Zealand Pharma A/S
Q1 2021 Earnings Call Transcript

Published: 12 May 2021

[Operator:]

Good day and thank you for standing by. Welcome to the Zealand Pharma Results for Q1 2021 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. Please be advised that today's conference is being recorded. I would now like to the conference over to the first speaker today, Matt Dallas. Thank you. Please go ahead.

[Matt Dallas:]

Thank you, Operator. Welcome and thank you for joining us today to discuss Zealand's first quarter results for 2021. I'm Matt Dallas, Senior Vice President, Chief Financial Officer at Zealand. With me today are Zealand's President and Chief Executive Officer, Emmanuel Dulac; and Chief Medical Officer, Adam Steensberg.

[Emmanuel Dulac:]

Thank you, Matt. And thanks to everyone for joining today. The first quarter brought one of the most significant milestones in Zealand Pharma's history. The US FDA approval of Zegalogue, indicated for the treatment of people with diabetes who are at risk of severe hypoglycemia. Our first FDA approval as a company and our first approval in the dasiglucagon franchise. This marks a key turning point in our evolution from a research and development focused organization to a fully integrated biopharmaceutical company with a goal of five commercial products by 2025. Turning to Slides 4 and 5. Under the leadership of Frank Sanders, President of Zealand Pharma US, we have been steadily optimizing our commercial organization over the last year in preparation for the launch of Zegalogue in late June. Through established relationships with KOLs and HCPs, as well as high prescriber coverage, we are on track with our launch readiness preparation and believe this initial launch will put us in a strong position to further build out our commercial organization. To ensure a successful launch, we have four strategic objectives. The first is to establish a clear and distinct product position with HCP,s patients and caregivers. Second, we will focus on the back-to-school season to execute a focused launch that targets and prioritizes high volume customer segments. Third, we are working closely with top national and regional payers, pharmacy benefit managers, and health systems to establish market access and make it simple for patients and providers to acquire product. And fourth, we are committed to providing a patient support program to ensure education and access for patients and caregivers. Turning to Slides 6 and 7. There is a significant unmet medical need in the treatment of for severe hypoglycemia. And with the arrival of newcomers, we have seen an increasing utilization of rescue therapies. For your reference, we have the indication and important safety information for Zegalogue. A copy of the full PI is available on zegalogue.com/prescribinginformation. We believe Zegalogue will be an important new option for people with diabetes to consider in the management of potential consequences of the disease.

[Adam Steensberg:]

Thank you, Emmanuel. Please turn to Slide 9. And as just mentioned by Emmanuel, our preparations for the Zegalogue late June launch have been executed while in parallel continued to advance our pipeline programs, which range from late stages to preclinical candidates in a variety of metabolic and GI indications. Turning to Slide 10. We continue to pursue other indications for dasiglucagon. Among the most advanced clinical programs is the study evaluating continuous infusion of dasiglucagon in children with congenital hyperinsulinism or CHI, which is an ultra-rare disease caused by a defect in the pancreatic beta cells. And later this year, we expect the results from the second Phase III trial in the CHI children aged 7 days to 1 year. Please turn to Slide 11. In collaboration with Beta Bionics, we plan to initiate the pivotal Phase III trial program for the bihormonal iLet bionic pancreas device, which utilizes dasiglucagon in the second half of this year. We plan to enroll approximately 350 adults and 350 children with type 1 diabetes and randomize them into the trial. And these trials are expected to form the basis for an NDA submission to the US FDA for use of dasiglucagon in bihormonal artificial pancreas systems. Please turn to Slide 12. As Emmanuel mentioned earlier, we have also broadened our pipeline of metabolic therapies to target obesity and non-alcoholic steatohepatitis. Our clinical development partner, Boehringer Ingelheim, recently indicated two additional Phase II trials for the GLP-1 Glucagon Dual Agonist BI 456906 in adults who are either overweight or obese or for adults with NASH, and we believe that our dual agonist has the potential to achieve an increased weight loss via improvements of the patient's metabolism and also has the potential to alleviate mass by reducing upstream hepatic steatosis. And we expect BI to complete the Phase II trial in people with type 2 diabetes and to communicate the results from the 16-week Phase 1b trial later this year.

[Matt Dallas:]

Thanks, Adam. On Slide 16, you will see Zealand's income statement for the first quarter of 2021, and how it compares to the same period in 2020. Total revenue for the quarter was DKK47.8 million or USD7.5 million. This was driven by net product revenue of the V-Go wearable insulin delivery device, as well as partnership revenue from our collaboration with Alexion. The net operating result for the quarter was a loss of DKK260.9 million or USD41.1 million. Sales and marketing costs mainly related to the commercial infrastructure in the US to support V-Go at the upcoming Zegalogue launch, while R&D costs related to our late-stage clinical programs. Slide 17 illustrates our strong financial position and ability to support our growing business through continued investments. Net operating expenses for the first quarter were DKK284.8 million or USD44.9 million. At the end of the quarter, we had a cash position of DKK1.6 billion or USD252.9 million funding the company through several key upcoming milestones. And during the quarter, we also successfully completed the largest financing in company history by raising DKK750 million.

[Emmanuel Dulac:]

Thanks, Matt. Turning to Slide 19. As Matt has laid out, we are in a strong financial position to execute on the upcoming launch of Zegalogue while continuing to advance our pipeline programs and invest in building an organization with the best and brightest talent to bring forward new peptide therapeutics aimed at meeting unmet health needs. Our continued progress would not be possible without our research and development engine. The clinical and regulatory teams who worked tirelessly to advance our program and the members of our growing commercialization who are working to bring treatment options like Zegalogue to the patients we need it most. I am grateful and proud of all the hard work Zealand team has done to get us to this point and look forward to continuing to work together to deliver on our vision of offering five commercialized products by 2025. Thank you all. I will now turn it over to the operator for questions. Operator?

[Operator:]

And your first question comes from the line of David Lebowitz from Morgan Stanley. Your line is open. Please ask your question.

[David Lebowitz:]

Thank you very much for taking my question. Could you just, I guess, speak to the glepaglutide trial and how I guess enrollment has continued in that study? Have things stabilized in recent months after, I guess, you know certainly the pandemic has had - has increased challenges over the last year or so?

[Emmanuel Dulac:]

Adam, will you take this question?

[Adam Steensberg:]

Yes, thanks and thanks for the question. Yes, they have and we are continuing to see good progress as we also communicated our - at our full year. So we are you can say positive with regards to how we see recruitment right now. And so far it's - it is coming out as we had hoped for all here with vaccinations being rolled out across the U.S. and Europe.

[David Lebowitz:]

That's good to hear. And with respect to the upcoming launch, have market dynamics been changing? And I guess how is your launch been evolving as you prep for June?

[Emmanuel Dulac:]

Yes, I'll take this one. The market has clearly signaled a shift away from the legacy products to innovative new products for the patients and the caregivers, and the shift is still underway. So I think based on current trends. There is plenty of room to convert legacy shares of the innovative products. That's actually one side of the story. The other side of the story is that we have seen with the launch of the recently approved products and expansion of the market by 6% in 2019 and 10% in 2020 even though it was heavily market impacted by COVID and by no return back to school, which again accounts for around 60% of the total year. So we believe that Zegalogue will be attractive - very attractive new option with HCPs and patients alike and the launch sequence right now is ongoing. So that, we are confident that we will be actually ready to launch our product mid to late June ready on time for the back-to-school season.

[Operator:]

And your next question comes from the line of Graig Suvannavejh from Goldman Sachs. Your line is open. Please ask your question.

[Unidentified Analyst:]

on for Graig here. And first question, if I may on regarding the Zegalogue, given that the launch has been time for the back-to-school season, how should we be thinking about the progression of quarterly sales, i.e. are they going to be - it's going to be a high watermark in 2Q, 3Q when we consider the first several quarters of sales or are we more likely to see a more steady rise on a quarter-on-quarter basis? And then a follow-up on 906 with the expected Phase II completion in type 2 diabetes in the third quarter of this year, is it reasonable to expect that we might see some data from BI or should we be more safe to assume 2022? Thank you?

[Emmanuel Dulac:]

I'll take the first part and Zegalogue and Adam will talk to you about the BI collaboration and product. So our 2021 guidance is on a total combined revenue. So we are not providing individual guidance on the product level and definitely not facing it by quarter. That said, our field operating model is really well positioned to continue to support both the V-Go and the Zegalogue. And regarding the, I would say the launch and the plan for the launch, our plans are anchored around ensuring that we can execute a full product launch in late June, coinciding with the annual market opportunity on the back-to-school season, and so we are on track to achieving this objective. In fact our market access teams have already achieved engaging with national and regional payers and PDMs around the clinical value of the Zegalogue.

[Adam Steensberg:]

Yes, thanks. Thanks for that question as well. So we are, as you know, truly excited about this collaboration that we have with BI and the progress that they are making, also starting two new studies. What we do expect is I mentioned to see that they report the Phase 1b 16-week data, which was conducted in overweight patients later this year. We are also hopeful that they will share the data in type 2 diabetes that is expected to readout later this year that they will do that this year, but we cannot comment on it. If they roll with these data this year or the next year, this is really up to BI and we don't have firm commitments and a communication from them on this past. So I cannot be more precise here in the type 1, sorry, on this study in type 2 diabetes.

[Operator:]

The next question comes from the line of Lucy Codrington from Jefferies. Your line is open. Please ask your question.

[Lucy Codrington:]

Thanks for taking my questions. Just a couple. Just on the d-day performances this quarter, should we view that as a sensible run rate for the rest of the year or were there any kind of one-offs within the quarter that we should be factoring in. Secondly, on the artificial pancreas Phase III and this might be a misguided question. But given the plan is hopefully the majority of the patients in the insulin only trial will roll over into a hormone trial. Will those patients then be stratified given that it's likely that those patients have already been in the insulin only pump will have better control and therefore will that be reflected then in your dual hormone trial? Thank you.

[Emmanuel Dulac:]

So I guess the first question on the financial quarter will go to our CFO, Matt Dallas, and then Adam will take the next one on the dual hormone term by -

[Matt Dallas:]

Yes, so for the run rate, I mean right now what we do have is we have a large amount of launch, cost and activities ahead of Zegalogue as we prepared for that late June launch those costs will normalize as we head into as the drug is being sold but it will be offset with additional clinical spending will have as we approach the bi-half and obviously we've got the studies for our ongoing as well as the CHI. So I think our run rate should be relatively consistent within the year. With that, I'll turn it over to Adam.

[Adam Steensberg:]

Okay. So you are correct that the insulin only - the patients who participated in the insulin only trial can be offered to also enroll into the bihormonal study that we indicated we plan to start. There will not be a direct rollover. So - but - and you asked about the stratification and I think that's a very reasonable thought that you want to make sure that there is an equal number of patients who comes from the insulin only studies in each of the three groups that we are going to have in the bihormornal study as well, but it's not a direct rollover that there will be a time between they exit that study and then they enter with bihormonal study.

[Lucy Codrington:]

Okay, thanks. And then just back on the first one. Just in terms of the V-Go sales, though, is that a good run rate for the rest of the year rather than the run rate of OpEx? Thanks.

[Adam Steensberg:]

I would rather I mean for both revenue and OpEx, we don't provide guidance on a quarterly basis. It's more within the annual number I'd kind of refer to you to those targets versus providing quarterly.

[Operator:]

And next question comes from the line of Etzer Darout from Guggenheim Securities. Your line is open. Please ask your question.

[Etzer Darout:]

Thanks for taking my questions here. Just a couple of here. So I guess maybe first wondering what you're learning from the pivotal trial for the study instrument only Bionic pancreas particularly anything you could kind of provide on terms of - in terms of performance of the pump as you prepare for the bihormonal Phase III launch later this year. This is first question.

[Emmanuel Dulac:]

Adam, do you want to?

[Adam Steensberg:]

Thanks. Yes, I can take that. Thanks for the question. I think it's a very important thing you raise here. We have to remember that the Beta Bionics and the iLet in particular is the first time that the commercial iLet is actually being tested in a large clinical setting here in the insulin only study. So of course there are issues that are being solved especially in the start of that study. And this is something that we consider as a significant upside. So when we asked bihormoal study because it's really been - being, you can say the technical risks are being reduced significantly. So what I, you can say so in our mind, it's really helpful that we can then answer the large bihormonal study, which includes both adults and children around 700 patients with a device that has already been tested for six months across 440 patients with the only difference being that the glucagon, you can say, Champa has been activated. So, that of course you can say risk reduce our study significantly from a device perspective. So, we are being happy with the progress that Beta Bionics are making in the insulin only. We look very much forward to have them complete the insulin only study and then see the results of that study that should hopefully provide some guidance, also for what we can expect for the bi-hormonal study. When we then correlate back to what has been seen in Phase II trials and so on. So it's for us also a very important milestone to have Beta Bionics to complete the insulin-only studies.

[Etzer Darout:]

And maybe Adam just on sort of the two Phase - the Phase II trials for the dasiglucagon mini-dose. If you could just maybe provide a little bit more color on sort of the trials that are playing in. I guess from the press release on this quarter any further details, you could provide would be great.

[Adam Steensberg:]

Yes, I mean actually you can say both in type 1 the mini-dose kinds of diet for exercise induced hypoglycemia, but really giving smaller doses than what we use for rescue therapy that concept we have tested which we know that smaller doses of dasiglucagon works for correcting mild to moderate hypoglycemia similarly in patients with post-bariatric hypoglycemia, who can I mean not tolerate eating without getting hypoglycemia that we've also done an in-clinic study to show that dasiglucagon can actually correct the situation. So they don't get as hypoglycemic as - when they just take placebo. So - but these are studies conducted in the clinics, and the studies that we plan to our starting this quarter they are actually outpatient studies. And we have the actual pen that they can be the ultimate device in the hands of patients to see how they will utilize this in this type 1setting to correct mild to moderate hypoglycemia and exercise settings in type 1 diabetes and then for patients with post-bariatric hypoglycemia, how they will utilize that such a pen and realize. So it's really going from in-clinic studies into the real life setting and thereby also you can say with positive results setting the scene so moving into Phase III. So we are extremely happy to see the progress that we're making here we and look forward to seeing the results in both these markets - for both these opportunities once they are finalized.

[Operator:]

And your next question comes from the line of Joseph Stringer from Needham and Company. Your line is open, please ask your question.

[Joseph Stringer:]

Thanks for taking our question. Just a general question on the 5 by 25 strategy here that you recently announced you could potentially have five products coming online, but just curious if there is a goal of sort of a first year of profitability or at least maybe an idea of, perhaps a peak operating loss here, what are the levers in terms of not only R&D but just OpEx in general that need to be pulled over the next several years to get there. Thanks for taking our question.

[Emmanuel Dulac:]

Matt, would take this one?

[Matt Dallas:]

Yes so, Joey. Great question. One area that we focus on, we've got the 5 by 25 strategy, but behind that's not kind of in that 5 grouping is all of the research and the early stage candidates that we have behind those kinds of five late stage of commercial candidates we have now. Our goal is to continue to fund those programs so that beyond 2025. There is a lot more than 5 that are coming to market and so with that, we don't provide any guidance on profitability because it's all going to be determined based on the success of the early stage pipeline.

[Operator:]

There are no further question at this time, please continue.

[Emmanuel Dulac:]

Okay. Well, I guess if there is no more question, then we will actually complete this call and yes, operator. I think you can potentially close the line now. Thank you everyone for joining this call and thank you for actually participating and listening to us. We remain available for any additional questions if you have. But thank you again. Talk to you soon.

[Operator:]

This concludes today's conference call. Thank you for participating. You may now disconnect.