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

Good morning, everyone. I'm Charlie Mabbutt, Pharmaceuticals equity research analyst and we're delighted to have with us Adam Steensberg, CEO of Zealand. Before we get started, for important disclosures, please see Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures, If you have any questions, please reach out to your Morgan Stanley sales representative.

So thanks for being here. So I guess I'll dive straight in and go straight to rare disease. So I guess, firstly, you're in the midst of sort of starting off partnership discussions for Dasiglucagon in CHI. So could you provide, firstly, any update there? And in particular, you had some positive news recently on the acceptance of the first part of the filing. So I guess, how it works with the two parts and that would be a great place to start.

Absolutely and thank you for the invitation. It's always good to be here. Yes, you're right. So we have 2 rare disease assets where we set out the year with the ambition of submitting 2 NDAs to the FDA. We managed to do the first one in June with CHI and just a few weeks back, we got also PDUFA date, which is going to be late December this year. FDA also decided to split the review into two under the same NDA, one which focused on the acute use and one which focus on chronic use. And our -- you can say, understanding of that situation is that they will take a little bit more time to review the longer-term data, continuous glucose monitoring, which is actually the first time that the FDA considers such data sets. So to really meet the very, very short timelines for the first part, they decided to then split the filing. So we see this as a hugely positive for this program. And look very much forward to keep engaging with FDA on the potential approval of Dasiglucagon for treatment of CHI. That's a huge need for these small children, and we think we have a good tool that could potentially help them. So in parallel with that, we are running partnership discussions. We started that late in Q2, and we expect to complete a partnership this year for CHI. When it comes to Glepaglutide, which is our Short Bowel Syndrome program, we expect to submit the NDA later this year. We are on track for that. And also here later in this year, we will start partnership discussions again to find somebody who can help us commercialize that product as we progress towards registration. So things are going according to plans and how we set out to run things in the start of the year.

And just briefly on CHI. So do you know how long it will take to get the Part 2 and what data you have to provide there? And I guess also my impression was that the drug would be more used in a chronic setting. So when it's in the acute, do you expect many patients too?

This is clearly a product that is intended for chronic use. I mean we see that for our clinical programs. We actually have been running two Phase III programs and then a long-term extension study where we have rolled patients into -- so one of them was a short-term study where we had patients in the hospitals, small babies in the hospitals depending on IV glucose and then we put them on our drug, which is a subcutaneous injection fusion. And then we observed the capacity to get out of the need for IV glucose. And that came out positive, but that's the short and meeting the primary endpoint. Then we had another study which was running in a home care setting, where we had small children up to the age of 12 years who simply had despite being an all available standard of care and so on, they had so much hypoglycemia that physicians thought they needed something more and we put them on our drug. We didn't meet the primary endpoint, which was finger-prick guided glucose, but we did see half of the events of hypoglycemia when we use continuous glucose monitoring which -- and you can also say we had most of the children from those programs who are run into -- roll into the long-term extension study. So what we are now working with the FDA is how to understand that CGM data set. And it's a new thing for FDA. They have not really recognized CGM data yet, but having now engaged with them and having received a significant amount of information request around that data set gives us a lot of confidence that we will find a way forward. I mean the easy way for FDA would be to say we will just disregard these data. So we are very positive on this. but we also acknowledge that it will require a more thorough review, which you cannot do in 4 months. Timelines, I cannot guide on yet, but hopefully, later this year, I can be more specific on that.

Okay. Great. And then you referenced SBS. So I guess one of the things people debate is obviously the comparison to GATTEX and then obviously, a competitor molecule from Ironwood. So I guess, firstly, when we talk about GATTEX, how do you see the relative profile from sort of an efficacy and safety perspective?

Yes. So we have not done head-to-head studies. It's simply impossible in these rare disease indication with such a low number of patients available. But if you just look at the clinical outcome from our program, which we reported last year, we are extremely happy with you can say both how we met the primary endpoint. But also -- and perhaps even more important, how we managed to actually get almost 15% of the patients out of the need for parenteral support. So all these patients who were enrolled in this program were depending on IV infusions of nutrition and water and electrolytes, and we had 15% of the patients within the half year that managed to get out of that need. If you compare that to the studies done with GATTEX, they did not achieve that for a single patient. So I think that's a very strong testament for what we can achieve with Glepa. The other thing is -- and that's, of course, a very qualitative feedback as well that we hear very positive feedback from investigators who have participated in the studies when it comes to how well tolerated this product is -- so those, we believe, are going to be very important parameters beyond just that we have a more simple injection and less frequent injection.

Okay. And when you think about the profile relative to the competitor molecule I referenced earlier, I guess Phase III data for that is expected now in March next year, and you're obviously progressing into partnership discussions. So how much of a bearing do you think that competitor data could have on your timelines? And I guess, in terms of -- if a partner was to partner with you before that data, do you think you would sort of have to accept worse economics as a result? Or do you not see it that way at all?

I think it has a limited impact at least on how we think about progressing our own molecule. We have the full clinical data in place. Now we know what we can achieve with our molecule, we understand the profile from also a convenience perspective. And we still need to, of course, learn how [indiscernible] fares in a large Phase III study with a heterogeneous patient population. So far, we have seen very limited data, uncontrolled data set. So whether it will be before or after it's not something that is a key focus for me. These are things that can also be handled in how you structure the potential deals so I mean, for us, the most important thing is to find a very committed partner. We think we have a wonderful opportunity here to address the needs for patients and something that looks to be potentially the best opportunity.

Great. And then moving on to obesity, which is obviously the key focus of most investors. So I guess, firstly on Survodutide, is there any comment or update on what the Phase III data program looks like? Or are we not allowed to go any further there?

I can tell you, you're not the only one who asked that question, I get it all the time. It is really up to our partner, Boehringer to reveal the nature and the scope of the Phase III program, they have communicated that it's three studies that they anticipate to start in obesity and also that they anticipate dosing the first patients this year, and they would reveal more on the studies before they do that. So we are as eagerly awaiting those communication lines as you are, but I can unfortunately not comment more on it.

That's fine. No problem. And I guess just more holistically looking at the product then. I guess do you see it as taking sort of a small shelf life for a large market with as a fact of sort of supply issues, pricing competition, et cetera? Or do you believe sort of the glucagon mechanism can really result in sort of a patient niche for the product?

I think if we just look at the data that have been released thus far, both on a weight loss perspective and also the ability to manage the glucose, I think they have a very strong GLP-1 containing molecule that we have seen it provides very significant weight loss and also good glucose control. So you can say in the setting where we only have those data, you're right, it's probably about getting a fraction of a segment of the growing obesity segment, where I see a huge opportunity. And I know that BI shares that view, with their potential of having actually a potential winner within the GLP-1 class, that is in NASH as well. And you do know that they also have a Phase IIb study now that we read out later this year, and we should see the full data early in the first half of next year. And if BI with the glucagon component which directly goes into the liver and get fat out of the liver, if they manage to achieve, this biopsy-driven study to provide significant outcomes there. I think we are on to something very big here. And then this product would have a very significant competitive profile compared to the other molecules that we have ahead of us actually.

Do you -- how do you see that sort of, I guess, comparing to Lilly's retatrutide, which is also, I guess, another glucagon molecule? Or would it be sort of a case of, I guess, NASH is a very big market, both going into that together. And I also guess just in NASH more generally, how do you see the development of that market? Or do you sort of see it as a subset of obesity?

Yes. I think you have to view NASH from a perspective of if you have a product that also provides weight loss, it will be a big driver to -- if you have an obese individual who is at risk of NASH, which many are because 35% of obese individuals have some degree of NASH. Then if you have good NASH data, that would be a major driver to put a patient on such a product. If you just have a product that addresses NASH by itself and not do anything on weight loss, it will be reserved for those who have more established late phase NASH disease. So I think it's a major driver for future anti-obesity treatments if you have an NASH label. When it comes to Triple-G for Lilly, I think it's too early to kind of judge the situation. I think we should just remind ourselves that these are molecules that are still in development. They are now entering Phase III development. When you build labels, it's about -- not only about benefits, it's also about risk, and I can say that what we have seen with our molecule, we have a very benign risk profile when it comes to, for instance, effects and heart rate. I think there's still some things to address there with the triple-G. So it's quite important that you do not only look at the level of efficacy, but also consider what the risk picture is.

Yes, for sure. And in NASH, I guess, how important do you see the development of sort of biomarkers to select those patients. Because I guess one of the issues at the minute is sort of the biopsy that people have...

Again, if you have a product that does not provide weight loss, it will be incredibly important to get new biomarkers so you will not have to follow that through with biopsies for all patients. If you have one that provides weight loss and you have clinical data that provides evidence that you can actually also prevent development or do something for NASH. I think that alone will be a major reason to prescribe this molecule for many obese individuals if you're a physician. 75% actually have navel, which is a little -- is excessive fat in the liver. And we know that is one of the things that then lead to NASH. So I think once you start to build -- once you have the clinical outcomes, I think these will be adopted to a much larger extent. It's actually a bigger in my mind, a bigger problem than diabetes, which everybody recognizes, it's highly associated to obesity. But once you have solutions for NASH as well, and they provide the weight loss, I think it will be a major reason to prescribe the medications and it's -- especially now that we see more and more patients who have had obesity for a long period, I think the consequence when it comes to NASH and end-stage liver disease will start to be -- we will start to realize that in the next 10, 15 years.

Great. And then, I guess, moving on to sort of your more mid-stage and early-stage obesity pipeline. I guess, just look -- taking it from a higher level, I guess, where do you expect in sort of a year's time, Amylin and Dapiglutide to be in terms of development?

Yes. So we are very bullish on our two internal assets where we have all the rights ourselves. So if we start with dapiglutide, that is one of the few truly differentiated GLP-1 containing molecules in development. If you look at the other molecules that are in development right now, it's GLP-1 mono-acting, then is GLP-1/GIP, copies of Mounjaro, I would say. Then we have the GLP-1 glucagon class. And then -- but we don't -- we are the only ones who are developing a GLP-1/GLP-2 and we are really trying to leverage the known benefits of the GLP-1 when it comes to weight loss and management of diabetes and so on, and then adding additional control of inflammation. And we think we are onto something very big here with the GLP-2 because there's a number of early studies that demonstrate that you can lower inflammation in obese animals if you provide them with GLP-2. And it is one of the hallmarks of obese patient is to have this low-grade inflammation. And if we can address that with such a molecule, it has a huge potential to address co-morbidities also as NASH, but also cardiovascular disease. When it comes to Amylin, this is really probably what I would consider the crown jewel in our entire obesity pipeline because it could provide yourself as an alternative to the GLP-1 class and GLP-1 molecules, even though they are fantastic weight loss medications and also addressing co-morbidities, cardiovascular risk and so on, they do carry side effects as nausea, vomiting, and constipation. And the way they introduced the weight loss is a little bit on how you work on appetite. Amylin is working on weight loss with a very different mode of action where it introduced as satiety, it restores leptin sensitivity. And in our hands, at least it has a much more benign profile and we think it can achieve GLP-1 like weight loss, Amylin. So next year, we would hope to have good data from our, you can say, 16-week -- 13- and 16-week data to support the concepts and then progress them into large-scale Phase IIb studies.

Okay. And I guess, do you believe there's a need to sort of partner these assets sooner rather than later to accelerate development in larger, longer studies? Or I guess, how far do you want to take them to derisk them yourselves before you sort of take that step?

So I mean, I took over as CEO last year in March and where we also closed down the commercial operations we had in the U.S. and really with the aim of being able to free-up resources and allow us to focus on developing obesity assets. So what we have spent our time over the last 1.5 years to set up our organization so we can truly follow through on these obesity assets and with the increasing amount of data that we have had over the last 6 months, our confidence in these programs has increased. So also our organizational efforts towards the programs have increased. So what we are doing right now is completely preparing for entering Phase IIb studies and all the associated development activities needed to progress as fast as possible towards Phase III. Then our ambition would be to have a partnership before we embark on Phase III, so we can have a truly global reach and also have support with how we address the commercialization. So I would say before we start Phase III -- but we are, as an organization, setting ourselves up to be able to progress these molecules with full speed in the next few years.

Yes. So I guess one thing just on the Amylin, for example, like I know Novo have talked about maybe moving their oral Amycretin straight from Phase I to Phase III. And Amylin is obviously a much more derisked mechanism from that respect. So I guess, is that something that's possible? Could you go straight to Phase III? Or are you sort of intent on going through the sort of Phase IIb path?

Yes. And the first focus for us will be to move into Phase IIb longer studies. And then you can always discuss when do you start your Phase III studies, if you want to do that, some of the studies before your end Phase, IIb. But I think for us, we are aware of the need to be speedy, but also want to do this right. And you have to understand, whenever you cut steps in your development path, you also introduce risk of doing things wrong. And it's very, very difficult to redo them once you get into Phase III.

Good. So just going into a bit more detail on the Amylin itself. I guess, please could you briefly talk about the advantages versus Novo's cagrilintide? And then you just mentioned, I guess, the ability to reach incretin-like efficacy levels with the product. So I guess what gives you confidence here from the data you've seen that would be really interesting.

So we released top line data from our 6-week starting with very low doses of our amylin analog, 0.6 milligrams and 1.2 milligrams this summer. And there, we actually achieved a 5.3% weight loss over 6 weeks. That is on par or even more than what most of the GLP-1s have achieved in that short time frame. Next year, we'll see how that goes with a 16-week study. But if we then look at Novo's cagrilintide, just as a stand-alone and not the combination, they actually achieved north of 10% weight loss over 26 weeks, and that's comparable to what they saw with semaglutide, 11%. So of course, that gives us hope that in longer-term studies that we can achieve GLP-1 like weight loss. And I would also highlight that if you look at our 0.6 milligram dose, it actually provided the same degree of weight loss after 6 weeks at as the 4.5 milligram dose of cagrilintide. So it looks like we have a more potent molecule here. We have a long half-life of 10 days, which is one of the longest that we are aware of at least in the class, we have developed our, designed our molecule so it's stable at neutral pH, which we believe is a major upside not only for how we can actually -- if we wanted to do with time, two combinations with our amylin and other GLP-1s, but also maybe when it comes to how you inject the molecule and side effects. So in many ways, we think we have a potential best-in-class molecule here.

And I guess when you think about partnerships down the line and how the Amylin sort of potentially plays out, do you believe that the Amylin monotherapy would sort of be the driver of a partnership? Or do you think any partner would probably want a GLP-1 backbone as well?

It's really difficult for me to answer, but I would put it this way. If I was a large pharma company and I wanted GLP-1 containing molecule, I would make sure to get one which is differentiated and not a copy of something that Novo or Lilly have always developed. And there, [ TAVI ] is a very interesting asset, especially when it comes to reducing cardiovascular risk. When I look at Amylin, as I said before, I think it is the crown jewel in our pipeline because we -- it's less crowded there. And number two, I think it has the potential to really provide an alternative to be on a GLP-1 and thus. The way we look at this, this could actually be the next generation of how you manage weight also, and this is something we look forward to review more in December when we have an R&D Day. If you just look into the cardiovascular risk factors, it looks like Amylin can actually do a lot to reduce the cardiovascular risk factors and perhaps even more than a GLP-1.

Yes. So I guess, something you referenced there is something I wanted to ask about. So I guess, in terms of the combinability of Amylin and DAPI, that obviously makes a lot of logical sense. So why have you not done that in humans yet? And I guess what sort of timelines could we think about that sort of study being run?

Yes. So first of all, from a development point of view, we really want to understand how each molecule is dosed optimally on its own before we start to combine them, so that's a very practical thing. The other thing is we think the opportunity is much bigger for a monotherapy Amylin as an alternative to a GLP-1. We also see a huge potential for combination therapy for those patients who need more than 25% or 30% weight loss but we don't see that as the majority of patients. I know as an industry, we have been pursuing more and more and more weight loss for a long time, but I think the human experience now from a clinical setting is that many patients are not -- actually not aspiring to have those high degrees of weight loss. So I'm not sure. I think the broader opportunity, the bigger opportunity is as a monotherapy, and then the combination therapy is a wonderful approach for those who really need the very high decrease of weight loss.

And I guess just on another point you touched on around the CV benefit of Amylin. So this is a debate we've been having yesterday with Lilly, et cetera. So I guess, do you expect the CV benefit of these drugs to be solely driven by the weight loss? Or what other factors do you think are important and will sort of play a big role here. And I guess that feeds into sort of your strategy with the Amylin.

I think there's more to it. And I think we have already seen some with the -- if you look at the type-2 diabetes with the GLP-1 class and the SGLT2 inhibitors and so on, there will be more than just weight loss. There will be also how they affect organs, which are known to address specifically cardiovascular risk, so inflammation, lipids, blood pressure, heart rate and so on. And another thing with the Amylin, if you just look at it, it doesn't have increases in heart rate as we see with GLP-1s. Before we had the cardiovascular risk outcome studies with GLP-1s, there were concerns around increases in heart rate. I think with the SELECT study and also studies in diabetes. Those have, of course, been removed, but I would say any day you would prefer to develop a molecule that does not increase heart rate and Amylin so far, it looks like it's actually perhaps even reducing heart rate a little bit. And again, if you just compare across studies, I mean, the effects on lipids and the effect on CRP seems to be higher with Amylin compared to just what you can expect from a weight loss perspective. So I think there's more to it, but ultimately, you'll have to see in the clinical outcome studies.

Yes. Okay. And then on dapiglutide. I guess, you referenced a few of the potential advantages of combining GLP-2 and GLP-1. So I think one of the discussions has been around tolerability. So I guess starting there, what evidence, I guess, is there that sort of GLP-2 can improve GLP-1 tolerability?

So there are some small studies, but however, quite important studies are thinking in the clinical setting where investigators have tried to co-infuse a GLP-1 and GLP-2 and patients report less nausea when you give the two together than when you give GLP-1 alone. So that's quite strong evidence that if you give them together, people actually report less nausea. From a more biological perspective, it's also a fact that every time the L-cells in the intestines release GLP-1, they also released GLP-2, so it could just be a more natural way for the human body to experience high level of GLP-1 if there's also GLP-2 around, and that might be why we have less nausea observed. So let's see with our ongoing 13-week studies, if we can actually achieve higher doses and higher weight loss with this molecule than what you would normally expect from a mono-acting GLP-1, and that could be driven by our ability to actually give more exposure to GLP-1 because we have GLP-2 around. But I would say the main driver for this molecule is the ability to address low-grade inflammation and the leaky guts in these individuals. I think that would be the reason to push that, this is the reason to push this molecule forward because as we have discussed a few times now, I actually think we are getting to where we need to be when it comes to weight loss with all these molecules is about how can you address co-morbidities and how can you address tolerability and the way you take these molecules.

And I guess, just thinking about that 13-week study, I guess one of the questions I have is given -- I can't remember how many patients, I think it's 50 or 60 or that sort of benchmark. So how much of that benefit in terms of the leaky gut, but also in terms of the tolerability, do you think we'll be able to actually see over like a 13-week sort of 50, 60 patient study?

Yes. So I would -- I mean it's actually a quite data-intensive and studies. So we also do biopsies from the intestines and so on. So hopefully, we will be able to see that we are actually being able to tighten up the gut integrity and thereby, you can say, we have some mechanistic understanding around how the GLP-2 component works on the intestinal level and then biomarkers, inflammatory markers could help us in understanding what we are doing on the inflammatory environment in these patients. So beyond just weight loss, I would expect to have a lot of biomarkers. But of course, ultimately, I mean, we need to get into clinical studies where we would have longer outcome before we understand the full potential.

Fine. So for that, should we also think about -- I know you sort of communicated more around the Amylin program in terms of going into a much bigger Phase IIb next year. Is that something we should also expect from DAPI where you see sort of successful results?

We are also progressing a DAPI full speed ahead. I would say, and have a lot of confidence in it as a molecule, but it's also a fact that it's a more complicated development path because we need to show true clinical differentiation when it comes to outcomes, and they -- so -- but it's still -- I would say the hypothesis behind this program is so strong that we are 100% committed to it. And it is one of the very few differentiated opportunities if you want to be in the GLP-1 space. And I've just said with the SELECT data out there, it's going to be very, very difficult to overlook the opportunity to actually address a lot of different co-morbidities when you have GLP-1 as a backbone in the molecule.

And when we think about -- I mean, I don't know if you'd be able to comment, when we think about the Phase II program next year, could we see a scenario where you sort of have an Amylin and DAPI, a combo and like a GLP-1 comparator arm. Is that -- would you think about doing such a big Phase II study all in one? Or should we think about them still as being kept to sort of single programs?

Many years ago, when I started this game, there was a very wise guy who talked me about the KISS principle. And I stay to that one, and that is about keep it simple, stupid. So don't try to overcomplicate things here. So, I think we should not make it too much of it.

Okay. Very clear. And I guess, just thinking about your earlier focus, I guess, you recently entered Ion channel blocker into Phase I. And I guess there's a lot less sort of discussion around what you're doing in the preclinic. So could you just briefly give us an idea of what sort of targets you're looking at, your strategy there? And is it really a pure obesity focus? Or are you sort of also going elsewhere?

We are also going elsewhere. We have a few more very good ideas. We think ourselves in the obesity space it has, again, as I said, it has to be too differentiated. It's not -- you should not expect me too's of copies of what others are doing, we have some things where we actually think we have a very unique approach in diabetes space. And so we focus on that one. And then I would say near term, if you consider what we will also put into the clinic next year, it's actually within the chronic inflammatory space. It's something we have invested quite a lot in the research space in the last 5 years. So we have some great opportunities I believe both addressing and the Complement space and also some Ion channels, which we believe are central in the immune cascade and autoimmune diseases. So I think in 3 years from now when we sit here, we will also be discussing those opportunities in chronic inflammation autoimmune diseases.

Great. And I just wanted to open up the floor if anyone had any specific questions? If not, Okay, cool. And I guess, overall, could you just sort of outline, I guess, the data part and the catalyst we should expect to see over the next, I guess, 6 to 12 months when we think about partnerships, the NASH data, I believe is also the investigator study for dapiglutide. So just sort of outline, I guess, the cadence of data readouts over.

I think we have an incredible rich -- potential news flow coming over the next 6 to 12 months. So of course, if we start with the rare disease assets, it's about NDA filings for glepaglutide, it's our upcoming PDUFA date for Dasi and CHI and its partnership discussions where we expect to close two partnerships in the next 6 to 12 months on those assets and then have those companies who will commercialize the assets. When it comes to the obesity pipeline, there's Boehringer disclosing their Phase III program and getting the first patient dosed, us receiving a milestone for that. Then there is, of course, the NASH data that they will present next year, first half next year. Then for Amylin, we have the 16-week data that we'll read out first half of next year. For Dapiglutide we will very, very soon start a further dose escalation study and then first half next year, we will report Phase II data. So it's going to be very data-heavy both with from obesity pipeline. And then for the early stage, as we discussed, we anticipate to start a few Phase I studies also first half next year. So I would say, all in all, a very news flow rich and data heavy period to do that.

Cool. And I guess last question. I guess you had to pick one of those data readouts, which would you sort of do you see as the most underappreciated and why you are most excited?

Amylin's 16-week data.

Okay. We'll stop there. Thanks very much for your time, Adam. A pleasure hosting you.

Thank you.