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

Great. Good afternoon. I'm James Gordon, JPMorgan European pharma and biotech analyst, and I've got the pleasure of introducing the Zealand presentation today. And we're going to hear from Zealand's presenter, Adam Steensberg. So thank you very much for joining us today and look forward to the presentation.

Thank you, and great to see you guys Yes. So I'm here to talk about Zealand Pharma and really our ambition to become a key player in the changing obesity market. And of course, I will be making forward-looking statements as I go through the presentation and, I guess, during the Q&A session as well. So what gives us the confidence to really aspire to become a key player in this growing market is really based on 25 years of peptide experience, R&D experience. So we have been, as a company, active in the metabolic space and, more specifically, developing peptides for metabolic diseases for more than 25 years. So it's not something that is new to us. And if you look into how we have, you can say, transformed the company over the last 3 years, we consider ourselves in an extremely strong position to grow from here, not only when we look into the pipeline, which I'll review in more details, but also when you look into our financial situation. So we're really set up for accelerated growth in the coming years ahead of us and leverage all the experience and the know-how we have in the company. So narrowing in on next year, which looks to be a very, very busy year from our perspective and really a year where we expect to see significant advancements of the obesity opportunities that we are pursuing, you will hear much more about petrelintide as a crown jewel in our pipeline and probably the key assets and which is driving most of our, you can say, equity story currently. The reason that we are so excited about petrelintide is because it offers the first non-incretin mechanism to actually provide the weight loss, we believe, that most obese patients are looking for. So we just initiated a large Phase IIb study and expect to complete that study this year. We will also initiate a large Phase II study in patients with diabetes. And then we will, later in the year, initiate a small combination study. Not that it's core to our strategy with petrelintide, but we recognize the potential of also combining petrelintide with a GLP-1-based mechanism. Dapiglutide is a very differentiated GLP-1-containing molecule, a GLP-1/GLP-2, where we will report data from a 28-week data -- study in this first half. We also expect to push this molecule into a large-scale Phase IIb study here in the first half of the year and thus see significant progress for this program. And then survodutide, which is being developed and commercialized by our partner, Boehringer Ingelheim. We expect them to actually complete the Phase III trials in obesity with survodutide and then also have significant progress within studies in Phase III targeting MASH. And I really think that a lot of investors and people looking into Zealand Pharma tend to overlook this opportunity because Boehringer is a private company. But in our minds, Boehringer looks to be the third large pharma company who can actually enter the obesity space with a very, very differentiated molecule, which I'll also talk a little bit more about. And then we have opportunities in rare diseases and chronic inflammation, which I will also talk about. Looking at our pipeline and which is really what excites us and what -- where we spend all our energy. As you can see, we have a very rich pipeline in obesity. We actually believe we have one of the strongest pipelines in obesity across the industry and a huge opportunity to drive, you can say, differentiation for the future. We truly believe that it's -- you can say, it's time to move on. We need to think about differentiated approaches rather than just seeing more of the same. And that's also something I will discuss more today. If we look below the obesity opportunities, then we have 2 rare disease programs in late-stage developments and/or in the regulatory phase, which used to drive the majority of Zealand's value. And they are still highly valuable assets. It's molecules that has a huge potential to make a difference for patients living with either congenital hyperinsulinism or short bowel syndrome. So we are continuing to invest in these programs and make sure that they reach the patients. But of course, when we look into the magnitude of the opportunity, the obesity opportunity overshines these today. Then, as I said before, we have a rich history of more than 25 years of peptide R&D, and we continue to innovate. We have actually scaled up our innovations and are accelerating our innovation and utilizing the platform, which has delivered plenty of molecules into clinical testing and 2 molecules to the market. So where you can expect to see more innovation from Zealand in the future is within chronic inflammatory diseases. And then within new and novel targets within obesity, that's the key focus area for our R&D pipeline -- early R&D pipeline. So let's just take a step back before I discuss our specific approaches to obesity and remind ourselves why it's so important to talk about obesity. And that is, of course, because there's 220 diseases which you can ascribe to obesity. And it's not just diabetes. It's not just cardiovascular disease, which we all like to talk about. 220 diseases, and it's quite scary to think about already today. There's 5 million excessive deaths every year you can ascribe to obesity pandemic. And if you really think about it, then what we're looking at today is still mostly, you can say, the consequence for people who have lived with obesity since they were young adults or adults. Very, very soon, we will start to face the consequences for people who have lived with obesity since childhood. And this is so important to remember, it's not about being obese or not obese, it's the duration you live with obesity that cause organ damage. So at least at Zealand Pharma, we speculate that a lot of these 220 diseases, which we know can be, to some degree, associated with obesity or obesity as a driver, we will see significant increasing prevalence of these diseases in the future. That's why we have to do something about it. So as I said before, it's not about obese and not obese, it's about tackling what we consider the biggest health care challenge of our times. It's just not something we feel to the same extent as other challenges because it's a slow-moving challenge that has been coming over us for 50 years. It's quite remarkable to think about it that humans have lived in this earth for 300,000 years. And for all those years, we have been able to maintain a more or less stable BMI average. When I was born 50 years ago, the average obesity trends were around 10% of the population was obese or overweight. Today, it's approaching 50%. This is not people who have changed. This is society that has changed. So we have now developed a society, which, actually, doesn't work for people who have developed, all of us, fantastic skills to seek food and preserve energy. It's not natural for us to say no when there's energy around. It's actually a survival instinct to say, yes, please, and then preserve that energy. That's how we have survived for hundreds of thousands of years. In the last 50 years, we have created an environment which doesn't work for most of us and many of us. So we need to do something about it. Otherwise, we're going to have -- we're going to be facing so many health care challenges that it will break the health care systems in the future, and that's why we are in this space. It's also important, when we think about the seriousness of this disease and the serious implications of this disease, that we start to move away from this arms race or the Olympics of weight loss, who gets the most weight loss, that is not the goal. It's not the goal for future medicines to develop the highest degree of weight loss. It's the goal to develop a healthy weight loss. And what we are seeing, what we have known for a long time, when we ask patients, they're looking -- most patients are looking for 15% to 20% weight loss. And if they achieve that, they'll say, "That's fine. I don't need the 30% weight loss," which the industry has been talking about for a long time because that is what you achieve with bariatric surgery. But bariatric surgery is not something you offer to the majority of obese individuals. That is something you offer to the most disease, most obese patients. And we just see repeatedly also now from clinical studies that if you give patients the choice, they will not go for the highest weight loss, they will go for weight loss that is fit for them. And the good news is, what we have also seen from clinical studies is, you don't need 30% weight loss to have very significant health benefits. Likely 10% to 15% is what gives you a lot of health benefits. So let's start to move away from this, you can say, Olympics of weight loss, who gets the most into more reasonable thinking, more mature thinking about how we address this obesity pandemic. Like with any other chronic diseases, we need many choices, and we need choices for different patient categories. We don't need more of the same, in our minds. It's also really important, again, to consider that there are 2, you can say, leaders in this space, 2 frontrunners who have products on the market today. And then there is a very, very rich pipeline of mostly early-stage assets, and most of those are built on the backbone of a GLP-1. And then you have added different pharmacology or different, you can say, properties to those molecules so they can have slightly different, you can say, product presentations and differentiation. But it's not a crowded area when it comes to developing novel medicines for obesity because most, if you are a patient, the patient experience is more or less going to be the same if you have GLP-1 in your molecule. And what cause patients to stop taking these molecules is the experience, it's not the lack of efficacy. We need different tools, and we think, as we will discuss more later in this presentation, that amylin as a category and petrelintide, our molecule, in particular, present the first alternative -- potential alternative to the GLP-1 category. The first alternative tool, not just a new hormone, if you're looking for something else, or an improved hormone. And of course, there will be more. Ultimately, obesity being the biggest health care channels of our time, we need to -- once -- that would be a mature therapeutic area once there are 4 to 5 different categories, which will each have different modalities within that category. But we are, by far, there yet. So we are not even, I believe, at the beginning -- at the end of the beginning of how to tackle this problem, and we need novel categories. And I've just listed some of the examples of how you can differentiate in the future. So again, as I said before, we have seen in clinical trials, we also hear from real-world evidence that GLP-1-based therapies are fantastic tools to help people lose weight. There -- it's the first time we are seeing medicines that actually help people achieving their goals of this 15% to 20% weight loss that most people, if you ask them, would say, that's my goal. But it's also a fact that they are associated with significant side effects, GI side effects. And what we see in the real world, you can say, use of these medicines, not in clinical trials because we are good at keeping study people in clinical studies. But once it's being used in the real world, we see that up to 30% of patients, they drop in -- drop out of these treatments within 1 month, and we speculate a lot of that have to do with side effects. And then a year into treatment, we have less than 30% to 40% who are still on treatment. I think today, the average daytime on a GLP-1-based therapy for obesity management is 5 months. That's actually a huge problem. It's not just about commercial opportunity here, it's a big problem because, I would say, all learnings from former health weight loss programs teach us that if you stop being part of a program, you will regain your weight. And one of the most unhealthy things when it comes to weight management is to do this yo-yo, where you lose weight, regain weight and lose weight. And the even bigger issue is there is a tendency, once you have lost weight, that you just put a little bit more on the next time. So we need to find solutions, and we need to start to have, you can say, a conversation, not around weight loss, but how we help people achieve their weight loss they're looking for. And then more importantly, weight maintenance. How do we help people remain on therapy and maintain their weight loss? And that is back to offering patients tools that are more easy to live with, things that you can actually -- which you are also willing to accept once you are through that initial excitement about your weight loss. Because that's the other thing we know, obese individuals and people are extremely motivated to lose weight. But we all know how it goes once you are a little bit further into that, and you have achieved your goal, it's much more difficult to maintain that weight loss. So we need things which -- new therapeutic categories, which patients are also, you can say, interested in staying on in the maintenance phase. The target product profile we have for petrelintide is, and I'll try to back up that target product profile with data that we have generated over the last few years, is to achieve a weight loss of 15% to 20% in long-term studies. And we are here talking about a high-quality weight loss with the potential to preserve muscles to a larger extent than with a GLP-1-based therapies. It's also hugely important to understand that it's a different mode of action. While the GLP-1 makes people lose their appetite and basically works on prospective food seeking. So you turn up at the buffet and you say, "Not hungry. Get me out of here. I don't like the view or food." Amylin works in a different way and, we speculate, is a more natural way by active -- by, you can say, overcoming the leptin resistance that many obese individuals experience. So leptin is the satiety hormone. That is the hormone that makes us feel full once we have eaten. And amylin stimulates that pathway. So in theory, you will turn up at the buffet, you will start to eat, but you'll just stop earlier. So that's the way you will reduce your calorie intake by eating smaller portions and not super sizing ourselves all the time. And we think it's a more pleasant experience. And then extremely importantly, what -- which I can also, you can say, review in the coming slides. What we have seen, thus far, with petrelintide, it carries significantly better tolerability profile when it comes to GI side effects compared to the GLP-1 class. So these are data that we released in June last year, and we, at least, were extremely pleased to see the outcome of this 16-week study. And when we look into the weight loss curves where we achieved up to 8.6% weight loss, it's really important to keep in mind that it was 80% males, and it was not a very obese population. So we all know that obese individuals and especially females, they lose more weight on these medicines. So this is really an impressive weight loss achieved in a classical Phase I study, which, normally, recruits mostly males. And when we look into the side-effect profile, which is, of course, always the other side of the coin, when we achieve those weight losses with, you can say, only 1 event of vomiting, and that was a patient who received a higher starting dose than what we are proceeding with in the Phase II study, and very, very low rates of nausea and close to no constipation and diarrhea. And when we talk about the GLP-1 class, we always talk about nausea and vomiting because that's the immediate experience, negative experience some patients have. But what makes it troublesome in the medium to long run, it's very often other GI side effects such as diarrhea and constipation. So you can say the side effect profile of this -- of our amylin stands out completely compared to at least our experience with other GLP-1s. And yes, it's in early days. I said 16 weeks in a classical Phase I cohort. But what excites us is it's actually just a continuum of the observations we have seen from the earlier studies as well, including the single-ascending dose study and a multiple-ascending dose study. And it also gives us confidence as we progress into Phase II that amylin -- short-acting amylin has been around for a long time. So there is knowledge around that class of medicines. We have seen Novo releasing data for CagriSema, but more important for us, cagrilintide. So now we have, you can say, safety data from thousands of patients who have been exposed to a long-acting amylin. So we actually move forward with a lot of confidence in the class and what I consider really best-in-class data so far in this amylin class. So the Phase IIb study was started in December. And as you can imagine, it's recruiting extremely well. I think we are even beating our own optimistic time lines. We expect to complete enrollment in this first half, complete the study, as I said before, it's a 42-week study. And then you can say, release the data early next year. So you will also see this is a thorough study. We are not in the camp of trying to bypass Phase II. If you truly want to develop a molecule to become a future foundational therapy but the potential to become first line, you need to do it right. And the most important part of any drug development program is Phase II. You don't want to skip Phase II. You want to make sure you get the right doses and the right, you can say, decisions before you move into the last Phase III programs. So we think we have a very unique opportunity here to come in with a product that delivers the weight loss that patients are looking for, with significant improved GI tolerability, potential for improved quality of the weight loss with muscle preservation. It's a unique mode of action that doesn't work on the GLP-1 pathway. And then one thing we also forget to talk about, somebody has to prescribe these medicines. And if you prescribe a medicine and you get a call back 2 weeks later to say, I cannot tolerate that dose or what can I do, doctor? That's a problem for most doctors because they don't have time for those repeat interactions with patients. And we think we have something which actually is not just something that patients would appreciate, but potentially also prescribers. Shifting gears because, of course, the GLP-1 space is not completed yet. I'm not there yet. But it is, you can say, as I said before, providing the first tools to help people lose weight. It's complicated tools for many to be on, but they are wonderful tools, not only in how they achieve patients' ability to lose weight, but also how they work on comorbidities, such as diabetes, liver disease, cardiovascular disease, sleep apnea, osteoarthritis. A lot of other of those 220 diseases that are associated with obesity. What we're doing with dapiglutide, our GLP-1/GLP-2 receptor agonist, it is leveraging also anti-inflammatory potential of the GLP-2 component of this molecule. A lot of the organ damage that you see with obesity is believed to be caused by low-grade inflammation. And we think we have a molecule here which can not only provide you with a weight loss, but also will be even stronger in controlling inflammation. So for this program, we will report 28 weeks data from a Phase I study. As I said before, early -- later here in the first half, and then we'll start a large Phase IIb study as well. And then to the program that Boehringer is responsible for, where we just have a license agreement with them, receiving high single to low double-digit royalties. A few years back, they reported this, what I consider actually a very strong data set in obesity suggesting at least to us that survodutide has the potential to give you north of 20% weight loss in a Phase III setting. And it's a molecule that is based not only on GLP-1, but also glucagon. Glucagon is, you can say, from textbook's perspective, their molecule that get energy out of the liver, it increases life policies. So it might actually beyond just providing, you can say, the classical GLP-1 effect. It might actually also increase energy expenditure slightly by increasing their life policies to the burn effect. But -- and it looks very competitive in the obesity space, but it's not what will make it a leading molecule. What the edge is for this molecule is what also Boehringer presented last year, first half of last year and presented us groundbreaking results within fatty liver disease, is its potential to address actually fibrosis in patients living with fatty liver disease. And again, because there's no treatments at these -- there's only 1 approved specific treatment for NASH today, but it's been an overlooked area from a -- there's not been many treatments around for patients. It's also been a little bit overlooked in the, you can say, clinical society. But if you look behind the data, it's actually 35% of all obese individuals who have some degree of fatty liver disease. It's a much higher number than diabetes. And Boehringer, they have a program here, which, in our minds, at least, again, have shown best-in-class within the GLP-1 containing molecules in addressing liver health, and they have just, last year, started what we consider the biggest program ever in people living with NASH including people with F4, so the most diseased levels. So that leads me to my concluding slide. And we have a very exciting year ahead of us, with a significant amount of progress expected within the obesity pipeline and also the other programs. But it's fair to say that our key focus is on the obesity programs also this year.

Thank you very much. We've now got some time for questions. Is this on? Can you hear me now? Testing. Well, there's also other microphone. Does that -- I think with that, is there any in the audience have a question they'd like to ask? Otherwise, I've got one line up. Maybe I'll start with a question on amylin. It's been quite a busy couple of weeks for amylin. We've had another company announcing was the CagriSema data, so another amylin therapy. The market's reaction wasn't that positive. What do you think of the data? And what does it mean for amylin as a class? Does this change how we should think about your amylin, petre?

Yes, you will probably be surprised when I say this, but I actually think it's good data. And -- but of course, if you have a very, very effective combination, which we believe a combination of [indiscernible] then -- and you allow patients to make decisions if they want to get to the highest doses you will, you cannot expect to see the maximum potential of that combination. Because, at least, in our minds, as I also discussed before, when people reach a 15% to 20% weight loss, most say, I'm happy with that. In our minds, a product like CagriSema is better suited for those most -- more with the obese patients. And if you want to get those patients, most of those patients who have that 30% weight loss, you need to have, I would say, a very significant physician engagement where the physicians continue to work with the patient and convince them why it's important to get that extra 10%. So it came out actually, when you allow that flexibility, which was new to us, that they had allowed the degree of flexibility. But if you allow that degree of flexibility, that's what you achieved, so it basically just underscores what I said before in our minds at least that patients are looking for 15% to 20%. And then I would say, more importantly, for us, and this might also be a little bit overlooked, cagrilintide was also tested in a mono arm, where it was only cagrilintide, and that provided around 12% weight loss, with a dose of 2.4 milligrams, which we consider a very low dose of an amylin analog. Remember, we are dosing up to 9 milligrams with our amylin analog. And we also believe we have significantly higher bioavailability of 80% compared to maybe 30% with -- that's our estimate for cagrilintide. So you can say, 6x more. So that, again, underscores the potential to get into that range of 15% to 20% weight loss for petrelintide. And then -- as importantly, we now have the first data set in thousands of patients being treated for more than a year with a long-acting amylin that has a very similar receptor biology as ours, which is a hugely derisking event for Zealand because we are still early with our program.

Thank you. Question to the -- pass with the hand up there. If you wait for the microphone 1 second, just so everyone could hear you. Thank you.

I have 2 questions. One, you just mentioned, people have said, in general, females, just quick, is more sensitive to GLP-1-related drugs. [indiscernible] Where did you get this conclusion? This is my question.

Where did I?

I think it was the question about the weight loss by gender, the data to support -- I think it's the women lose weight more quickly versus men was the question.

Correct. [indiscernible]

Yes. I mean it's seen in all the programs. And I would also say, we'll present the data later in the year. It's a very small data, but you will see the same trend. And so -- and I would also say, look into the clinical studies that are being conducted. You always see, let's say, 70-plus percent females, and that's by design, not by coincidence. So there's data out there to support the females lose more weight on the GLP-1 class. We don't have robust data yet for the amylin class, but I would say the observations we had in our small studies to support that, it would be the same phenomenon.

Another question is, if you just look about patient, given GLP-related drugs, when they go to a strong environment...

Could you hold your microphone like this?

Yes. You just joke about when people are given with GLP-1 drugs, they couldn't suffer a [indiscernible]. They couldn't go there, right? I totally agree with you. The preservation of the present sensations is very important for patients. But have you looked into the -- how much appetite being left when people are receiving your drugs?

How much what?