Zealand Pharma A/S
Q4 2021 Earnings Call Transcript

Published: 10 Mar 2022

[Operator:]

Ladies and gentlemen, thank you for standing by, and welcome to the Zealand Pharma Fourth Quarter and Full-Year 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. I would now like to turn the conference over to your speaker today, Emmanuel Dulac. Please go ahead, sir.

[Emmanuel Dulac:]

Yes. Please, Matt, take it over.

[Matt Dallas:]

All right. Thank you. Thanks, Emmanuel. Welcome and thank you for joining us today to discuss Zealand's fourth quarter and full-year results for 2021. I'm Matt Dallas, Senior Vice President and Chief Financial Officer at Zealand. With me today are Zealand's President and Chief Executive Officer, Emmanuel Dulac; President of Zealand Pharma U.S., Frank Sanders; and Chief Medical Officer and Head of Development, Adam Steensberg. You can find the related Company announcement and additional supporting information on our website at zealandpharma.com. I would like to point out that we will be making forward-looking statements that are subject to risks and uncertainties. These statements are valid only as of today and the Company assumes no obligation to update them except as required by law. Please refer to recent filings for a more complete picture of risks and other factors. With that, I will turn the call over to President and CEO, Emmanuel Dulac.

[Emmanuel Dulac:]

Yes. Thank you, Matt, again, and thanks to everyone for joining today. Before we begin, I would like to take a moment to acknowledge the headwinds that we are all facing from these current geopolitical and the current biotech market landscape. In spite of these obstacles, we have the principle at Zealand Pharma to deliver on our mission and we believe we can actually rise to this challenge. Please turn to Slide 3. 2021 was a transformational for Zealand Pharma as we received our first FDA approval and launched our first commercial product, while continuing to advance our deep pipeline. With the launch of Zegalogue in the U.S., our established research capability in Denmark and now complemented by a commercial franchise in the United States. In 2022, we are eagerly anticipating our pivotal Phase III results with both glepaglutide for SBS and dasiglucagon for CHI, and continuing our strategy to discover and develop innovative peptide therapeutic options for patients with type 1 diabetes, rare diseases, obesity, and inflammation. With this established momentum across our robust preclinical and clinical pipeline, we feel well positioned for continued progress in the year ahead. Next slide, we continue to discover and develop innovative peptide therapeutics for patients with type 1 diabetes, rare disease, and obesity and have established momentum across our robust preclinical and clinical pipeline with a number of significant milestone this past year. Later in the call, our CMO and Head of Research and Development, Adam Steensberg will discuss on most recent pipeline updates in greater detail, including completing enrollment in the pivotal Phase III trial of dasiglucagon for the treatment of congenital hyperinsulinism, or CHI in children up to 12 months old. Completing enrollment in the EASE-SBS 1 pivotal Phase III trial assessing glepaglutide in patients with short bowel syndrome or SBS, and successfully completing the Phase Ib trial of our GLP1-GLP2 dual agonist dapiglutide. These achievements positioned us well for continued progress in 2022. This year, we look forward to a number of clinical milestones, including data from each of those recently enrolled Phase III studies for dasiglucagon and glepaglutide along with dosing the first patient in our Phase III program of the iLet bionic pancreas device for the treatment of type 1 diabetes in collaboration with our partner Beta Bionics. But first, I will turn it over to Frank Sanders, President of Zealand Pharma U.S., who will discuss the continued work of our commercial team on the launch of Zegalogue. Frank?

[Frank Sanders:]

Thank you, Emmanuel. Please turn to Slide 5. In the fourth quarter, approximately 2,000 total prescription claims for Zegalogue were submitted to commercial and government payers. Also, approximately 500 distinct health care providers wrote prescriptions for Zegalogue. Most of these prescribers were endocrinologists, both adult and pediatric and approximately 60% of prescribers were repeat prescribers writing Zegalogue prescriptions multiple times in the quarter. On average, 2.0 units of Zegalogue per prescription were being dispensed. Of note, we have been encouraged to see an uptick in the number of unique prescribers with most recent Symphony health data showing 30 new prescribers per week, representing a 36% increase per week versus what we saw over the fourth quarter of 2021. While Zegalogue demand has grown since launching last June, it has not translated into a proportional level of revenue growth. 2021 full-year net revenue for Zegalogue was DKK5.5 million or US$0.8 million. Please turn to Slide 6. Zegalogue now has favorable coverage in approximately 70% of commercial lives, which accounts for more than 130 million lives and approximately 95% of Medicaid lives, which accounts for 69.1 million Medicaid lives. Now I will turn to Adam who will provide an overview of the progress of our clinical development programs.

[Adam Steensberg:]

Thank you, Frank. And please turn to Slide 7. Here, you can see our robust pipeline targeting four therapeutic areas of high unmet medical need. In 2021, we successfully completed patient enrollment into two of our key late and mid-stage development programs, setting us up for very exciting 2022 with a number of pivotal clinical data readouts. We also saw significant progress in our peptide platform and early pipeline, which will become increasingly visible throughout the year. In type 1 diabetes, our partner Beta Bionics initiated the Phase III program for dasiglucagon in the Bihormonal Artificial Pancreas in late 2021. We expect to present data from the Phase IIa trials with dasiglucagon mini-dose pen in type 1 diabetes later this year, and we look forward to providing more visibility into these programs throughout 2022. During the second and third quarters, we expect pivotal Phase III data readouts on our rare disease program targeting CHI and SBS. And in the event of positive outcomes, we will shiftily pursue NDA submissions for both indications with the U.S. FDA. For dapiglutide, we completed the Phase I program late last year, and we look forward to sharing further results at a scientific conference later in 2022, at which time we will also provide an update to the next development step for this molecule. As a reminder, dapiglutide is a long-acting GLP1-GLP2 dual agonist with potential across a spectrum of metabolic and gastrointestinal diseases. And with its dual node of action, we believe this compound could lead to rather than clinical differentiation for patients. 2022 also looks to be an exciting year for our obesity portfolio. First, we expect to present data for the Phase II trial with BI 456906 in people with type 2 diabetes and a medical meeting, and to see the results of the Phase II trial in obesity. Our partner Boehringer Ingelheim is making good progress in all fronts. We also began dosing patients in the Phase I obesity trial of our long-acting Amylin Analog ZP 8396. And I'm very happy to announce that the trial is making good progress. We expect to initiate the Phase Ib multiple-ascending dose trial data in 2022 and to provide further preclinical and clinical updates as we advance into the year. Please turn to the next slide. While discuss our dasiglucagon CHI program and the upcoming results for our pivotal trial for this indication. Among the most advanced clinical programs in our pipeline is the evaluation of continuous infusion of dasiglucagon in children with Congenital hyperinsulinism, or CHI and ultrarare disease caused by a defect in the pancreatic beta cells. CHI is the most frequent cause of severe and persistent hypoglycemia. It starts as early as the neonatal period and profoundly affects those children and their families from infancy through the teenage years. It is characterized by an excessive and uncontrolled insulin secretion triggering the current episode of profound hypoglycemia, which requires surveillance, rapid and intensive interventions to prevent neurological sequelae. We have randomized the last patients into the pivotal Phase III trial. The primary objective of this trial is to demonstrate a reduction and need for intravenous glucose infusion in the hospitalized children. Secondary endpoint includes reduction in need for intensive hospital treatment, reduction in frequency of dangerous low blood sugar, and need for constant feeding and to potentially delay or eliminate the need for pancreatectomy. We also have a number of children in the long-term safety and efficacy trial, 17106, with some children having been treated with dasiglucagon for several years. Data from this trial is planned to be included in a potential NDA submission with the U.S. FDA, and I am happy to announce that we have managed to close the database for the interim data for this study last week. Pending positive results from the pivotal Phase III trial in the second quarter, we work quickly and diligently towards an NDA submission with the U.S. FDA based on data from all three Phase III studies. Please go to Slide 9. And our efforts to develop a novel treatment options for people living with short bowel syndrome. We recently announced the completion of patient enrollment into the pivotal EASE-SBS 1 trial. And glepaglutide has the potential to be the first long-acting GLP-2 agonist and the first to be delivered by an auto-injector. Patients with SBS, they have limited treatment opportunities and many remain in need for long-term daily intravenous infusions of liquids and energy to maintain life. And we believe that glepaglutide has the potential to make a significant difference in the lives of these people. And Phase II data have shown the potential to improve gastrointestinal absorption in people with SBS and thereby reducing the need for parenteral support. Please go to Slide 10. The pivotal EASE-SBS 1 trial has around 95% power to detect a treatment effect of glepaglutide versus placebo. It's a six months trial and full result of the study is expected in the third quarter this year. Long-term safety and efficacy data from EASE-SBS 2 and 3 will be included in a potential NDA submission to the U.S. FDA, and we are currently planning for interims database for these trials later this year. Please go to the next slide. Data presented last year from the Phase Ib trial of BI 456906 a long-acting dual glucagon GLP1 receptor agonist showed that the compound resulted in clinical relevant body weight reductions of up to 13.7% with no unexpected safety findings after 16 weeks of dosing. In 2022, we expect to present data from the Phase II trial in people with type 2 diabetes, and to see the results of the Phase 2 trial in obesity. Please go to the next slide. At Obesity Week last year, we also presented pre-clinical data as related to our long-acting amylin analogue ZP 8396, either as a monotherapy, all in combination with semaglutide. The combination therapy resulted in up to 20% weight loss in in-vivo models. The Phase Ia trial was initiated late last year and we continue to make good progress. Later in 2022, we expect to present further pre-clinical and clinical updates from the program and to initiate that multiple-ascending dose Phase Ib trial. I'll now turn over to our CFO, Matt Dallas to walk us through our year-end financials. Matt?

[Matt Dallas:]

Thanks, Adam. On Slide 13, you'll see Zealand’s income statement for full-year 2021 and how it compares to 2020. Total revenue for the year was DKK292.6 million or US$44.6 million. This was driven primarily by net product revenue of the V-Go wearable insulin delivery device and Zegalogue as well as partnership revenue from our collaborations with Alexion, BI and Sanofi. The net operating result for the year was a loss of DKK1.05 billion or US$160.1 million. Sales and marketing costs mainly relate to the commercial infrastructure in the U.S. to support the Zegalogue and V-Go commercial programs while R&D costs primarily relate to our late-stage clinical programs. Slide 14 illustrates our financial position and ability to support our growing business through continued investments. Net operating expenses for the year were DKK1.22 billion or US$186.7 million. In December, we announced a seven-year $200 million financing agreement with Oberland Capital that included an upfront payment of $100 million in exchange for a seven-year interest-only secured note. And at the end of the year, we had cash, cash equivalents and marketable securities of DKK1.4 billion or US$217.7 million. Turning to our financial guidance on Slide 15. For 2022, net product revenue from the sales of commercial products is expected to be DKK235 million, plus or minus 10%. Net operating expenses are expected to be DKK1.2 billion, plus or minus 10%. We do expect revenue from existing licensing agreements. However, since such revenue is uncertain because of size and timing, we do not intend to provide guidance on such revenue. And with that, I will now turn it back to Emmanuel.

[Emmanuel Dulac:]

Thanks, Matt. So in summary, 2021 was a year of significant progress for our organization. 2022 is the year where we expect significant infliction in our pipeline. We have a deeply-rooted know-how in developing peptide therapeutics and have the potential to change the lives of patients with our late-stage programs in metabolic and gastrointestinal disease. Summarizing again, what Adam just described. In 2022, we expect to see Phase III data from our second and pivotal trial of dasiglucagon CHI. Phase III data from a pivotal study of glepaglutide in SBS. Phase II trial results. For the program, we have any collaboration with BI in type 2 diabetes. Phase II trial completion for the same program in obesity and Phase I single ascending dose results from our amylin analogue trial in obesity. So despite economic and geopolitical challenges, our company believes that we can continue execution across all our clinical milestones, and it will bring us closer to our goal of offering five commercialized products by 2025. Thank you, all. I will now turn it over to the operator for questions.

[Operator:]

Ladies and gentlemen, we will now begin the question-and-answer session. The first question is from Thomas Bowers. Please go ahead. Your line is open.

[Thomas Bowers:]

Yes. Great. Thank you very much. A couple of questions here from my side. So if we just dive into your product revenue guidance. So if we are assuming – I know you don't split up V-Go and Zegalogue, but just assuming flat or low-single digits V-Go growth, we are looking at some under DKK50 million in 2022 sales for Zegalogue. I mean, this is very close to your initial 2021 guidance. So is there anything that materially has changed and how you looked at the market potential for Zegalogue? I mean, now you have more or less zero issues with payer coverage going forward or at least from Q2 or something, so prior to second half 2022? That was my first question. So second question is just related to Sanofi. So I've seen your revenue that you have 30 million milestone from Sanofi during the year. And well maybe it's mostly for modeling reasons, but that full amount that you expect from you can say the lixisenatide leftovers here. I believe, I remember that the full amount was around US$10 million to US$15 million. So is this for the 30 million that you're going to get? Or is there potentially additional revenue or milestones in the near future? And then my last question, maybe just, if we just dig a little bit to Zegalogue and then also V-Go. So maybe a little bit more high level. So is there actually still an argument against just pulling the plug here and in this part of the pipeline? I mean, of course, the expected upcoming products launches you have with glepa and also in CHI, and hopefully also dual-hormone. I mean, those all target either ultra-rare orphan segment that you can cope with a small sales force and then, of course, the dual-hormone stuff is probably going to be done with partner. So is there that much spill over aside from, of course, the back office functions? And I remember also your initial arguments were actually just to keep the full control of dasiglucagon, so not out license to any particular indication. So maybe a little bit color on that, that would be very helpful. Thank you.

[Emmanuel Dulac:]

Yes. Three questions. So I think the first one, I will ask Frank to answer. I think on the middle – maybe you can touch as well on the last one, Frank, if you want right away. And then I think probably Matt will address the second question, the middle regarding the payments from Sanofi. And then I will probably add on the third question. Frank?

[Frank Sanders:]

Okay. Thank you, Emmanuel. Look, let me start by saying, we experienced two main obstacles in the first two quarters of launch in 2021. The first was driving new patient starts while we were in the process of securing market access coverage with payers and PDMs. And the second is that our sales teams face challenges, physically accessing HCPs, healthcare professionals in the third and fourth quarter of COVID. And then this is because many hospitals and healthcare provider practices were shutdown the sales rep access during the time of COVID. So for 2022 and the beginning of the year, these conditions have improved on both of these fronts. The first is that and you saw this from the slide that we had shared a moment ago, that Zegalogue now has favorable coverage in approximately 70% of commercial lives in the first quarter and 95% of Medicaid lives again in the first quarter, which is a major difference versus the first two quarters of launch in 2021. The second thing that I will say is that physical access to HCPs is improving. And HCPs are reopening their doors to Zealand representatives, which again is a change. And then finally, we are seeing an increase in the number of unique prescribers for Zegalogue in 2022. We're gaining now approximately 30 more prescribers per week in 2022, which is about 35% greater than what we saw in the fourth quarter of 2021. So that do address your first question. The commentary that I'll make, as it relates to the second, this is the first launch in a long string of potential launches for Zealand that are planned over the next couple years. And we see this as an opportunity obviously to establish our presence in the U.S., but the infrastructure that we're building, as you had said Thomas in the back end, is something that we see as being scalable and supportable of other product launches in rare disease, and we'll continue to evaluate that as we get closer to launch. So thank you for the questions.

[Emmanuel Dulac:]

Matt, do you want to take the one, yes.

[Matt Dallas:]

Thomas there's one outstanding milestone for Sanofi, it's for US$10 million or DKK65.6 million.

[Thomas Bowers:]

Okay. That's very clear. Thank you very much.

[Emmanuel Dulac:]

Thank you, Thomas.

[Operator:]

Thank you for your question. The next question is from Michael Novod from Nordea. Please go ahead. Your line is open.

[Michael Novod:]

Yes. Thank you very much. Also two questions, rather simple probably. But on the milestone front as well, if you look at your election collaboration, should we expect any milestones? I know you're not guiding on it for 2022 and of course, there's uncertainty. But is there any sort of clinical progress expected that could potentially trigger milestones from the election collaboration? And secondly, on the BI milestones, are there any milestones related to readout of the Phase II data in type 2 diabetes or will the next milestones be in connection with initiating Phase III? Thanks.

[Emmanuel Dulac:]

Maybe you can take it, Adam.

[Adam Steensberg:]

Yes. Thanks for the questions, Michael. Unfortunately, I cannot give you answers to those because our partners will not allow us to do so yet for competitive reasons. But we can just confirm that we are making very good progress in the BI collaboration and you can see the milestone and royalty structures are classical structures that actually goes for both programs. But we cannot provide more specific guidance on when we will have the next one for the BI. Same goes for the election. We are making very, very good progress for this. I should probably remember, we are responsible for driving all activities up to the first human dose study where after they will take over. But I can unfortunately not give you more specifics on when we will start Phase I or when we will have the milestones…

[Michael Novod:]

Okay.

[Adam Steensberg:]

Contractual obligations.

[Michael Novod:]

All right. That's fine. Thank you very much. That's it.

[Operator:]

Thank you for your question. The next question is from Joseph Stringer from Needham. Please go ahead.

[Joseph Stringer:]

Hi, everyone. Thanks for taking our questions. Two from us on the SBS program. For the Phase III EASE-SBS 1 trial, can you speak more on the change in parenteral support? Obviously, the primary endpoint is an absolute change. And then a key secondary is a relative measure sort of the responder analysis greater than 20% change, if I recall correctly. I guess my question is what would you consider sort of clinically meaningful absolute change on the primary endpoint? And then what's most important, I suppose from a physician perspective in terms of the absolute versus the relative change or responder analysis? And then just the question on the safety exposure requirements from FDA or for a potential NDA submission, do you – given some of the recent changes in open enrollment in EASE-SBS 2, do you still remain on track to satisfy the safety exposure requirements for glepa and SBS prior to potential NDA submission? Thanks for taking our questions.

[Frank Sanders:]

Thanks for the questions. Maybe just on the first question you can say, people living with a short bowel syndrome and the independent parenteral support are extremely heterogeneous. And that also means that some will have an infusion of IV solutions every day, and that could vary between a few liters up to 10 liters. Some will only need 2x or 3x a week. And you can say for our study, you need at least 3x a week. So you can say the absolute reduction for the individual patient of course depend on how much volume they're normally depending on. But on average, if we would – you can say, if you look into what was observed in prior studies, then an absolute reduction of 2.3 liters was across the broader publication, but that would be a mix of some people having a very, very significant, much higher absolute reductions and some having a much lower one. So it's really depending on the individual need of those patients when they enter the study. But I would say any reduction could lead to clinical benefits for patients because you can say, both time we need to be hooked up to these systems. It's the potential to be off treatment for one day. And you can say the amount of times you have to go to the toilet throughout the night, if you have a lot of liquids infused. So it's a difficult answer. But on average, we would expect to see more than 2.3 liters across the population, if we have a similar distribution of patients as in the form of Phase III studies conducted in this population. The relative response of 20% reduction is a little bit of an artificial one, but it's still seen, I would say, from as many as a clinical relevant measure because you can say, let's say, that could give you at least one day off, if you have infusions more than five days a week, or actually provide quite significant daily reductions in volume for each individual patient, if you have a 20% daily reduction. So I hope this is clear enough, but it's really dependent on each patient in the absolute ones. On the safety database, we are actually confident and comfortable with the safety database as it is right now with regards to exposure both for six and 12 months and long-term exposure, which is exceeding what we discussed with FDA at pre – end of Phase II meeting. So you can say any additional patients we get in EASE-SBS 2 is actually only upside to where we are today. Having said that, we do expect to see that upside scenario because it's a quite attractive study to participate in from a patient perspective, and we are as you know keeping the trial open for new randomization into EASE-SBS 2.

[Joseph Stringer:]

Great. Thanks for taking our questions.

[Frank Sanders:]

Yes. Thank you.

[Emmanuel Dulac:]

Thank you, Joey.

[Operator:]

Thank you for your question. The next question is from Lucy Codrington from Jefferies. Please go ahead.

[Lucy Codrington:]

Hi. Thank you for taking my questions. Just on the artificial pancreas, what's the realistic timeline for the first patient in? I know screening is underway and a realistic timeline now for when we might expect data, and we are still looking at early next year, or is that slipping into kind of just the first half of next year. And then just thinking about the bar for demonstrating efficacy in this study versus the insulin-only, will obviously get – hopefully get the insulin-only data at some point this year. But you are aiming for superiority with non-inferiority still be enough for filing for that. And then last question just relates to whether you have any significant exposure to Russia or Ukraine in terms of your ongoing or planned clinical trial? Thank you.

[Emmanuel Dulac:]

Yes. So I can start by addressing the last question first and that's a short answer of note. So that's good for us here in this unfortunate situation. With regards to the BI study, we have actually not guided on when we expect results and we will not do that until we have dose to first patient. So I cannot comment further on. But when will we dose the first patient, it's actually a little bit – we are discussing that with our partner right now as well in the sense that they've completed the insulin-only, haven't made slight adjustments, so we just need to get those into the device and then we are ready to go, and we will provide further updates when that happens, but that should be as guided still. So when we look into – you ask about the superiority versus non-inferiority and the primary endpoint, we are definitely going for superiority of the bihormonal artificial pancreas versus insulin-only when it comes to lowering of HbA1c that is the primary endpoint. And I would consider this, you can say fail study if we don't demonstrate superiority on HbA1c. Clinical relevant changes in a regularly but we would go for more I would say. We would actually see the key secondary endpoint, which is time and hypo, it's enough. We believe to show non-inferiority. So say you can get better glycemic control without increasing the risk of hypoglycemia. But personally, I would also hope to see superiority in less hypoglycemia, which would be a very strong product profile. But primary endpoint is superiority on HbA1c, and we're going for that, and then at the same time show non-inferiority on hypoglycemia.

[Lucy Codrington:]

Thanks very much.

[Emmanuel Dulac:]

Thank you.

[Operator:]

Thank you for your question. We don't have any other question at the moment. I will hand back the conference over to Mr. Emmanuel Dulac.

[Emmanuel Dulac:]

Well, thank you very much. And then with that, we would like to thank you all for attending and for your questions. We look forward to connecting on future announcements and updates. Thank you again.

[Operator:]

That concludes the conference for today. Thank you for participating. You may all disconnect.