Zealand Pharma A/S (ZEAL) Q2 2022 Earnings Conference Call August 11, 2022 10:00 AM ET
Company Participants
Anna Krassowska – VP of IR and Corporate Communications
Adam Steensberg – President and CEO
Matt Dallas – SVP and CFO
David Kendall – Chief Medical Officer
Conference Call Participants
Joseph Stringer – Needham and Company
Lucy Codrington – Jefferies
Michael Novod – Nordea
Thomas Bowers – Danske Bank
Operator
Good day, and thank you for standing by. Welcome to the Zealand Pharma Second Quarter 2022 Financial Results Conference Call and Webcast. [Operator Instructions] Please note that today’s conference is being recorded.
I would now like to hand over to your speaker Anna Krassowska. Please go ahead.
Anna Krassowska
Thank you, operator. Welcome and thank you for joining us today to discuss Zealand’s second quarter results for 2022. I’m Anna Krassowska, Vice President of Investor Relations and Corporate Communications at Zealand. With me today are the following members of Zealand’s management team; Adam Steensberg, President and Chief Executive Officer; Matt Dallas, Senior Vice President and Chief Financial Officer; and David Kendall, Chief Medical Officer. You can find the related company announcement and 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, Adam Steensberg. Adam?
Adam Steensberg
Thank you, Anna, and thanks to everyone for joining today.
Please turn to Slide 3. This has been a busy quarter for the company and I’m really happy with the progress we have made on multiple fronts following the announcement of our strategy to prioritize investments into R&D. In light of these changes, I’m pleased that we completed the sales of V-Go for MannKind in May.
For the Zegalogue rescue pen, we are in advanced partner discussions and I hope to provide an update on this front soon. In the second quarter, we strengthened our balance sheet; first, by amending the existing note purchase agreement with Oberland Capital; and secondly, by executing a private placement with certain institutional investors. This has extended our cash runway beyond important clinical milestones.
As part of the restructuring activities, we continue to focus on improving our operational effectiveness and implementing corporate cost reductions. Earlier this week, we announced the decision to end the non-liquid ADS program which has been in place since August 17th. Today, the American Depositary shares accounts for less than 1.5% of the total share capital and by consolidating our listing to NASDAQ Copenhagen, we believe we can maintain trading flexibility for global investors while achieving certain operating efficiencies for the company and reducing costs.
Following those corporate updates, I would like to touch on the clinical pipeline to briefly review some of the progress and upcoming milestones before I turn the call over to David Kendall for additional details and color.
Key priorities as shown on Slide 4. As we review the pipeline, I want to draw your attention to the revised timelines related to Dasiglucagon for Bihormonal Artificial Pancreas systems. This is a consequence of focusing our resources as we execute our new strategy and not a reflection of our attention for the program.
In May, we announced positive results from the Phase 3 trial of dasiglucagon in infants with congenital hyperinsulinism or CHI. We are preparing a new drug applications or NDA for dasiglucagon and following our pre-NDA meeting with the FDA, we now anticipate submission in the first quarter of ’23.
At the scientific sessions at the American Diabetes Association in June, we presented Phase 1 data for dapiglutide, our long-acting GLP-1/GLP-2 showing encouraging weight loss in healthy volunteers. This data has given us the confidence to move this molecule forward in obesity, as also announced in June. In July, we achieved last patient last visit in EASE-SBS 1, our Phase 2 trial with glepaglutide in short bowel syndrome and now look forward to seeing the results late in the quarter.
At the upcoming European Association for the Study of Diabetes Annual Meeting in September, our partner Boehringer Ingelheim will present Phase 2 GLP1R/GLP-2R receptor agonist in patients with type 2 diabetes. And finally, we anticipate initial Phase 1 clinical data from our amylin analogue later in the year.
And with that, I will now turn over the call to David Kendall. David was appointed Zealand’s Chief Medical Officer in June, and for the past two years, he’s been serving as a Senior Global Medical Advisor to the company. And before joining us, he has held senior leadership positions in clinical and academic medicine and in the biopharmaceutical industry. We’re extremely excited to harness his broad experience in diabetes and metabolic diseases that spends more than 35 years. David?
David Kendall
Thank you for the kind introduction, Adam.
I would like to begin by discussing the progress with our dasiglucagon program in patients with congenital hyperinsulinism or CHI, an ultra-rare pediatric disease in which patients suffer from recurrent and persistent hypoglycemia due to excessive insulin production.
On Slide 5, we have summarized key data. As you may recall, we previously reported data showing a clinically meaningful reduction in rates of hypoglycemia measured by continuous glucose monitoring in the Phase 3 trial in older children when treated with dasiglucagon added to standard of care shown in the left hand panel.
In May, we announced positive top line results from the Phase 3 trial in 12 infants up to 12 months of age with CHI, who required continuous intravenous glucose support to prevent or manage hypoglycemia. The focus of this trial was to evaluate the ability of dasiglucagon treatment to reduce and eventually remove the need for continuous IV glucose infusion.
The trial met its primary endpoint, demonstrating that dasiglucagon delivered as a continuous subcutaneous infusion via pump resulted in a statistically significant and clinically meaningful reduction in the requirement for IV glucose when compared to placebo. Numerically, dasiglucagon treatment reduced the mean glucose infusion rate to 4.3 milligrams per kilogram per minute compared with 9.5 milligrams per kilogram per minute with placebo, a treatment difference of 5.2 milligrams per kilogram per minute, which is a 55% reduction in the requirement for glucose by IV infusion.
It is also worth noting that 11 out of the 12 patients participating in the trial subsequently enrolled into the ongoing long-term safety extension study. We look forward to presenting the full trial results of study 103 at the European Society for Pediatric Endocrinology or SB Annual Meeting in mid-September.
We anticipate the data from this Phase 3 trial along with data from the previous Phase 3 trial in older children as well as the information derived from the safety extension trial will form the basis an NDA for dasiglucagon in CHI and we expect to submit in the first quarter of 2023. We had previously projected a submission in late 2022, however, as the NDA preparation is now underway, the revised timeline reflects the comprehensive analysis or individual patient outcomes that we believe are essential for our submission, which we further believe will ensure as complete a dataset as possible for our NDA targeting this ultra-rare disease.
Turning to Slide 6, our full pipeline is shown here, and I will highlight a few of our programs. First, I would like to share an update on another of our dasiglucagon projects, namely the Bihormonal Artificial Pancreas program, which as many of you know is being performed in collaboration with Beta Bionics. We have recently aligned with our partners on a sequential approach for the Phase 3 pivotal program.
The Phase 3 program now consists of three sub trials designed to support the marketing application for the Bihormonal iLet Bionic Pancreas known as the iLet Duo and an NDA for the use of dasiglucagon in Bihormonal Artificial Pancreas Systems for the treatment of type 1 diabetes.
Our two companies have agreed that the smaller crossover study of 60 patients to assess safety and efficacy of the Bihormonal iLet Duo and insulin-only configuration known as the iLet will now be completed prior to initiating the two larger randomized controlled Phase 3 trials, which will include 350 adults and 350 pediatric participants.
Importantly, the sequential approach allows for an initial assessment of clinical outcomes from the shorter-term comparative trial prior to initiation of the main pivotal trials, the clinical protocols are being updated accordingly and we expect Beta Bionics to initiate the small crossover trial in early 2023. We believe the sequential approach will allow us to optimize Phase 3 execution and use our resources most effectively.
Moving on to glepaglutide, our long-acting GLP-2 analog being investigated for the potential treatment of short bowel syndrome. The pivotal Phase 3 EASE-1 study is designed to allow us to demonstrate a significant reduction in the need for parenteral support for people living with SBS. A once or twice-weekly fixed dose injection of glepaglutide delivered by our ready-to-use auto injector can provide clear and very important features of differentiation from the currently approved product.
We are excited to report that we have recently achieved last patient last visit in the Phase 3 EASE-1 trial and our expectation is to have top line results available by the end of September or early October of this year. Pending review of the EASE data, we anticipate this randomized controlled trial will serve as the basis for our planned NDA for glepaglutide.
Moving to a discussion of our work in obesity, we believe we have a number of novel and exciting assets in our current portfolio and we are pleased to be advancing this clinical portfolio, including our GLP-1/GLP-2 dual agonist, our novel long-acting amylin analogue and the dual glucagon GLP1 receptor agonist, all assets generated from our peptide platform.
Initial data from the clinical studies of our GLP-1/GLP-2 dual agonist gepaglutide reported at this year’s American diabetes association scientific sessions demonstrate that weight loss of up to 4.3% from baseline after only four weeks of treatment in a Phase 1 trial of healthy volunteers.
Our novel long-acting amylin analog is currently under study in Phase 1 clinical trials and we expect data from the Phase 1 single ascending dose trial by the end of 2022. This amylin asset is differentiated by virtue of design characteristics that both allows for once weekly dosing and for formulation and co-formulation with other peptides in the physiologic pH range, a feature that should facilitate the potential for development of combination therapies.
Additionally, initial data readouts from the Phase 2 program for the long-acting dual glucagon receptor GLP-1 receptor agonist, also known as BI 456906 being developed with Boehringer Ingelheim will be disclosed later this year. Initial data from the Phase 2 trial in type 2 diabetes is scheduled for presentation at the European Association for the study of diabetes in September, highlighting the primary endpoint of the trial, the dose relationship of treatment on hemoglobin A1C from baseline to 16 weeks relative to placebo. Along with our BI colleagues, we also anticipate presentation of the secondary endpoints of the type 2 diabetes trial assessing the effect of change on body weight at a scientific congress later in 2022.
In summary, it has been an incredibly active, exciting and data rich time for our clinical development programs and the second half of the year looks to maintain the strong momentum across our entire research and development platform.
Now I will turn the call over to our CFO, Matt Dallas to walk us through our half year financial results. Matt?
Matt Dallas
Thanks David.
In the first half of 2022, we initiated our organizational structure taking steps to strengthen our financial future and ensuring that Zealand can continue to discover and develop innovative new peptide therapeutics.
In addition to the 90% workforce reduction implemented in the United States, in the second quarter, we amended our loan agreement with Oberland Capital and raised DKK274.8 million in a direct private placement. With these events and the consolidation of the exchange listings, as mentioned at the beginning of the call by Adam, the company is well positioned to execute on the strategy.
On Slide 7, you will see Zealand’s income statement for the first six months of 2022 and how it compares to 2021. Total revenue for the first six months was DKK43.5 million or USD6.1 million. This was driven by net Zegalogue product revenue and partnership revenue from our collaboration with Alexion.
The operating result for the period was a loss of DKK539.2 million or USD75.3 million. Sales and marketing costs, mainly related to the commercial infrastructure in the U.S. to support Zegalogue, our R&D costs primarily related to our late-stage clinical programs.
As a result of our announced restructuring, our gross margin and operating expenses related to V-Go are accounted for as discontinued operations. Total discontinued operations for the first half of 2022 were a loss of DKK97.9 million or USD13.7 million.
Slide 8 illustrates our financial position and the ability to support our growing business through continued investments. Total operating expense for the period was DKK577.4 million or USD80.6 million, included in the operating expenses for the period are DKK75.8 million related to our announced restructuring. And cash on hand at the end of June 2022 was DKK864.4 million or USD120.7 million.
Turning to our financial guidance on Slide 9, the company anticipates that net product revenue from the sales of Zegalogue is expected to be DKK11.5 million plus or minus 10%. This is a reduction of DKK7.5 million from our updated guidance issued on May 12th. With the completion of the asset purchase agreement for V-Go with MannKind Corporation, the company will no longer provide guidance on net product revenue associated with sales from that program.
Zealand Pharma expects revenue from existing license agreements, however, since such revenue is uncertain in terms of size and timing, we do not intend to provide guidance on such revenue. Net operating expenses in 2022 are expected to be DKK1 billion plus or minus 10%. This is unchanged from our prior guidance and the decrease of DKK200 million from the original guidance issued on March 10th.
With that, I will now turn the call back to Adam.
Adam Steensberg
Thank you, Matt.
As previously announced, Matthew will be leaving Zealand by the end of August and this will be his last quarterly call, I would therefore like to thank Matt for his leadership and many contributions over the last few years, and I wish him all the best for his next challenges. In light of Matt’s departure, we have been conducting a search for a new CFO for the company and we expect to be able to make an announcement soon.
Turning to Slide 10. The second quarter has delivered on several fronts and we believe Zealand is now well positioned to leverage the value of our pipeline. We have some exciting months ahead of us with significant number of important milestones, which should further clarify the potential of our many new product opportunities.
Thank you, all. I will now turn it over to the operator for questions.
Question-and-Answer Session
Operator
[Operator Instructions] The first question comes from the line of Joseph Stringer from Needham and Company. Please ask your question. Your line is open.
Joseph Stringer
Hi, thanks for taking our questions. Heading into the SBS read out here, can you provide your thoughts just based on feedback from physicians which efficacy endpoint is most important for potential widespread adoption or uptake in the SBS market, for example, from a registrational perspective, obviously your primary endpoint is absolute change in PS. [Gattex] was approved on a different endpoint the responder analysis greater than 20% PS reduction, but are there other key endpoints such as you know number of patients completely weaned off PS or change in other PS metrics that you would consider important from a potential commercial perspective? Thank you.
David Kendall
Yes, this is David Kendall. Thanks for the question and you very nicely summarized both what was part of the previous regulatory approval for dapiglutide and given the construct of our trials, obviously the statistical power for registration is tied to reduction in the volume of parenteral support, and secondarily, looking at similar proportion reduction in that parenteral support, but I think you also make a very important distinction which is the potential to reduce the number of days on parenteral support discontinuing parenteral support either on given day or a series of days will be critically important.
Obviously, powering a study for regulatory review based on the latter has its challenges given that this is a rare disease and having adequate numbers of subjects to demonstrate that with clarity or certainty could be challenging.
However, we will be collecting just that in our clinical program to assess whether there are meaningful reductions in the days off of parenteral support. So I think all three go well beyond just achieving a regulatory endpoints and are critically important both to the burden of SBS and ultimately to the significant burden of days on parenteral support.
Operator
The next question comes from the line of Lucy Codrington from Jefferies. Please ask your question. Your line is open.
Lucy Codrington
Hi, thanks for taking my questions. I’ve got a few. And just still on the glepaglutide Phase 3 and the expectations there into the data, so just in terms of setting our expectations, should we be looking at the kind of 1.6 to 2 detail reductions in parental nutrition volume seen in the Gattex in that Phase 3 and the 30% to 40% placebo just the response rates are sensible bars for efficacy? And then related to that can you remind us of any stratification by random palatine in your trial. Does that differ to that used in the GATX Phase 3 and could that have any influence when we’re looking at the datasets together with the caveats of cross trial comparisons of course? And are there any other differences between the Phase 3 that we should be aware of? And I’ll stop at those and jump back in queue.
David Kendall
Very good, if I can test my short-term memory and recall those, I think your first question to the proportional response, if you will, reduction of parenteral support, we know that glepaglutide glepa is the GLP-2 agonist just like teduglutide, so while these are not comparative studies, obviously this is placebo-controlled, we would estimate that at least qualitatively reductions that have been seen with the other GLP-2 receptor agonist would be those that we would expect.
But obviously to go further and try to predict at this point what those data may show would be both premature and speculative only, I think that is a reasonable starting point certainly, and I think I wrote it down, but I’ve already lost the second half of that question.
Lucy Codrington
Just whether there is any justification on that mix?
David Kendall
Yes, so we do have so called kicker colon and continuity subjects as well as stoma patients within the trial. But there is no a priority at least primary endpoint for assessing differences, but obviously this will be part of the secondary analysis is that we will undertake obviously understanding that those two populations can behave differently, particularly when it comes to completely withdrawing parenteral support. So, yes that will be part of our analysis, it is not obviously part of the primary endpoint.
Lucy Codrington
And sir, just to be clear on the differences between, you would expect those with continuity to respond less, is that right?
David Kendall
Yes, correct.
Lucy Codrington
Okay, great. And then just my last question this relates to the dapiglutide obesity trial, at least reading the press release it’s going to be an investigator-sponsored study, does that reflect resource prioritization while the new conducting the trials yourself?
David Kendall
I think it is not solely a resource utilization question, obviously there will be more of this efficacy endpoints and opportunity to explore mechanistic components of how the compound acts, which are obviously done of most effectively and are well-established academic center which those trials looking at complex mechanistic responses to the increase in hormones.
So I think beyond some efficiencies of being able to initiate this earlier for a relatively more efficient cost in the setting of an investigator-led trial, it will also allow for that detailed look potential mechanisms, which may be a play for this very novel agent.
Operator
We have the next question coming from the line of Michael Novod from Nordea. Please ask your question.
Michael Novod
Thanks a lot. It’s Michael Novod from Nordea. So three questions, first of all, to the BI 45 compound the GLP-1 glucagon 2 agonist. So I could see that the FDA is already titled in the in the asset book. So maybe just to gauge your confidence in the safety, because we have had a lot of discussions around glucagon safety, we’ve seen a publication by novo with their glucagon compound or if you want glucagon which did look to promising in terms of safety, so just gauging your confidence on the safety side going into the year, if you can comment on the specific data?
Then secondly on Zegalogue, maybe Adam you can give a bit of extra color on the potential timing of a license deal for this asset? And then lastly, also in respect to glepaglutide, how should we think about timing with regards to also license deal on this, given that you are progressing if data is positive towards submitting an NDA. I guess a potential part would like to be active on that side as well or how do you think about timing for glepa should data be positive?
David Kendall
This is David. I’ll start with BI 456906 question and the safety profile. Obviously, Phase 2 is really the first more comprehensive look at efficacy and safety, and I think as you suggested, having the posted abstract for the BI compound is both exciting for us and we look forward to seeing the full details of glycemic outcomes at EASD.
And I think it would be premature to further speculate on behalf of our BI partners on the comprehensive safety, but obviously we fully expect the tolerability and safety will be detailed in presentation. But given that we now have completed that Phase 2 in type 2 population suggest that at least completion of the trial supports its utility, to go beyond that, I think I’d be getting ahead of the formal presentation and speculating on the safety outcomes.
Adam Steensberg
Yes. And maybe also just to follow-up on David’s note here, which I completely agree with. I think at the American Diabetes Association meeting in June BI did show some more details on the molecule, including the ratio of the work on GLP-1 and so on. I think you should be careful to compare across these molecules, even though they named look on a glucagon GLP-1 that could be different ratios and were quite individual observations for each molecule. So I would also ask you to draw the attention to the presentations that Yes I made at the American Diabetes Association meeting.
Then for Zegalogue, as I said, we are in advanced discussions and I’ve said all the time that it’s our ambition to complete a deal before we did this quarter and this is still the ambition for the company, and I think it’s premature to comment more on this until we can announce something hopefully.
On the last one for glepaglutide, we now really the key focus for us is to get to the key results and then engage with FDA, and on the partnering front, our key focus right now is to complete our discussions on Zegalogue and then we also have CHI, as you know, coming up. So it’s not that we are in a hurry, we think we have our event in a good place and, but as I’ve also shared in prior calls, we have had quite a significant inbound interest in the programs. So we will take it from there, but we will not advance these discussions on, so we have seen results for sure.
Operator
The next question comes from the line of Thomas Bowers from Danske Bank. Please ask your question. Your line is open.
Thomas Bowers
Yes, great. Thank you very much. A couple of questions from my side here. So can you maybe just give us a little bit of color on the U.S. delisting. So in terms of annual cost savings. So including fees and insurance and legal stuff? So that was the first question. So just a follow-up on Zegalogue, can you maybe just remind us on the commercial commitments you have here now going into August, so is there anything that makes things a little bit more difficult for you?
And also in addition to that, the recent capital infusion, so I’m just wondering whether you are maybe looking more into an out-license with royalties compared to a one-time upfront payments from selling to the asset? And then my last ask question just on BI 45, just wondering in regards to what we are all awaiting the Phase 2, but bearing our private company if they could also make a decision prior to those Phase 2 data and then going to or announce Phase 3, so I’m just wondering if whether you have any information or will you may be even could potentially see bearing take that decision prior to the Phase 2 data, if that’s possible? Thank you.
Adam Steensberg
So maybe I will address Zegalogue and BI and then turn over the ADR question to Matt on the potential cost savings. But if we take BI, of course you can say we would expect BI to inform us when we take that decision and we will probably also inform the market if the decision would be taking on the initiation of Phase 3 and we cannot comment further on when they will take this decision right now, they will do it before.
They have also seen the Phase 2 data from the obesity study then I remind you that is the type 2 diabetes study that is being presented at ESAD and also later this year. So but we do expect them to see the full data from the obesity study as well. So this is really up for BI to decide and we will of course inform accordingly.
For Zegalogue, I really can only, you can say confirm, that we are in advanced discussions, we are keeping the product on the market, we are supporting the product from all the regulatory medical and supply aspects. We have very little sales support as you can also see from the numbers now.
So that has been, so it’s completely in line with the restructuring that we announced and that’s of course also why we have a key focus on completing a potential agreement before we get into the quarter. And I can honestly not — I will not comment more on the potential deal structures of Zegalogue at this time. Matt, maybe over to you on the ADR potential cost savings and things.
Matt Dallas
Yes, we have not publicly stated what our exact expectations are on a per dollar basis, but I can tell you that the cost of maintaining the U.S. listening requires significant external legal and audit requirements due to the regulatory reasons as well as significant internal time cost and efforts in finance, legal, risk management. As this delisting takes place in the curves, we will see significant cost reduced from those areas as well as again from internal focus as well.
Operator
The next question comes from the line of Lucy Codrington from Jefferies. Please ask your question. Your line is open. Hello Lucy, your line is open, you may ask your question.
Lucy Codrington
Apologies. Just if I may, is it possible to get an updated cash runway guidance now following the delisting on the debt restructure and the capital raise? And then in terms of potential near-term milestones are not included in guidance, is there anything that we should be aware of that could be a possible near-term marking? Thank you.
Adam Steensberg
Matt will you start on this one.
Matt Dallas
Yes. So right now the current cash runway, and this is based on just as the company stands at this very moment, it takes us in the Q2 of 2023. This does not include potential Zegalogue partnerships, does not include any future milestones, such as from our partnerships with BI or Alexion or any additional partnership cost savings from any of the other additional programs with obesity and SBS. It also includes the full burden of maintaining the dual listings, the dual listing has not been yet completed.
So as we move into the next period and the updated guidance on that side, all of those costs we filter through wouldn’t be reflected in future announcements.
Operator
We have no further questions at this time. I will now hand back the call to Mr. Adam Steensberg, CEO for closing remarks. Please go ahead.
Adam Steensberg
Okay. With that, we would like to thank you all for attending and for your questions. We look very much forward to connecting on future announcements and updates. Have a good day.
Operator
This concludes today’s conference call. Thank you for participating, You may now disconnect your lines.
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