that can be administered in a very simple auto-injector and you don't need to adjust for weight or we also believe we will not have to adjust for kidney function. So all these things, of course, adds to ease of administration. And now we will have to wait to see the clinical data. You are right, there are other competitors approaching this once weekly GLP-2 by VectivBio. We need to see the data for that program. And then there's the 9 Meter which are approaching but somewhat different means, which is a GLP-1 analog, long-acting analog. So our understanding of that space is that likely GLP-2 is a more effective opportunity. GLP-1, we do think it plays a role, but I mean it could be a complementary opportunity later on if they are successful.

Okay. And perhaps we move on to discuss your obesity pipeline. So if we start with BI 456906 so that's your as you know, once weekly GLP-1 glucagon and it's partnered with BI, for obesity and diabetes. So we've seen that multiple competitors are pursuing glucagon. And for the treatment of diabetes and obesity, you've got low drug, Altimmune and then Lilly's mazdutide and DDD. Could you help us understand how your compound differs from those in development? And maybe you could touch on the ratio of GLP-1 to glucagon targeting and how that compares with other molecules in development also.

Yes. I would be happy to have it. First of all, it's important to recognize that these are all individual molecules. And a big part, of course, when you do dual pharmacology is the ratio, how much do you stimulate in this case, the GLP-1 or the glucagon receptor. And with our molecule, our partner, BI, have published the data that we have clearly a bias towards GLP-1 and less effects on GLP glucagon. And that was by design. We wanted to have all the known benefits of GLP-1 and just have a little bit of glucagon effect for several reasons. I think some of the competitors have different ratios. And so I think you need to view each molecule as the individual data appears in the clinical setting, you can not just compare across the molecules here.

Sure. And this morning, Altimmune released some data for their GLP-1 glucagon in NASH. I know your trial with Boehringer is also looking at the NASH indication. So I was wondering if you could comment on potential differences that you see between the assets and how you're interpreting that data.

Yes. So Boehringer, they have actually three Phase II studies going on, one in type 2 diabetes, one in obesity and one in NASH. And later this month, they will present the data in type 2 diabetes, which looks specifically into glycemic control in this patient group. And I would expect a GLP-1 glucagon to provide quite significant effects on glucoglycemic control, if you have the GLP-1 component at least that's what we've seen with any other glucagon -- sorry, GLP-1 molecule. Specifically, I think obesity and NASH, if you think about the modality of Tier-1 and glucagon, that's super interesting because, of course, glucagon works directly on the liver to get nutrition out of the liver. So it is a really strong concept there. That's also what we expect BI to really be focused on. So -- but a combination of the beneficial effects of both those modalities is what we expect.

Okay. Perfect. And you mentioned the data is being presented at the EASD conference data this month. and spoke about the HbA1c benefit. But what are your expectations in terms of weight loss and the safety profile of that asset?

Yes. So we presented -- or Boehringer presented the data from the Phase Ib study, which was a 12-week study. And there, they saw 13.7% weight loss, which we were very impressed with and happy. I think it's actually approaching best data from those molecules. So of course, we are ambitious on the weight loss profile as well. We know already now how effective the GLP-1 class molecules are, and we are hopeful that then the politic effects of glucagon can add to that as we approach longer-term exposure.

Sure. And there's been a lot of speculation around the adverse event profile of this class in terms of QTC prolongation, live abnormalities and then the debate between protein breakdown versus that. Could you help us understand the toxicity profile for the BI compound? And are you seeing any of these effects with the data so far?

Yes. I mean it has been a focus for us doing that collaboration all the time, and we are well-aware of theoretical concerns or also having chronic glucagon stimulation. So we -- that was by purpose that we designed a molecule which has a preference for GLP-1. But when it comes to cardiac issues, those are things you observed early on in the clinical development program. So if there have been two issues, we would have expected our partners to inform us of those. So we feel pretty comfortable there. Long term, of course, you need to pay attention to proteases and other things. But again, I think with the data that BI have presented so far, I think we have, at least to my mind, have a very good balance of the two modalities.

Sure. And we know the data in diabetes has been presented shortly, but there's also the ongoing obesity and NASH trials, as you mentioned. So could you update us as to when we could see Phase II data from those trials?

Yes. We know that BI is completing the study in obesity later this year, but we would not expect them to present the data until later and maybe next year. And the NASH study, they have also informed that, that will only be perhaps already '24 they will be done with the full randomizations and have data available. But -- so that's the time lines for those studies. I think the BTC study, in particular, is important. That's a 40-week study, which actually better describes the titration profile and what you can achieve in a long-term setting than the shorter-term studies.

And the last one before we move on, when can we expect a Phase III go or no-go decision for diabetes and obesity from Boehringer?

Yes, I cannot comment on that. It's up to them to make those decisions. We can only observe that they are getting close to completing the Phase II programs.

Okay. And perhaps we move on to dapiglutide. So Zealand appears to be one of the only pharma companies exploring a GLP-1, GLP-2 for the treatment of obesity. So why do you think that this mechanism has been overlooked by large cap pharma competitors? And could you help us understand what the benefit is from adding a GLP-2 to a GLP-1?

Yes. So we all know the potential benefits of the GLP-1. I think that GLP-2 has been overlooked to some extent. But if you look back in the literature, then 10 years ago, there were some extremely exciting data demonstrating that if you're an obese individual, you actually have an increased bacterial translocation across the intestinal membrane and that is the driver of the low-grade inflammation you have in this setting, which can actually affect liver, heart and kidney and cause a lot of the comorbidities. And there was also studies demonstrating that if you then gave GLP-2 analog to animals, you could actually prevent this bacterial translocation. So that has actually been the driver for us to initiate this program. And I think it's -- since then, we have seen more and more data also suggesting potential benefits on glycemic status and then we saw a very interesting data set from a clinical group a few years back where if they co-infused a GLP-1 with a GLP-2, you actually see less nausea. So this is also something that we are going to explore in our programs going forward. We were positively surprised or we were happy with the profile in the Phase I studies. And now we look forward to getting it into Phase II to explore that. But the concept of having a more healthy gut in these patients with obesity and also potentially in the NASH setting.

Understood. And could you help conform the early Phase I data for us in terms of the benefits seen on weight loss?

Yes. So it was a short duration study. So it was only 4 weeks, but we saw around 4.3% weight loss over those 4 weeks. And then I would say, rather limited nausea and tolerability compared to what you would otherwise expect. So -- and we think that's extremely encouraging for the indication. We all know that with time, you would expect to see more weight loss. So if you compare across other studies, I think that's a quite significant weight loss over a short period of time.

Okay. That's very clear. And there's been a bit of speculation as to the safety profile of targeting a GLP-2 particularly with oncogenesis. So could you help us understand any kind of safety implications with dapiglutide?

Yes. I think there's 0 data suggesting that GLP-2 should be oncogenic. I mean, but it is, of course, a growth factor that makes it can increase the intestinal mass. Many of the factors that we work with, including GLP-1 actually has growth potential on different tissues. So of course, it's something you have to address. And we look forward to present more data on this molecule on the balance between GLP-1 and GLP-2 because, of course, you don't want the same level of growth, as you see in an SBS setting, for instance. So it's something we are aware of. It's something, of course, you need to monitor, but it's a drug development.

Understood. And are Phase II trials still on track to begin at the start of next year? And perhaps you could talk about your cash runway? And whether there's enough to support the development of these assets irrespective of finding partners for the late-stage pipeline.

Right. It's -- yes, it is on track to be initiated early next year, I guess, we could even start it earlier, but we just don't want to start it just before the holiday season because there's too much changes in patients, how they live. So that should be on track. Our cash runway, we have announced that with our Q2 earnings that takes us into June next year with us not doing anything else. But as we have also announced, we are now -- discussion partnerships, and that could bring in non-dilutive capital as we go along. So we do have the means to take the programs forward as we plan as we speak today.

Okay. And when can we expect a data update from the Phase II trial?

For dapiglutide?

Exactly.

Yes. We have not announced that, but it's a longer study. So I would say earlier is till late next year.

Okay. Perfect. So maybe we move to talk about your amylin analog, the ZP8396 -- your compared to Novo Nordisk has recently released some positive Phase II data for their amylin analog agrolinotide in obesity. And so following these data, has your level of confidence increased in your own amylin analog?

I think already a few years back, now we release some initial Phase II data which increased our confidence a lot in the target. So we've been working on it for a long time and see quite significant effects, of course, in the preclinical setting, but it's, of course, nice to have the data confirmed in humans that the concept is great. So -- and with the new data, I mean, of course, it has only increased our confidence in the opportunity, both as a stand-alone treatment, but also in combination with GLP-1-containing molecules.

Okay. And are there any important competitive advantages for your asset? I noticed that it's pH-neutral. So how important is that as a differentiator versus the competition?

I mean, potentially very important because I think the future for obesity treatment is going to be combination therapies. So -- and of course, when you are speaking about injectables, you can prefer to have only one injection rather than several injections. So the focus for us and that goes for the rest of our pipeline as well is that we have tried to built these designs early in that we can actually coformulate. And with the data we have so far, we actually think we have a molecule that could be coformulated with any of the GLP-1s we are aware of or GLP-1 containing molecules we are aware of in the industry.

Okay. That's very clear. And Novo's cagilinetide had some downside. So for example, it had a blood pressure neutral profile despite showing significant weight loss. So do you expect to see any systemic benefit with blood pressure lowering for your amylin analog?

Yes. I think that's actually difficult for me to comment on until we have the data. So I think I can only acknowledge that Novo have the most progressed molecule in this category. So we need to see if there's differences between ours and theirs in that setting.

Okay. And then perhaps you could help us understand Boehringer's decision to hand back the rights to the amylin analog program, which was announced in March last year. So what led to that decision.

I think any big pharma company make portfolio decisions along the way. And until Novo demonstrated their Phase II data, I mean we only had preclinical support for the concept of amylin as a weight loss medication, and at the same time, I guess, we started to see very nice data with the GLP-1 glucagon product that we had with BI. So in my mind, it's probably a portfolio decision. We -- a few months later, we saw Novo's data, and we were very thrilled. So now we will develop it.

Okay. That's very clear. And when can we expect the next update in terms of clinical data for your amylin analog and what's next in terms of commercial -- or clinical development, apologies.

Right. So we started the Phase I study late last year, and we hope to provide -- that we plan to provide updates later in the year and also to start the multiple ascending dose study. So we are progressing as fast as we can with this molecule. So that will be later this year to provide updates on the Phase I study and then starting the multiple ascending dose study.

Okay. Perfect. And then the last obesity molecule you have in development, I believe, it's the GIP agonist that's preclinical at the moment. So perhaps you could help us understand and frame this asset a bit better? And what the next steps are in clinical development?

Yes. So our GIP analog could also enter the clinic next year. And it's a program that it has its ups and downs. And of course, with tecibotide and Lilly's data that created a lot of interest in GIP. But it's super complex biology. So -- but right now, we have a lot of confidence in the concept, but only as a combination therapy with a GLP-1. We don't see it as a very strong monoagonist, but again, we have designed this molecule. So it can actually be combined with other modalities, where we do see very strong data, though, is on the antiemetic properties of GIP, which could also partly be some of the beneficial opportunities in combining them because you can then push the GLP-1 doses higher. So our aspiration will be to put it into the clinic next year and progress it and then hopefully find a good combination partner for that one.

Okay. It's very clear. And maybe we could move now to talk about dasiglucagon. So can you help us understand what the next data points are for this asset?

Yes. So dasiglucagon is actually the active ingredient in several of our product presentations, including the rescue pin where we just made commercial agreement with Novo Nordisk. But I think the program you allude to is basically as a chronic infusion for treatment on congenital hyperinsulinism, where we had really nice Phase III data coming out here in June. And we are now pursuing an NDA submission later in the year. And that it's an also rare indication where we see a huge unmet medical need for small babies who basically end up with hypoglycemia constantly because they produce too much insulin and they, in our minds, have no good treatment alternatives today. So we are extremely excited about that opportunity.

And when can we expect a partnership agreement for the congenital hyperinsulinemia setting?

Yes. So after announcing the restructuring four months ago, we -- our focus was to find partners for the two commercial assets. So that was where we put all our efforts. And now I would say we're going to turn the attention to finding the right partner for CHI. And so that will run in parallel with our NDA planning and also the process. So yes, we -- I would put it this way that we are completely scaled to progress this molecule to -- all the way to approval. And then in that process, we expect to find a partner.

Great. And you mentioned that you recently partnered with Novo Nordisk and Novo hasn't been active, I suppose, in targeting glucagon in obesity looking at more amylin combos. Is the decision to in-license a glucagon maybe suggestive that Novo could move back into looking at this as a target more broadly?

I think this is a completely different use. So this is for treatment of severe hypoglycemic events. So it's a short-acting glucagon analog. So this is this rescue treatment in the space of type -- diabetes. So I don't think -- I think you cannot make any parallels if to glucagon in obesity.

Understood. And then you also have a partnership agreement with Alexion to develop some preclinical assets. But perhaps you could update us here on what you're investigating and the next steps and when we can expect data?

Yes. So I mean I think the amylin -- sorry, the Alexion collaboration on complement C3 really represents some of the novel biology that you should also expect to see more from Zealand's novel chemistry. So this is a complement C3 inhibitor, which we are extremely happy with. So we think it's a very interesting area to work in, and then working with Alexion as the market leader in complement is fantastic. Our ambition for this molecule has all the time been to develop something that is convenient to dose, so you don't need to give too high volumes and also can have infrequent dosing. And that program is progressing well. And again, I'm sorry to -- that I can't share more, but it is really our Alexion to announce next steps, but it is progressing well.

Perfect. And just to kind of wrap up. Maybe you could comment on what you think investors are missing about the Zealand story or underappreciating?

Yes. But we are undergoing a transition right now from one vision where we wanted to build a fully integrated company with commercial operations and launching everything ourselves towards a more R&D focused with strong commercial collaboration. So I think that, of course, it takes time to understand that transition. We have not been talking a lot about our obesity opportunity because that was not key to our story a few years back. I think that is starting to get a lot of attention as we speak. And so for us, it's just a matter of making sure that it's not just about the rare disease assets, but actually also the pipeline, and I think the rest will come.

Perfect. That was very helpful. Thank you very much for being here today. I think we'll wrap up there. Perfect.

Thank you.