Zealand Pharma A/S
Q3 2018 Earnings Call Transcript

Published: 15 Nov 2018

[Operator:]

Good day and welcome to the interim report for nine months 2018 conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Britt Meelby Jensen, President and CEO. Please go ahead.

[Britt Meelby Jensen:]

Thank you and welcome everyone. Joining me on the call today is Mats Blom, our CFO and Adam Steensberg, our Chief Medical and Development Officer. So on page 2, before starting, I’ll remind everyone that today's discussion includes forward-looking statements and that any of these statements may be subject to risk and uncertainties. So, moving on to page 3. I’ll begin today's call with a short introduction then I'll turn the call over to Mats for a quick summary of the financials for the quarter ended September 30 and the first nine months of 2018. And this will be followed by an update on our clinical progress from Adam. I’ll then conclude with our outlook and upcoming milestones before opening the call up for questions. Turning to page 4, so the past months have been a transformational period for Zealand. We became no doubt a financially stronger company with funding and we also was focused to get our medicines in development so market. In September, we concluded an agreement with Royalty Pharma through which we monetize our future royalty stream and $85 million of potential commercial milestones from Soliqua and Lyxumia. This transaction allows us to immediately recognize tremendous value from these assets, adding approximately DKK940 million or $150 million in cash to our balance sheet. After deduction of direct cost from the transaction as well as, the repayment of an outstanding royalty bond of $24.7 million after which we are now fully debt free. Morgan Stanley was our advisor in this transaction and they ran the competitive process with multiple rounds of negotiations and we believe that this process has realized great value for the company and for our shareholders. Most importantly, having this capital on hand that allows us to invest with greater financial independence and stability into our late-stage programs and as a result it puts us in a stronger position to build both short and long-term shareholder value, while avoiding shareholders dilution. This brings me to our development pipeline. We have made significant progress in our late-stage clinical programs and Adam will go through this shortly in more detail. An important highlight from the quarter was the very promising results from our Phase 3 pivotal trial with dasiglucagon for severe hypoglycemia. These results indicate that dasiglucagon HypoPal rescue pen could become the fastest rescue treatment for severe hypoglycemia. And following these very strong results, we initiated the pediatric Phase 3 trial for dasiglucagon for severe hypoglycemia. On a major milestone in the period was the initiation of the pivotal Phase 3 study for glepaglutide for short bowel syndrome. Our key objective with glepaglutide is to achieve fast approval and with this solid Phase 3 trial design, our main focus is now to ensure high quality and timely execution of the Phase 3 trial. Our early pipeline is following fast on the progress of our late-stage clinical pipeline. So, in Q3 one of the product candidates developed in partnership with Boehringer Ingelheim advanced to Phase 1b. We are excited to announce also the selection of our GLP-1/GLP-2 dual agonist to move into Phase 1 at the start of 2019 and will be advancing also Complement C3 inhibitors in preclinical development. So, looking back we have had a strong focus on advancing our wholly-owned programs and with the successful progress we continue as mentioned to focus on high quality executions to get to market. Our second key focused area for us now is partnership and therefore we have expanded our leadership team with the appointment of Marino Garcia as Senior Vice President of Corporate and Business Development. He has decades of experience in both commercial new product planning and business development and he'll have a leading role in advancing our strategic corporate initiatives as well as, business development initiatives. So, as you can see on page 5, we have established a robust pipeline of clinical programs that have the opportunity to provide patients with improved care and also offers opportunities for our company’s growth. As mentioned earlier, our decision to monetize our royalty assets from Suliqua and Lyxumia allows us to advance these programs with greater stability. Adam will give a more detailed update on some of these individual programs shortly. So, on page 6 let me turn the call over now to Mats Blom, CFO discuss the financials.

[Mats Blom:]

Thank you, Britt and good afternoon and good morning everyone. Let’s start on page 7. As Brit mentioned earlier in September you'll recall we sold the future royalties for Suliqua and Lyxumia, plus two milestones totaling in $85 million to Royalty Pharma for gross proceeds of $205 million. As Britt mentioned, the net cash effect of deduction of direct costs from this transaction and also the repayment on an outstanding royalty bond amounts approximately DKK940 million or $150 million and following this we are my old completely debt free. We do retain one milestone from Sanofi of up to $50 million and this one we expect to receive in 2020. As a reminder, under our royalty agreement with Sanofi, we used to receive 10% on net sales revenue plus upto DKK100 million in milestone payments. While we value the relationship with Sanofi immediately recognizes these value, enables us to generate additional capital to support ongoing development in our product line. So, as such we think this transaction supports the long-term value creation for our shareholders. Looking at page 8, you can see a summary of our financial results for the first nine months of 2018. And our total expenses for the first nine months are in line with our expectations. The net results for the first nine months of 2018 was a profits of DKK704.3 million compared to a loss of DKK164.6 million the same period last year. And of course, this profit is primarily a consequence of the sale of the Sanofi royalties. Our R&D expenses for the first nine months amounted to around DKK300 million compared to DKK221 million for the same 2017. And the increased cost mainly related to the clinical development of the three dasiglucagon programs, as well as, glepaglutide for short bowel syndrome and some preclinical research activities. If you look at page 9 and turned to the balance sheet. As of in September 2018, we reported securities cash and cash equivalents of approximately DKK1.5 billion or $230 million. And this cash balance includes the proceeds from that royalty monetization. You should note that the 13.5% or DKK177 million that we paid to third parties from these proceeds would not be paid until December this year. So, they are included in the cash position. We, of course, believe that these resources would put up a very strong position to fund our programs going forward. Looking more boldly on page 10. Our financial results for the first nine months are on track with our expectations. We do maintain our guidance for full year as originally announced in our annual report by the beginning of the year showing net operating expenses to be in the range of DKK475 million to DKK495 million or $73 million to $77 million. And since we now have sold future royalties from Sanofi, we no longer expect any royalty revenues. So, on page 11, I will now turn the call over to Adam to discuss our pipeline in greater details and we’ll take any questions you might have on the financials by the end of the call. Adam?

[Adam Steensberg:]

Thank you Mats. So, if you turn to page 12. We recently announced advancement of glepaglutide for the treatments of short bowel syndrome into the clinical Phase 3 trial. That was done following very strong Phase 2 results where we demonstrated increases in intestinal absorption following only three weeks of further dosing. Glepaglutide that is a long-acting GLP-2 analog with an effective half-life of approximately 50 hours, which actually allows for potentially weekly dosing in an auto-injector. And the U.S. FDA they have granted us an orphan drug designation for this indication. Patience with short bowel syndrome they need better treatment options and on unefficacy glepaglutide also provides the potential for the weekly dosing in a ready-to-use solution, which could be a major benefit for these patients. And we are convinced that glepaglutide has the potential to become a best-in-class treatment for short bowel syndrome. If we turn to page 13, you will see the design of the Phase 3 trial. In the trial, we see demonstrate efficacy and safety of a once and twice weekly injection of 10 milligram glepaglutide in patients with short bowel syndrome on parenteral support. 129 patients will be enrolled at approximately 40 highly dedicated investigational sites across U.S., Canada, and Europe. The trial is a placebo controlled randomized, placebo controlled and double blind design and the primary objective is to confirm the efficacy of glepaglutide in reducing the parenteral support volumes in the patients. This will allow patients to spend significantly less time being hooked up to the parenteral support infusion systems and it will potentially also allow patients weekly days off parenteral support. Major efforts has been put into securing high quality sites for the trial and we feel very well prepared to execute timely on patient recruitment. And I’m really happy to say that the first patients are already being dosed with glepaglutide and we look on bringing on additional sites in the U.S. this quarter. So, if we turn to page 14. I would like to talk about dasiglucagon. That is our potential first-in-class stable and soluble glucagon analog. We have it in development as a ready-to-use HypoPal rescue pen for easy, fast and effective treatment of severe hypoglycemia. And in September, we announced the successful result of our pivotal Phase 3 trial, which I will touch upon in more details on the next page. This also allowed us to initiate the pediatric Phase 3 trial and we expect initial results from that 40 patient study in summer of 2019 and we maintain the goal of submitting an NDA filing to the U.S. FDA by the end of 2019. On page 15, in regards to the adult Phase 3 trial for treatment of severe hypoglycemia, you demonstrated that single doses of dasiglucagon rapidly increases blood glucose levels in patients with type 1 diabetes following an insulin infused hypoglycemia. 168 patient trial, which compared the effect of dasiglucagon with placebo and that of currently available glucagon for reconstitution, successfully achieved all primary and secondary end points. And the primary endpoint was time to plasma glucose recovery, defined as an increase in plasma glucose of more than 20 milligrams was easily done. From page 9, without administration of rescue glucose. And the median time to glucose recovery was only 10 minutes of dasiglucagon and that was superior to placebo with a median time of 40 minutes and the median time for glucagon was 12 minutes. In addition and importantly 99% of the subjects were recovered within 15 minutes versus only 2% in placebo and 95% with glucagon. Overall, we observed no safety concerns during the trial and nausea and vomiting were reported with similar numbers between dasiglucagon and glucagon. So, now we can turn to page 16. And we're very pleased with the progress our partner Beta Bionics has made in the development of dual-hormone pump that uses dasiglucagon for also maybe diabetes management. Beta Bionics they received approval of their IDE from the U.S. FDA in the beginning of the second quarter. And home use clinical trials in adults with type 1 diabetes already now being conducted at the Massachusetts Hospital and Stanford University Hospital using the fully integrated iLet. Within the coming months, a Phase IIb trial with dasiglucagon in the fully integrated iLet and the dual hormone configurations will be initiated and we expect to have results in the first half of 2019 from that study. Turning to page 17. We are also developing dasiglucagon as a potential treatment option for congenital hyperinsulism or CHI, which is a rare disease affecting mainly newborns and young children. We had expected to initiate the first of the two Phase 3 trials already now, however, after having received additional comments to the protocol from FDA, which we actually believe will simplify and improve the overall program, we now look forward to initiate the trial by the end of the year. The second phase 3 trial for dasiglucagon in CHI is expected to start in the first quarter of 2019. The trials will evaluate the potential for dasiglucagon as a new non-surgical treatment for children with CHI. During the trial, neonates and children, they will be given low doses of dasiglucagon infused via the Roche Accu-Chek Combo pump system. On page 18, I would like to present our two products that we are developing with Boehringer Ingelheim for obesity and Type 2 diabetes. The first is a one GLP to one glucagon agonist and the second a once weekly amylin analog. The global prevalence of obesity has more than doubled since the 80s and in 2014 more than 1.9 billion adults were classified as overweight with 600 million of these being obese. And we are very excited about the progress in these programs. The Phase 1a single ascending dose safety and tolerability trial with a GLP-1/Glucagon agonist has been successfully completed and in all those Boehringer Ingelheim initiated the Phase 1b multiple ascending dose safety and tolerability trial, which we expect will read out in the first half of 2019. Based on extensive additional work by Boehringer Ingelheim, they have now decided to replace current amylin lead with a stronger backup candidate, which is anticipated to enter clinical development also in the first half of 2019. So, if you turn to page 19. So, our knowledge on the GLP-1 and GLP-2 mechanisms that has convinced us that combining these two activities into a single peptide will have utilities in several diseases, given the impact upon they've got liver access. We are optimize the [indiscernible] and peptide active at both receptors and [indiscernible] decreased intestinal agility and increased intestinal growth. We have also demonstrated that the dual agonist has a greater effect on intestinal growth than the GLP-2 analog alone, which could translate into increased intestinal surface area and absorption. So, we expect the dual agonist to deliver increased absorption of internal maturations and refuse stable output as well as increased metabolic control compared to the single acting agonist. The preclinical toxicology studies have been completed for these molecule and we aim to initiate Phase 1 next year. So, please turn to page 20. And if we look at our preclinical progress in a long-acting C3 Complement inhibitor program, which we have not discussed before. The Complement cascade contains many intervention clients that opportunities for normal target peptide therapeutics. These peptides may offer greater specificities and administration advantages over other modalities. We usually have focused our discovery platform on C3, the central regulator of the Complement cascade and identified a novel potent selective and long-acting peptide inhibitor. This program is now looking to start clinical development in 2020. So, with that review of our pipeline, let me turn the call back to Britt.

[Britt Meelby Jensen:]

Thank you Mats, thank you, Adam. So, to summarize on page 22, 2018 has so far been another busy year with progress on the pipeline. And looking ahead we’ll continue to have strong focus on delivering on our programs and advancing them towards the market. We will in 2018, when the Phase 3 for dasiglucagon in CHI has been initiated has three product candidates that can launch within the next two to four years. Based on all peptide platform; we have as we have seen today, added new and exciting programs to the pipeline. So, we have multiple opportunities for high value partnerships, we have a strong cash position with no debt and a highly skilled team to deliver on our promises. So, please turn to page 23 to conclude by looking ahead. The key focus for the next period through 2019 will be updates on the ongoing Phase 3 glepaglutide trial. For dasiglucagon we will with Phase 3 results in pediatrics head towards NDA submission. We'll start Phase 3 with dasiglucagon for CHI and we will complete Phase 2b in the first half of next year in the dual-hormone pump for diabetes management. In addition to this, we have a number of ongoing partnership discussions that are advancing and like it's to conclude next year, but we are not guiding on this. So, thank you for your attention and I will now hand over to the operator to open the line for questions.

[Operator:]

[Operator Instructions] We’ll take our first question from Alan Carr with Needham and Company. Please go head.

[Alan Carr:]

Hi, thanks for taking my questions. Can you tell us more about the two pump program with dasiglucagon, a bit more about the bridging study that you're talking about? And then you know what your plans are for the trial after that. I know you’ve had some discussions with the FDA and then more about what they want to see? And the other one, actually for Mats with this, can you guide us, I think there's some milestone payments due from Boehringer on their progress with those two programs. What's the latest on that? One of them is moving forward, one of them, they're starting over, how does it impact the revenue from that deal? Thanks.

[Britt Meelby Jensen:]

Thanks, Alan, and I think I'll let the two gentlemen answer the question. Mats, do you want to go..

[Mats Blom:]

Okay. Yes, I can start on the milestone question on the BI. I mean, we have two separate licenses with the items, so it's two completely separated programs, both of which have significant milestones at start of Phase 2. And you know it's hard to guide, but as it looks like now the GLP-1/Glucagon is ahead. And if that's positive we’ll probably have them in Phase 2 first while of course, if we’re starting with now new stronger candidate on amylin program and possible Phase 2 have seen more to the future. But in principal, we are really happy with that both program progresses. And with the cash position we are at right now, we're not that dependent on these milestone continues quickly.

[Adam Steensberg:]

Okay. And if I should follow-up on the development on the collaboration we have with Beta Bionics on the dual-hormone pump activities then, you can say, we have already discussed also in our Q2, when we said they will have some very good and fruitful discussions with FDA about what is actually required to go into Phase 3 in this pump setting. And we had originally anticipated that a larger Phase 2b study would be needed in order to bridge between the initial data that we have generated and then before Phase 3 dialogue that we have right now is and much more limited studies, that basically at Phase 2 study, which will just demonstrate the functionality of the pump together with dasiglucagon. So, shows that is why we cannot be more clear at this time point on exact study design. But I can say we are very encouraged by the dialogue and we just need to have the final details in place and then we can communicate about it. But as it looks like now it would be a much faster and easier way to Phase 3, so more following what we would see as being a device development timeline. So that could be a very big win for Zealand.

[Alan Carr:]

So, you mentioned Britt you mentioned BI oncology brought in someone to help with business development that sort of thing. Is running a Phase 3 on your own with this program feasible after you know this information for your discussions with the FDA? Or do you need to partner for the Phase 3?

[Britt Meelby Jensen:]

Thanks, Alan, that's a good question. So, actually right now you can say, I mean we have a very strong collaboration with Beta Bionics. And as Adam mentioned and also very good dialogue with FDA both had welcomed device division and you can say. I mean, with Beta Bionics they have quite a sizeable NIH grant, I mean, earmarked for the Phase 3 program, so that actually means that we are able to move into Phase 3 with a very limited investment from our side and that's, of course, what we believe at this stage makes a lot of sense because we see great potential in this for Type 1 and incentive insulin in Type 2 patients. So, therefore, we, I mean, we are building value on this right now and I think the progress we have seen over the recent months, both with the impacts with the FDA having, I mean this brand. And also the financial position of Beta Bionics who have great significant amount of money and to combine with our financial strength, actually means that we think this is very encouraging to take further for now also.

[Alan Carr:]

And then one last one. You have a few trials, looks like supportive trials on clinicaltrials.gov for the HypoPal program, which sort of, with extra support of clinical work is needed for the NDA next 4Q 2019 besides the pediatric trial you started. What else do you have going on there what's needed for the NDA?

[Adam Steensberg:]

Yeah, so I can take that for you. So we, the competitive trial that is -- the trial that we see on critical path for the NDA submissions, so that's why we have put so much dose on that one. But you can also see from clinical trials right now is that we are conducting an additional smaller Phase 3 trial with the actual auto injector that is you can see a regulatory requirements that we need to confirm the data that they have already seen with the prefilled syringe that is sitting inside the auto injector. So, that study is being conducted right now and will read out in the first half. Then we are conducting some additional [indiscernible] safety studies PK Phase 1 studies just to show the IB and PK data describe the PK profile, means, you can say, our Phase 3 studies. And then we anticipate to start one extra study within a month or so, which will fully support the dual source continues that we are going forward with this product. But these are studies that are not on critical path and you can say more supported studies to the Phase 3 program.

[Alan Carr:]

Thanks for taking my questions.

[Operator:]

Thank you. And we’ll take our next question from David Lebowitz with Morgan Stanley.

[Unidentified Analyst:]

Hello, this is [indiscernible] for David, thank you for taking our questions. Two quick ones from us. What changes are being made to the hyperinsulinism Phase 3 trial post FDA input to simplify and improve the program? And second quickly, could you speak to the size of the market opportunity? Thanks.

[Adam Steensberg:]

Okay, thanks. I can take that question. So, we have actually had a very good dialogue over the year with FDA on this indication. And what is important to understand here is that it’s the first time that anybody is trying to engage or is engaging in a Phase 3 program. So, we also know that FDA, they have actually been reaching out to key specialists and stakeholders in the CHI community to better understand the unmet medical needs and how these children are being treated today. And what we have learned and together with FDA that is that they are actually ready now to put more emphasis on the glycemic parameters. Basically, the risk of hypoglycemia and allow these, you can stay endpoints to be the primary endpoints in the study, before we have had discussions with FDA, that we needed to have more clinical endpoints. And of course, it simplifies the studies a lot, if we can have, you can say glycemic endpoints. So, that is what we decided that based on that interaction and it came in quite late. It's a very busy division, so we decided to implement those recommendations before going on with the -- before initiating the study. So, overall we actually see it as a positive thing, but also we are of course, very aware that we need to execute quickly on this program and get to the market fast. With regard to the market opportunity, one thing I can say that it is also indication, but it's also an indication and area where there is a substantial need for better treatments, so of course if our program is successful, we see an opportunity to generate significant value in a very limited amount at a group of patients. We expect to have around 300 patients being an integral in the U.S. and Europe.

[Unidentified Analyst:]

Thank you.

[Operator:]

Thank you. We’ll take our next question from Peter Sehested with Handelsbanken.

[Peter Sehested:]

Yeah, hi, it's Peter from Handelsbanken, thanks for to take my questions I have a one follow-up, actually three questions; the first one is a follow-up to the question on the Boehringer Ingelheim projects and the one going into Phase 1b. I think that your understanding was that you would have the potential to move into Phase 2, potentially next year. So, you didn't comment on the timing for potentially going into Phase 2. So, if you could elaborate on that. Secondly, when you announced your deal for the sale of royalty stream and that you [indiscernible] receive $205 million, i.e. DKK1.3 billion and now we're seeing that its actually income is I mean substantially lower than that due to cost. I mean, could you just elaborate, I mean, $200 million in costs seems a bit high. Could you give us an explanation for that? And thirdly, with respect to CHI, give an update on what you believe the potential for a pediatric review in this indication? Thank you.

[Britt Meelby Jensen:]

So, I think maybe we take one question each. I'll start with the first one. So, on the Boehringer Ingelheim, so in terms of the dual agonist, GLP-1/glucagon. So, I mean, given that they are now in have progressed from Phase 1a to Phase 1b, you can say, which they should be able to, I mean, report on some time in the first half of next year. We believe that it is very likely that they could start Phase 2 next year because they are definitely very committed. But you can say we deliberately do not guide on this as this is a program that is fully controlled by Boehringer Ingelheim. But I think with the commitment that we see, I mean, that could do very well be the case. And then as Mats also elaborated on the amylin program, given that they went with another lead candidate, which they thought was better, you can say that, of course, is one year set back roughly. So, that will mean that that will likely not come next year, but could come the following year. But we are still, I mean, that in early drug development that's where you, I mean, see these things happening. We are still very excited to see that they are fully committed to the amylin program. So, that is I think overall a good news and also as expected. Mats, do you want to comment on the thesis of the gross to net.

[Mats Blom:]

Yeah, we did present the gross to net in September as well and the reason is as you know we have on all royalties and milestone that we have received from Sanofi, we pay 13.5% to third parties and have done historically. And now when we sell it all off, we still have to pay 13.5% to third parties and which is absolute majority of these costs and the remaining costs are the costs for the actual transaction, so that explains this gross to net. From a cash point, we then use some of these proceeds to repay a debt, but that's, of course, a different story.

[Adam Steensberg:]

And then maybe to last question on the CHI and potential to obtain [indiscernible] strategies to I think voucher so now that you can say dialogue with FDA, we feel that we are getting very close to having a very good understanding about what would be needed for approval. I think it’s also a good time to start talking about that designation with FDA. So, as we have seen them as we have said all the time, very confident that we will get this information. And with regard to the voucher required that it will be the first NDA that will then become some very you can say significant decisions that Zealand will have to take by the year, end of 2019 because that would mean that the CHI program would have to be approved before the rescue pen, so we will have to update on that. But definitely it's a potential that we see in our pipeline.

[Peter Sehested:]

Thank you.

[Operator:]

[Operator Instructions] We’ll hear now from Eric Le Berrigaud with Bryan, Garnier.

[Eric Le Berrigaud:]

Yes, good afternoon, two questions. First is on dasiglucagon rescue. My understanding was that you wanted to go as quickly as possible towards filing and could that happen by the end of this year, even before discussing a potential partnership, seems also both Lilly and Servier filed in the middle of this year. And is this correct that maybe in that late and last line before filing, then you realize that you needed more data. And so those data will be provided in the first part of next year. And so there is a delay compared to the previous calendar in terms of filing for the drug? And maybe related to that, can you be more specific then by the end of 2019. Could we expect the fighting in the first or the second part of 2019? And the second question related to the operating expenses, so the total between administrative and R&D. So, this year we will be into the range, meaning that for the fourth quarter, we should expect something between 150 million and 160 million. Given the, and I’m not asking for guidance for next year, but anyway some of the programs are ending but SBS will be full speed next year and some other will come. Is it realistic to think about 4x the last quarter, which would be another 30% increase over this year? Or is it too high or too low maybe a first rough indication of what it could be for next year? Thank you.

[Britt Meelby Jensen:]

Thanks, Eric for the questions. I can start and then and my colleagues can add. On dasiglucagon HypoPal, we have, I mean, just to clarify also the timeline. So, we have, I mean, the plan has actually been all along that we in the second half of this year, sort of 2018, we would have the pivotal Phase 3 results, which we reported on in September. And then we would also do the pediatric trial before filing and that is the one that we have initiated in September, we should have results next year. And then in terms of filing our plan is that we will file end of next year, so, in 2019. So, that is the plan that we have right now and you are correct in saying that, I mean, that is slightly behind both Servier and Lilly who filed this summer. And I think that also from our point of view highlights, how important the results that we reported in September where we clearly showed that we have potential to be very fast and [indiscernible], they key for when you have a severe hypoglycemia, to make sure that your rescued. So, this is really where we are and how we look at this program. And then, I mean we have, has had and have ongoing discussions in terms of commercial partnering because our strategy for this program is to have a partner commercialize it, but all along our focus has been to get through the registration ourselves, mainly because of speed and also because it was very low cost and straight forward for us how to do that. So, that's really how we focus on this one.

[Eric Le Berrigaud:]

Can I ask therefore, if you know, plan to file end of 2019 and you still plan to do that yourself that means that it’s unlikely now that we’re going to give the partner in the course of 2019.

[Britt Meelby Jensen:]

No, not necessarily. So, you can given we only -- given we only had our Phase 3 results in September. I mean, we do not have closed any partnerships before the Phase 3 results, but we are still in discussions and we could very well close a partnership next year, so that's not -- I mean, that's still a very high possibility.

[Eric Le Berrigaud:]

Okay.

[Adam Steensberg:]

You're right, that we haven’t guided for next year, so I'm going to be very careful with what I say. What I say is -- what I can say is the cost go up for the recent period [ph], it will probably be the peak cost year for Zealand with only Phase 3. And I can also say it will not go up by 30% and I'll say to you know that's what we can say today.

[Eric Le Berrigaud:]

Okay, thank you.

[Britt Meelby Jensen:]

I think, maybe to add to that also, if we look at our costs for 2018, we have actually taken significant cost of the clinical programs this year both for, I mean, the majority of the Phase 3 costs for the dasiglucagon HypoPal Phase 3, which is included. And also we have initiated the Phase 3 for glepaglutide where we’ve also taken quiet, I mean, fair part of the cost for the initiation.

[Eric Le Berrigaud:]

I'd like to be sure, Mats, did you say the peak was in 2018 or will be in 2019?

[Mats Blom:]

It will be in 2019, our costs will go up next year, but they will not affect the system.

[Eric Le Berrigaud:]

Okay. Got it. Thank you.

[Operator:]

Thank you. We’ll take our next question from Thomas Bowers with Danske Bank.

[Thomas Bowers:]

Yes, thank you very much. Just a few follow-ups. Just to be sure on the CHI indication, the slight change to the Phase 3 design, does that lead to any change in timeline just to say that it’s the most simple. So, but then of course, also the date with the advances [ph] could you give us any color on when do you expect to report data from both of those Phase 3 studies getting started. And then secondly just on the partnering discussion, you also mentioned in the prepared remarks, I just wanted to show you, we only referred to the rescue pin discussions or are also talking more broadly. So, are we also in initial talks with the glepaglutide for potentially be general deals. And then last question just on the BI collaboration, so just to understand this correctly. You mentioned that the Phase 1b will tend to be a fast study here and then already be able to meet out in H1 2019. So, is that still some sort of realistic opportunity for a potential milestone when entering Phase 2 already in 2019, I think, how that is there? Thank you.

[Adam Steensberg:]

Okay, thank you Thomas. Maybe I’ll just start on the BI program. So, as Britt said, it is a program that Boehringer is in control of, and what they have informed us is that they expect to have the Phase 1 read-out in the first half of 2019. And if that looks positive there is a chance that it could -- that the Phase 2 could be initiated in 2019. But it's something that we are not guiding on at this time because it is up to Boehringer to decide and also on how fast progress into that. But, of course, if you have good data in the first half, then you could start Phase 2 in the second half. But we are not guiding on that. The CHI program and speed again here we are, a little bit careful, because now we want to have to studies initiated and then we need to monitor recruitment. And as we have discussed before, we have been very focused on getting significant number of sites included in the study, so we can secure fast recruitment into the CHI program because it is pivotal to get fast recruitment if we are to get the voucher. Whether the changes from FDA has eased the requirement, I would say, especially it has, the first Phase 3 trial looks more or less the same a small change of influence maybe. So, but that's also in the [indiscernible] where we do not -- where we are not as concerned with timelines. For the smaller children, I think it could actually provide a significant benefits to the timelines of recruiting these children, but that is some -- that's a study which we plan to start now in first quarter of 2019. So, overall, I think it could be a faster program, but we had placed, started -- delays in initiation.

[Britt Meelby Jensen:]

Then, Thomas, maybe to comment on the pipeline, so what we are looking at right now, I mean, as I mentioned our strategy is to go with the commercial partner for the rescue pen. And then in terms of glepaglutide for the short bowel syndrome, our clear strategy is that we would like to go alone in the U.S. market because we see actually a huge potentially there. Also that, I mean, with the very concentrated prescriber group where we will know the key prescribers from the Phase 3 program that we believe is doable. In terms of development our focus is on U.S. and where 90% of the revenue is today. And then also Europe, but outside these areas there is also attracted markets, Japan being one, which has a very high prevalence of BI diseases and that's where we are in advanced discussions on partnering because we believe that it's actually not a big clinical program that is required to get to market. But given all the other activities we have in order to reduce both cost and complacency into, I mean, get an offside on this, that's where we believe that it makes sense to engage with the partner. And then you can stay on top of this, we have some other earlier opportunities for partnering that we are -- where we have discussions ongoing. I mean, one example that I can mention is that we have a GLP-1 program that is late pre-clinically now pipeline. And as you may recall, that's where Lilly announced very positive data at the EAC about a month ago. So, that's of course, an area with increased interest and where we are -- where we are also engaging and partnering because that's programs that will not make sense for us to progress ourselves given that it’s too broad indication.

[Thomas Bowers:]

Okay. Kind of just follow-up then on the Japanese market, so I guess, the Phase 3 with the glepaglutide will recruit -- that will be recruit spend in U.S. So, I expect that you will -- anticipate that you will not [indiscernible] for any recruitment of patients. So, I guess, for you to license in Japan, for example, that doesn’t really matter whether you await the Phase 3. So, that potentially do prior to the Phase 3 readout, is that correct?

[Britt Meelby Jensen:]

Yeah, you can say, it will require a separate smaller Phase 3 trial. I mean, as an example, you can say that has have conducted an 11 patients study. And then to your question on whether to do it before, after, I mean I think, there are different philosophies and given that we know that GLP-2 works in this indication. I mean, it could make sense and given that we have also strong data and also on the safety. I mean, it could be possible to initiate it before we have results. But, I mean, on the own circumstances, it will be the partner that we engage will take part in conducting or fully conduct the Phase 3 trial in the Japanese patients and market.

[Thomas Bowers:]

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

[Operator:]

Thank you. And at this time there are no further questions. I’d like to turn this back over to management for any additional or closing remarks.

[Britt Meelby Jensen:]

Thank you and I would like to thank everyone for participating on the call today and thank you for great questions.

[Adam Steensberg:]

Okay, thank you.

[Operator:]

Thank you. That does conclude today’s conference. Thank you all for your participation.