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

Cool. Well, thank you all for being here. I'm James Machen from the Morgan Stanley banking team and delighted to have Adam from Zealand Pharma here this morning. I guess over the next 30, 35 minutes, we'll dive into a number of areas across the portfolio. But maybe to kick off, and start with a quick intro to yourself, maybe a short overview on what you're doing as a business, and then we can start to get into some of the detail.

Absolutely. Pleased to be here. And yes, Zealand Pharma is a Danish founded company. We've been 27 years in the making, and we are on a journey towards becoming a leader in metabolic health. In December last year, we kicked off our new ambition, which is called the Metabolic Frontier 2030 with an ambition of having actually 5 products on the market in 2030. Having a pipeline of 10 clinical programs and then also having industry-leading times from idea to clinic, so we are on a very, very, you can say, ambitious journey towards addressing what we believe is the biggest health care challenge of our time, not only the obesity pandemic we are seeing, but all the health consequences that follows obesity. So going beyond weight loss, looking into how we can help people improving their health span, living longer with a healthy life, the way people want to live their lives. That's what motivates us, and we are on a good journey towards delivering on that.

Okay. Great. No, very exciting times for yourselves and for the broader industry. You hinted at it with how the market is changing. And clearly, you as really one of the leaders within amylin biology and all the benefits that, that makes, which is really cementing it as one of the leading next-generation mechanisms in obesity. Can you maybe dive into a little bit more detail on why the profile of amylin is so well suited for obesity patients and really how it starts to meet the needs that the consumers are needing in the market?

Right. We were, I guess, one of the first to kind of clearly articulate the need to introduce medicines for patients living with obesity that they can actually tolerate and not only tolerate during the most -- the period where they're the most motivated, meaning the first few months where you lose weight, but also once you get into the weight maintenance phase because living with obesity is a chronic condition for most people, meaning that if you start taking a treatment, you will rebound in weight and you will not get all the health benefits. So we -- when we saw the profile of pirinetide, we already at that time knew that we had something that would be a logical first choice, but also a product that patients would likely appreciate to stay on, overcoming the issues we see with the GLP-1s today where many patients stop within a month and after a year, probably only 20% to 30% of patients are still on treatment, meaning we don't achieve the health outcomes. The interesting perspective when looking and thinking about the future landscape of weight management and treatment of obesity is actually it would -- if I'm right here, it would not be dissimilar from what we have seen in other chronic disease areas. If you think about obesity, type 2 diabetes, dyslipidemia, hypertension, -- when we introduced the first therapeutic opportunities for these patients, we were always targeting the most difficult-to-treat patients, and it was often with very cumbersome but also effective medicines. As they fill and matured, you will see more tolerable, more easy to be on medicines being introduced and actually becoming the therapeutic leaders and the go-to products for most patients. You also see that physicians start to treat earlier and earlier. And what we are hearing -- actually starting to hear more so this year is that people say, why are we waiting or physicians are saying, why do we wait with treatment until you get to the highest DMI? Why not start to treat when you pass the 27 or approach the 30. And that is completely in line with the positioning that we are thinking about within the amylin as a broader class that you want to start on a medicine that gives you the weight loss that most are looking for in the most present way. And with patrinotide, we have a profile which has delivered double-digit weight loss and a placebo-like tolerability profile. So we really think we are -- that profile is the profile that most patients would actually appreciate to be on. And only if you desire an even higher weight loss, you would start to think about combination products of getting on the more cumbersome GLP-1s.

Okay. Great. And I guess that profile is now really starting to emerge with your positive uprem-1 data, which emerged earlier this year. Can you remind us all in a little bit more what came through from that data and then really translating that through to clearly going into the pivotal trial, the design of that and the way that you're thinking about optimizing that route to market?

Absolutely. So it was a pretty comprehensive Phase II program testing 5 different doses of pirinetide and also with a lot of patients in each arm, including a balanced exposure to males and females. So we have a very good understanding of how the product behaves also at the different dose levels. So we are moving into Phase III together with Roche now with a lot of confidence that we actually have the dose setting right and also that we understand the profile of this double-digit weight loss and placebo-like tolerability. So the focus of the program will, of course, be speed to market because we think it's important, of course, to be among the first to launch into a new category and help defining the amylin class as a first choice therapeutic class. One of the things that really excites me, but also where I know we may still be a little bit ahead of the curve is this thing that if you ask patients, 4 out of 5 patients would give you a weight loss number below 20%. So most people are looking for weight loss in the teens. Very few are actually looking for weight loss above 20%. However, many companies and many working in this space have been focused on what I've addressed as the weight loss Olympics being excited when you saw a higher weight loss number, not realizing that, that is actually not what patients are looking for. Even with the current use of the GLP-1s that are available today, most often, the average dose is half what is approved, meaning that patients never get to those impressive weight loss numbers because they're not interested. At the end of the day, we need to develop medicines that fits the patient's lives, the lives that patients want to live. We don't -- we cannot think about managing the obesity pandemic if we require people to fit the lives of the product. It has to be products that fits the lives of patients.

Okay. Great. And I guess that translates through to really there's clearly a commercial edge that's coming with tolerability of different agents. Where do you think that will be once roll a few years into the future, once Petri is on market, really, how do you think consumers are going to start to differentiate between medicines and really make those choices?

I think we are already starting to hear the conversation that more and more people are starting to kind of articulate that the next battle is actually not going to be who delivers a few percent more weight loss. It's going to be around who can deliver the weight loss that patients are looking for with the best tolerability profile. And the one thing that could actually cause a change in in perception faster than what you would normally see in other chronic disease areas is that we know that patients are so engaged in this category. So I think it's like around 60% to 70% of all scripts is actually a patient-initiated conversation. So it's a patient who goes up to the doctor and say, I would like to get on a weight loss medication, and I would like to try this product out. So if we can think about a product now which delivers the weight loss that patients are looking for, but in a more pleasant way where people can actually feel great when they're losing weight, that is a situation where we would envision that the conversations on social media would be very, very firm early on. So you could imagine a take-up that would be quite dramatic because patients are engaged. So you don't need to go through the normal channels that you normally would launch with focusing on Tier 1, Tier 2, Tier 3, key opinion leaders and then you get to primary care physicians because the patients would drive the narrative around wanting to be on a product like this. And I would also say the other thing which excites us is that we think with preintide, if the profile that we have seen thus far comes true, it will also be a product which will allow patients to stay on therapy for longer. And if you start to think about capturing new patients, but also having them to stay on for longer, then that's where you can actually drive up volumes and ultimately value for this category, but also in the end, address -- truly address the obesity pandemic and all the disease that follows.

Right. No, it's super exciting. Super exciting. Maybe let's -- we talked a bit on mono. Let's maybe think about combo as well. As a reminder, you obviously have the Zynergy Phase II trial starting as well in combo with Roche. Can you maybe speak a little bit on aims with that trial, what you're looking to demonstrate and then translate that through link that back to the commentary you had before of decision between mono versus combo therapy and how you expect that will evolve over the longer term?

Absolutely. And when we did the partnership with Roche, of course, it was important for us to have shared economics not only on the prinetide opportunity, but also on the combination. So we could really, in a consolidated and shared effort, build the franchise leadership around prinotide that we are aiming for. So with the combination product, it's a unique opportunity to leverage the strength of each individual molecule. But when you think about combination therapies in the future, you also have to acknowledge that these should be products that are provided to patients who can benefit from both modalities. And I just -- as one example, even in today's market, 15% of patients don't respond to a GLP-1. So you also -- you don't want to put such a patient on a combination product. So when we envision what the combination product should do in the future, it's around providing additional weight loss or metabolic benefits for those patients who have already benefited from 1 of the 2 components that are within such a product. That would -- that's the logical positioning. That could be patients who live with obesity and type 2 diabetes. It could be patients who are -- who may be coming from a very high BMI status and thus ultimately requires the deepest weight loss. Once they have started the journey, they may get on to a combination product. So it's really an opportunity to expand not only the amount of weight loss you can achieve, but also perhaps how you address certain comorbidities of obesity.

Okay. Great. And trial just starting to get up and running and maybe a little bit on what the aims are on that trial.

Yes. So it's a clear dose-finding study where we are trying to find the right balance between the GLP-1 GIP component, meaning CD388 and then the amylin component with betreintide because -- and it could ultimately also be different profiles for different patient segments. But for us, it's incredibly important to get the ratios right and a little bit in line with what we have talked about with betreintide. If you think about this market in the future, you need to have the right molecules, not just molecules. And in particular, when it comes to combinations, we need to move beyond just trying to seek the highest weight loss if it comes at the compromise of tolerability, very few would actually ever get to that in the real world. So we need to find the right balance where we also get the right amount of weight loss when you still consider tolerability.

Okay. Great. A little bit more on Roche as a partner. And I guess as a reminder, this was a $1.65 billion upfront partnership, over $5 billion in milestones and importantly, the profit share on both the mono and the combo as you mentioned. Can you speak a little bit around why Roche as a partner? What were the attributes there that really excited you as you stepped into that partnership and selected them?

It was a highly competitive process when we were partnering out with pirinetide. And what really excited us about Roche at that time was both Thomas and Theresa's very strong commitments when we spoke with them around how they wanted to be a top 3 player. they shared their plans around how they wanted to establish a strong manufacturing network and overall just where they wanted to take the company. And I must say that I'm extremely pleased to see that everything we discussed at that time has come true. I mean I think people who follows LinkedIn can see how they are investing in manufacturing capacity. And also, I think they have started to be more public in their kind of commitment to how they want to lead in this space going forward. So among all the large pharma companies we spoke to, we just sent the strongest commitment to actually to come in and make a difference for patients in this new category, which I still think is a new category. Remember, we are 4 to 5 years into treatment of obesity and weight loss. So while a lot of people may think it's these treatments has been around for a long time. It's really novel. We have one category more or less with the GLP-1 class. We have 3% to 5% of patients being treated today in the U.S. There's so much opportunity to come in and lead if you want to do things differently. And that was what we heard from Roche that they wanted to come in and drive innovation in this space, not only when it comes to molecules, but also how you go to market, how you secure the most effective manufacturing. And that's what we see in the partnership.

Okay. Great. No, great partner. We'll see how Theresa addresses it over the coming weeks as well with their respective R&D Day. Let's turn to second asset within the portfolio, still on obesity versus the other areas. And clearly, a different partner with Boehringer andutide. Can you maybe frame that as an asset, how that is distinctive from the amylin where you're looking, where you and your partner see the greatest potential of that product?

Yes. So svaglutide is a licensing agreement we made with Boehringer. So they are fully responsible for the clinical development and commercialization. So we just have high single to low double-digit royalties, which is a nice situation to be in, in particular, because survlutide, and we just saw the first data here from the Phase III program here at ADA this year. It looks to be a very, very strong GLP-1 glucagon molecule when you think about not only weight loss but also metabolic health. What Boehringer showed at ADA was that while they achieved around between 16% to 17% weight loss in the Phase III program, most of that weight loss was attributed to losing weight in the losing fat, getting fat out of the liver and the intestinal fat which is normally seen as the bad fat, if you will, so it was predominantly liver and visual fat that was lost. And they also showed data that there was only 10% muscle wasting or muscle loss, which is in contrast to the 20% to 30% we have seen from other GLP-1s. So I think they have a molecule here with svaglutide, which is really going beyond just weight loss and addressing the metabolic health that we're actually all trying to achieve with these weight losses. So we are super excited, and we know Boehringer is super excited about the prospects of svlutide. And as they say, you see obesity, think liver because a lot of the metabolic disturbances you have with living with obesity starts in the liver. And if you can really get fat out, that's a major event. They also -- they will report the rest of the Phase III program this year in obesity. And then they have a large program in NASH and NASH, including end-stage liver disease that will read out in the coming years and will hopefully help further underscore the potential to actually -- to address some of the underlying organ defects that you see with long-standing obesity. The other thing which we are pleased with the partnership is the continuous commitment to invest into the program. So earlier, I think, in August, they announced that they started a Phase III study in type 2 diabetes to really -- with the aim of expanding, I guess, the label universe for seirvaglutide. And sometimes in this world of obesity treatments, we forget that the GLP-1s are still generating more revenues within type 2 diabetes. So it's nice to see that continuous investment. They're investing in women's health. They're investing in heart failure. So they're doing additional studies to really support this product.

Okay. Great. So multiple indications and really then looking to derisk the pivotal program over the next year. ight. And the MASH data that comes through the course of '27?