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

Everyone thanks for joining us for the next session. I'm pleased that we have Adam Steensberg, who's CEO of Zealand Pharma with us today. Adam, thanks for joining us and making the trip over in person.

Maybe just kind of to kick it off, if you wanted to kind of make some high-level introductory comments about Zealand, about the pipeline, about therapeutic focus for some of the people that may be less familiar with the company.

Absolutely. And thank you for the invitation. Great to be here. Yes. So Zealand Pharma is a Danish-based biotech company focused on peptide drug discovery and development. We have a very strong pipeline within obesity, both assets in Phase I through Phase III and together with our partner, Boehringer is one of them. And then we have opportunities in rare diseases and chronic inflammation, so basically leveraging our peptide drug discovery and development skills, which we have been refining, I would say, over 25 years. We have a few products that we have invented that are already on the market today. So a mature peptide drug discovery and development engine with a very strong pipeline within obesity.

Perfect. So you mentioned obesity, which is obviously a key topic that everybody has been focused through '23 and likely into '24 as well. Could you just kind of give us your view on where you think we are and where the kind of the sector is in terms of development made in obesity, where we are, what's left?

Yes. So of course, it has been on many people's minds and all over media for a few years, the obesity opportunity, if you will, I would rather call it the obesity challenge that we are seeing as a global entity. We, at Zealand Pharma, has been working with obesity-related products for more than 10 years. So it's not new to us. It's -- I would say -- but when it comes to products on the market, it's a rather new thing which having only seen the first product being launched a few years back. So I would say from a treatment perspective, it's really the early days still of obesity -- of management of obesity. We see it as probably the biggest health care channels that we have faith in modern time. The comorbidities that we see with -- coming with obesity, and today, we have 2 products that are approved to address this challenge. And just to put that a little bit into perspective, then if you take another area like hypertension, we have 10 different modalities on the market, 120 different medicines to treat hypertension. And we see obesity as a much, much bigger challenge. So it's the very early days. We expect a lot of, you can say, new opportunities to rise in the future.

Okay. And you mentioned that there's kind of 2 dominant players right now in the space, and there is this kind of opportunity for new entrants. Where do you see that?

Yes. This is, of course, always the thing that is difficult to predict about the future. But I think if you look back at history, what you're very early -- what you have seen from most categories and most areas of treatment, then you have seen some of the first-generation molecules being taken over by newer generations. And I would actually guess that many people have not foreseen which would be the winner in the future. So I think what we're looking at right now are the first-generation opportunities to address the obesity and really where we have new opportunities in the future, molecules that are better suited towards targeting some specific comorbidities associated with obesity, it's actually more the diseases that are associated with obesity, we are treating rather than the weight loss per se. That's one area. And then I also believe that we will see more and more shift towards medicines that are perhaps more suited for weight maintenance because just with any other chronic disease management, I do not think that it's just a matter of losing weight. It's actually the more important factor will be how you help patients maintain that weight loss.

Okay. And if you think about kind of the assets that you have in development, how do you think about those fitting in? So I mean one of the questions that we always get from investors, so you have Survodutide, which is in Phase III. People ask us, well, why does this product need to exist in a world where we have semaglutide? And to that, besides that, how would you answer that question?

Yes. But I think, first of all, we have to look into different classes. And really the way we look at this at Zealand Pharma is the first class of medicines that are in the market today, they are built on GLP-1 as a backbone. Meaning that, that is what drives most of the weight loss and then you can add additional pharmacology to that backbone to better target specific comorbidities or perhaps achieve a little bit more weight loss than what you can achieve with a monoacting GLP-1. So what I see as the major unmet medical need going forward, if you have GLP-1 as a backbone, that is to truly, you can say, differentiate on some of the comorbidities associated with obesity to a larger extent than what their current medicines can do. Of course, there will also be somewhat of a, you can say, a drive towards molecules that gives you a little bit more weight loss, but reality is that for most patients, the weight loss that we see with the current medicines in this 15% to 25% is probably what they're looking for. So it will be a fraction of patients who will be -- who will need significantly higher weight losses. So the key thing, if you have GLP-1 as a backbone, that will be how well you address the comorbidities to obesity. And then I think for the next set of molecules, those that are in earlier stage development or perhaps even still in preclinical development that has to focus on novel modalities because I do agree we do not need like 100 GLP-1 molecules out there.

Okay. And what about tolerability because that's always kind of a question and it's something that still kind of remains to be seen how that plays out. So how do you think about that impacting that maintenance therapy?

Yes. So if you take the product that we have developed -- co-invented with Boehringer, they are now responsible for the development. In the way we see the data today is that they have released the Phase II data set where they had around 19% weight loss, which if you make the projections towards longer-term studies, Phase III study, it should get into -- I mean, 20% to 25%, probably closer to 25% weight loss. And of course, it comes at a cost, when you have a GLP-1 background -- backbone, that is nausea and vomiting, especially in the titration phase and also as we have seen with other GLP-1s, constipation and other issues when you are in the maintenance space. You can, to a large -- to some extent, at least handle this by careful titration. What we have seen with Survodutide in Phase II, we at least believe is similar decrease of nausea and vomiting as we've seen in the Phase II trials of the competing products. It's something we do believe that Boehringer can handle in the longer Phase III studies with more careful titration use of medication. And I think it's also a strong testament to this molecule that Boehringer is actually pursuing even higher doses in Phase III than what they utilized in Phase II.

Okay. Perfect. And then, I guess, kind of mechanistically with Survodutide, it's a GLP-1 co-agonist. Just could you remind us what you think is kind of the differentiation of the glucagon co-agonist?

So we have already seen with semaglutide from Novo Nordisk what a GLP-1 can achieve. When you add glucagon to that or a little bit of glucagon, not too much, at least in our minds, you should be careful not to have too much glucagon on board, then you, at least in theory, can increase your energy expenditure slightly more because that is what glucagon is known to do and that should, in theory, drive additional weight loss. Perhaps more importantly, glucagon is also known to specifically target the liver and get nutritions out of the liver. So any weight loss would also result in decreased fat in the liver. But with this molecule, we do hope to see even increased levels of -- decreased levels of fat in the liver and thereby, hopefully, this molecule could contribute more to targeting the MACE or NASH component of obesity.

Okay. And then on Survodutide, I guess, it's kind of a couple of years away from the Phase III readout. But just thinking ahead slightly, what do kind of the perfect product profile for that drug look like to you?

It is what I would describe as good enough weight loss for GLP-1 backbone molecule, which would be in that range of 20% to 25% weight loss. But then the key differentiator would be, let's see that we have data coming out here in this first half of the year, if we also generate strong data in NASH.

Okay. And I guess on that NASH component, we have the readout coming this year. At your R&D Day back in December, I think some of the physicians on the panel there mentioned that they could potentially see a potential for a fibrosis benefit. Could you maybe just put into context what you're expecting from the readout and your views on whether there could be a fibrosis benefit with Survodutide?

Yes. I mean I think they built that observation on prior observations from bariatric surgery, where you have seen effects on fibrosis following bariatric surgery and weight loss associated with that in longer-term studies. So of course, there is a chance that we can pick that up also in a study like this. But I just, again, have to remind people to be a little bit careful because there's only 1 year duration in this study. And when you are addressing NASH from a metabolic component, it could take a little bit longer before you would see the impact on fibrosis. But -- so I would say a best case scenario for me is not to have fibrosis. But of course, a blue sky scenario is if they also meet that already in a 1-year trial.

Okay. And then maybe just moving to kind of the other assets that you have in development for obesity. So at the R&D event last month, you kind of highlighted the GLP-1, GLP-2 and your amylin analog. Could you just kind of put into context those assets and again, what you're looking for in terms of product profile?

Yes. So if we start with dapiglutide, our GLP-1, GLP-2 dual agonist, then it's so important to remember, as I said in the beginning that we are not just treating weight loss, we're actually treating diseases associated with obesity. And beyond the metabolic challenge that many organ will experience in obese individuals, there's also an inflammatory component that has been known for many, many years that is not just metabolic challenges, but also inflammatory drivers that will cause the organ damage that you see the liver, the heart, the kidney, the brain. And I think with dapiglutide, we have really good preclinical evidence to suggest that by having both GLP-1 and GLP-2, we will be able to control inflammation to a larger degree than just having GLP-1 on board. So it's really a molecule, which we expect will be differentiated in the sense that it could address not only NASH, which is known to have a large inflammatory component, but also neuroinflammation, for instance, obesity or Alzheimer, for instance, is associated with obesity, that's one of the comorbidities to obesity. So it could -- dapiglutide be a very strong opportunity to address Alzheimer, which is also a big challenge to society. So that's really concerning that inflammatory component. When it comes to amylin, it's a different, you can say opportunity in the sense, it's a completely different modality compared to the GLP-1 class. The way an amylin introduced weight loss is different from how GLP-1s do. GLP-1s will decrease your appetite and an amylin will increase your satiety. So that is the feeling you have after you have eaten. So it's 2 very different ways that they work. Amylin also, you can say, in contrast to GLP-1s actually decrease insulin, whereas GLP-1 will increase insulin. In theory, that should be helpful when it comes to preserving muscle mass in your muscle when you lose your weight because you don't build up fat as you do when you increase insulin. So -- and we have preclinical data suggesting that amylin could actually increase the quality of the weight loss, meaning you lose less muscle when you lose your weight. And then I would say the very important other aspect is, and these are early clinical data that we have seen, but also from some competing programs, it looks to be a more tolerable way of losing your weight, meaning you don't see the same degree of nausea and vomiting as you do with the GLP-1. So we are extremely excited about amylin as a next generation, different modality that could complement or be an opportunity for patients who would like to try something else than a GLP-1-based medicine.

Okay. And then -- so we have a 16-week Phase I data this year. I guess, what are you looking for from that data set to validate your excitement in your amylin?

So we have seen 2 data sets so far from a Petrelintide side, our amylin analog. And one was the once -- you can say, 1 single ascending dose Phase I study, and then we had a 6-week data set where we saw 5% weight loss after 6 weeks' treatment. Now we have a 16-week study. And I would say if we can get weight loss data that puts us on par with the first-generation GLP-1s like semaglutide for weight loss -- for weight management, then I would be hugely excited. And this is actually 7% to 8% weight loss after 16 weeks, that would probably take you to the weight loss that you see 17% in longer-term Phase III studies. And then, of course, looking at the tolerability profile too, if that's confirmed from what we saw in the earlier clinical experiences, then, in my book, we have something that looks extremely interesting.

And then on the kind of lean muscle mass piece, do you think that the 16-week data set that we will get this year will have any kind of informative data to kind of support that?

No, not to a large extent, that will be covered in later studies where we will look specifically into those at the appropriate doses once we have established those. So the next step for this program is to start a larger Phase IIb study. And then in parallel with that, we expect to run studies that are assessing these opportunities because, of course, if you can have a molecule that preserves muscle mass to a larger extent when you lose weight, that is a very, very interesting concept, especially for weight maintenance for 2 reasons. First of all, we know it's good to have a function of muscle. And here, I must highlight functional. It's not just about, you can say, big muscles is actually muscle that works. And then the other thing, because that can contribute to also maintaining your resting energy metabolism and thereby having a more, you can say, normal -- maintaining a more normal weight loss.

Okay. And then those -- both of those assets, so GLP-1, GLP-2 and then your amylin analog are both unpartnered right now. Could you kind of just help us think about how you're kind of strategizing the partnership process from here? I mean you've been clear that, that is the plan.

Yes. So of course, when you are going after an opportunity, that is I speak of obesity, as I said in the start, we actually consider the biggest challenge that we have seen in modern time, it makes sense to partner at one point. And then the key question is, of course, when and with whom. And if for dapiglutide, which has a GLP-1 backbone, it is a more complicated development program because you have to differentiate on clinical outcomes like in NASH, Alzheimer's and other areas. So here, it probably makes sense to engage in a partnership somewhat earlier. For amylin, it could be later or it could be earlier because it's the most simple development in the sense that it's a new category. You just need to show that you have got good enough and differentiated towards the first category. And so for me, the most important thing when we partner this is that we have, you can say, a dedicated partner who have the same vision for the opportunities as we do, not just trying to play a game of catching up with the current leaders but actually trying to define a winning strategy to become a future winner instead of just somebody who stays behind all the time. So it's about ambition, I would say, and the right partnerships. And because we have differentiated molecules, I think it's fair to have at least a dream about being a future winner.

Okay. And in terms of the process and kind of earlier you can't say too much on that, but is it something that you're actively engaging in right now? Or are you waiting for data sets to mature as we get through the year?

We have a lot of dialogues. As you can imagine, I mean, as you started out saying there's only 2 players who are really on the market today, then we have Boehringer who looks to be the next company who could actually get a product on the market -- our glucagon if it sees all the way. But -- so of course, there's a lot of other large pharma companies who have to consider or are considering how to play in this game, and we are in dialogue with several of those. We are not pushing it into very, you can say, detailed discussions yet because I do think that there's a lot of value in generating the next data sets from our end to truly, you can say, build evidence around the potential.

Okay. And then just on kind of thinking about what an ideal partnership may look like from your perspective is kind of the deal that you have in place with Boehringer on Survodutide a good guide? Or would you want more economics or some kind of commercial exposure going forward?

Yes. That partnership that we have with Boehringer is one we established more than 10 years ago. It was a preclinical opportunity. It was actually targeting diabetes at that time. So it was a very different, you can say, setting and also at the preclinical stage. So of course, we are pursuing a different kind of partnership ultimately and also with different financial surrounding things we are talking about very unique clinical assets approaching Phase IIb now. And I would also say, in particular with amylin, I think when I look at this, if our -- if what we have seen so far are confirmed in the next data readout after the 16 weeks, I think we need to have some strategic rights because it becomes such a big opportunity that it would be important for Zealand to stay involved going forward.

Okay. And particularly at kind of the end of last year, there was a kind of step-up in deal activity within obesity. How does that influence your strategy? Do you feel that there's kind of potentially more pressure to enter into a partnership because potential partners are hovering up assets or even from a competitive perspective that these bigger players may be able to kind of invest behind the assets and it kind of reduces the head start that you may have?

Yes, not really, to be honest, because what I -- what we're seeing right now, I think, is deals that are focused on products that are similar to what is already on the market or oral versions of what is on the market. So I don't think -- coming back to what I started out saying that in the future, we should have 10 different modalities. We should have a lot of different opportunities. So -- and that's what we have at Zealand. It's not like new 2 compounds or things that looks more or less similar to the products that are already on the market. So I don't feel an increased pressure. I think it's important that big pharma starts to take steps into this so far, I've seen what I would describe as rather conservative steps in the sense that they are playing in the same space that has already been defined as by the 2 leaders, and we are trying to do something more than that. So I think we would be complementary to any of those ideas.

Okay. You mentioned oral GLP-1s. How do you think those could impact the treatment landscape? And I guess, secondly, is the internal capabilities at Zealand to play in the only oral game, if you needed to?

I do think oral made a sense for management of obesity will become important in the future. I think we are overstating, you can say, the impact of it today because historically, actually, if you look into any chronic therapy area, the biggest barrier to get an injectable is to start treatment. And that's -- their obesity is a very different animal because people are extremely motivated to get on treatment. So it's not a big barrier to get people to take an injectables. And once they're on it, they're actually very often, don't matter too much because it's such a simple procedure. So I don't think orals will revolutionize which patients would like to get treatment as you have seen in other chronic therapy areas. And on the other hand, I would also say the reason that I do think they should play a role is, of course, if you have a small molecule or made a sense for the future, you could consider cheaper productions and actually reaching broader patient groups with small molecule therapies, but we only work on peptides. It's a cumbersome process to make a peptide orally available. Very often, even we're very -- a lot of work going into this, you will only achieve very low bioavailability. So of course, we can do it. It's something we will do in partnerships. I think it will be, you can say, not the biggest drivers going forward. And I would also challenge people to think about if you ask patients on the current obesity medications, what are the few things that are they -- 3 or 5 things that you would like to see from a next-generation molecule, oral would not be the first answer. That would be less nausea, less constipation, maybe something that doesn't remove my appetite. So I can actually be at a dinner and without having to skip 2/3 of the meals. So -- and then after that, maybe they would mention, could I get an oral pill? So I think we're overstating the opportunity for orals, but I do think they will play a role. I would say, in 10 years from now, I would still think that injectables are the biggest category by far.

Okay. Helpful. And then just going back to amylin because I know that's kind of a molecule in your pipeline that you're particularly excited about and we got kind of informative data this year. One of the other interesting things there is that you're targeting a monotherapy strategy, one of your competitors as we know, is looking at a combination with the GLP-1. Could you just maybe talk to your confidence in that monotherapy strategy?

Our confidence comes from the data that we've seen thus far with 5% weight loss after 6 weeks. We have seen data from a competing program from Novo Nordisk, where they have shown, I would say, weight loss that is comparable to a GLP-1, but their amylin analog saw a 11 -- around 11% after 26 weeks. And so the bigger opportunity, we believe, is really in creating a new category distinct from the GLP-1 class for those patients who cannot tolerate GLP-1. Those patients who would like something of weight maintenance, those who would like to have perhaps a better quality weight loss with muscle preservation. So focusing on creating that new category is more important than just doing a fixed dose combination where we lock our molecule into one specific GLP-1, if you will. So having said that, that does not mean that we would not also pursue combination therapies, and that would be a natural thing to do in a Phase III program where you combine, let's say, our amylin petrelintide with a market-leading GLP-1. That's what you have done in other chronic therapy areas, then you show if there's added synergistic effects and then ultimately, you could also do consider fixed-dose combinations. We have actually designed our amylin so it can be coformulated with all the GLP-1s we know of because it has -- it's stable at neutral pH. That's in contrast to other amylins. So I'm not saying that we will not do it. I'm just saying it's not logical to be sure that as the first indication unless you have a market-leading GLP-1 such as Novo have, then maybe it does make sense to try and protect that franchise. But for us, it's much more important to create a new category of weight loss medication.

Okay. And then on the topic of combination therapy, how do you think that lands kind of in the long term? So we've seen dual agonists like yourself, we've seen triple agonist. Is there a point at which we kind of get too many agonists in a single kind of dose? And how do you think that all of these mechanisms can exist in harmony?

Yes. I think there's a limit to how much weight loss patients want. I mean, I guess, there's a natural limit at one point. And I think the -- you can say the dual action is probably we are reaching -- when we get to this 25% weight loss, which we can achieve, I think we are at least reaching the goal for most patients. Then you can consider adding an amylin and get closer to 30% or 35% maybe later on for those few patients who truly need that. But there is a limit to how much weight we should achieve. And I think the more important thing is, of course, how we address comorbidities. So ultimately, you also need to understand if you're providing even better outcomes with those degrees of weight loss compared to what you can do with a 15% to 25%, that remains to be seen, to be honest. So I would say, it remains to be seen. I do see an opportunity. I would stress that if you go beyond dual pharmacology in a single molecule, you are really on thin ice on predicting how to go from animals to humans because there's so many parameters you play on. It's not just about which resets that you hit. It's also the relative balance and also biosignaling and so on. So it becomes extremely complicated and probably you will also need a little bit of luck to get it right when you get into those matrixes.

Yes. And in terms of kind of GLP-1, GLP-2, could you just kind of remind us of the key events this year?

Yes. So we have a Phase IIa study reading out this first half year where we have those -- of these individuals for 13 weeks and with 2 different doses and placebo. So of course, here, we will learn a little bit more about the weight loss potential, but we have also included a lot of biomarkers, including intestinal biopsies to better understand how the GLP-2 component contributes to controlling low-grade inflammation. And then later in the year, we actually have a Phase Ib study that reads out where we have dosed even higher. So the combined data set from the Phase IIa and this Phase Ib study where we dose even higher will then allow us to move into a Phase IIb.

Okay. And the 13-week data, I guess, it's a relatively short trial. Do you think that's going to be predictive of what you may see in longer-term trials?