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Zealand Pharma A/S-American Depositary Shares (NASDAQ:ZEAL)
Q3 2018 Earnings Conference Call
Nov. 15, 2018 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

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'd like to turn the conference over to Ms. Britt Meelby Jensen, president and CEO of Zealand Pharma.

Please go ahead, ma'am.

Britt Jensen -- President and Chief Executive Officer

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. 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 uncertainty. So moving 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 to 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 DKK 940 million or $150 million in cash to our balance sheet, after deduction of direct costs 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 a competitive process with multiple rounds of negotiation. 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 shareholder dilution. This brings me to our development pipeline. We have made significant progress in our late-stage clinical program, 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. This result indicates 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. Another major milestone in the period was the initiation of the pivotal Phase 3 study for glepaglutide for short bowel syndrome.

Our key update is -- with glepaglutide is to achieve fast approval, and with this solid Phase 3 design -- trial design, our main focus is now to ensure high-quality and timely execution of the Phase 3 trial. Our early pipeline is following the path 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're 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 we'll be advancing also complementary 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 execution to get to market fast. While the second key focus area for us is partnerships and, therefore, we have expanded our leadership team with the employment of Marino Garcia as senior vice president, 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 Soliqua 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 we're on Page 6. Let me turn the call over now to Mats Blom, CFO, to discuss the financials.

Mats Blom -- Chief Financial Officer

Thank you, Britt, and good afternoon and good morning, everyone. If we start on Page 7, as Britt mentioned earlier, in September, you'll recall, we've sold the future royalties from both Soliqua and Lyxumia, plus two milestones, totaling $85 million, to Royalty Pharma, for gross proceeds of $205 million. As Britt mentioned, the net cash effect after deduction of direct costs from this transaction and also the repayment on an outstanding royalty bond amounts approximately DKK 940 million or $150 million. And following this, we are now completely debt-free.

We did retain one milestones 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 up to DKK 100 million in milestone payments. While we value the relationship with Sanofi, immediately recognizing this value enables us to generate additional capital to support the ongoing development in our pipeline. So as such, we think this transaction supports the long-term value creation for our shareholders.

Looking at Page 8. We can see a summary of our financial results for the first nine months of '18, and our total expenses for the first nine months are in line with our expectations. The net results for the first nine months of '18 was a profit of DKK 704.3 million compared to a loss of DKK 164.6 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 DKK 300 million compared to DKK 221 million for the same period of '17, and the increase was mainly related to the clinical development of the three dasiglucagon programs, as well as glepaglutide for short bowel syndrome, and from preclinical research activities. If we look at Page 9 and turn to the balance sheet, as of end of September 2018, we reported securities, cash and cash equivalents of approximately DKK 1.5 billion or $230 million, and this cash balance includes the proceeds from the royalty monetization. You should note that the 13.5% or DKK 177 million that we paid to third parties from these proceeds will not be paid until December this year, so they are included in the cash position. We, of course, believe that these resources would put us in a very strong position to fund our programs going forward.

Looking more broadly 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 DKK 475 million to DKK 495 million or $73 million to $77 million. And since we now have sold future royalties from Sanofi, we no longer expect any royalty revenue.

So on Page 11, I will now turn the call over to Adam to discuss our pipeline in greater detail, and we'll take any questions you might have on the financials by the end of the call. Adam?

Adam Steensberg -- Chief Medical and Development Officer

Thank you, Mats. Let's return to Page 12. We recently announced the advancement of glepaglutide for the treatment of short bowel syndrome into the pivotal Phase 3 trial. That was done following very strong Phase 2 results, while we demonstrated the increases in intestinal absorption following only three weeks of dosing.

Glepaglutide, that is a long-acting GLP-2 analog, with an effective half-life of approximately 50 hours, which actually allows for potentially a weekly dosing in an auto-injector. And the U.S. FDA, they have granted us an orphan drug designation for this indication. Patients with short bowel syndrome, they need better treatment options, and beyond efficacy, 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 you turn to Page 13, you will see the design of the Phase 3 trial. In the trial, we seem to demonstrate efficacy and safety of a once- and a twice-weekly injection of 10-milligram glepaglutide in patients with short bowel syndrome on preventive support. 129 patients will be enrolled at approximately 40 highly dedicated investigational size 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 preventive support volumes in the patients.

This will allow patients to spend significantly less time in hookups with the preventive support infusion systems and it will potentially also allow patients' weekly base of preventive 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 patient has already been dosed with glepaglutide, and we see -- 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 results of our pivotal Phase 3 trial, which I'll touch upon in more details on the next page.

This also allowed us to mitigate the pediatric Phase 3 trial, and while we expect initial results from that 40-patient study in the summer of '19 and we maintain the goal of submitting an NDA filing to the U.S. FDA by the end of '19. On Page 15, in regards to our Phase 3 trial succeeding our severe hypoglycemia, we demonstrated that single doses of dasiglucagon rapidly increases blood glucose levels in patients with Type 1 diabetes following an insulin-induced hypoglycemia. The 168-patient trial, which compares the effect of dasiglucagon with placebo and that of currently available glucagon for reconstitution successfully achieved all primary and secondary endpoints.

And the primary endpoint was time to plasma glucose recovery, defined as an increase in plasma glucose of more than 20 milligrams per deciliter from baseline, without administration of rescue glucose. And the median time to glucose recovery was only 10 minutes for dasiglucagon, and that was superior to placebo with a median time of 40 minutes and the median time for GlucaGen was 12 minutes. In addition, and importantly, 99% of the subjects were recovered in 15 minutes versus only 2% in placebo and 95% with GlucaGen, or we observed no safety concerns during the trial and mostly, and one more thing, we recorded similar numbers between dasiglucagon and GlucaGen. So now we can turn to Page 16, and we are very pleased with the progress our partner, Beta Bionics, has made in the development of a dual hormone pump that uses dasiglucagon for automated 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 General Hospital and Stanford University Hospital using the fully integrated iLet. While in the coming months, a Phase 2b trial with dasiglucagon in the fully integrated iLet in the dual hormone configurations will be initiated, and we expect to have results in the first half of '19 from that study. Turning to Page 17.

We are also developing dasiglucagon as a potential treatment option for congenital hyperinsulinism, 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 '19.

Those trials will evaluate -- the trials will evaluate the potential for dasiglucagon as a new nonsurgical treatment for children with CHI. During the trials, neonates and children, they will be given low doses of dasiglucagon infused via the Roche Accu-Check 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 once-weekly GLP-1/glucagon agonist; and the second, a once weekly amylin analog.

The global prevalence of obesity has more than doubled since the 80s, and in '14, more than 1.9 billion adults were classified as overweight, with 600 million of these being obese. And we're very excited about the progress in these programs. The Phase 1a single ascending dose safety and tolerability trial with the GLP-1/glucagon agonist has been successfully completed. And in August, Boehringer Ingelheim initiated the Phase 1b multiple ascending dose safety and tolerability trial, which we expect will read out in the first half of '19.

Based on extensive additional work by Boehringer Ingelheim, they have now decided to replace the current amylin lead with a stronger backup candidate, which is anticipated to end the clinical development also in the first half of '19. Let me 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 on the gut-liver axis. We have optimized the equipotent peptide, active at both receptors and demonstrated decreased intestinal maturity.

We've 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 should deliver increased absorption of enteral nutrition and reduced sugar output as well as increased metabolic control compared to the single-acting agonist. The preclinical toxicology studies have been completed for our lead molecule and we aim to initiate Phase 1 next year. So please turn to Page 20.

And if you 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 points that are opportunities for normal target peptide therapeutics. These peptides may offer greater specificity and administration advantages over other modalities. We initially have focused our discovery platform on C3, the essential 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 '20.

So with that review of our pipeline, let me turn the call back to Britt.

Britt Jensen -- President and Chief Executive Officer

Thank you, Mats. Thank you, Adam. So to summarize, on Page 22, 2018 had 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 toward the market.

We will, in 2018, when the Phase 3 for dasiglucagon and CHI has been initiated, has three product candidates that can launch within the next two to four years. Based on our peptide platform, we have, as you've seen today, added new and exciting programs to the pipeline. So we have multiple opportunities from 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 in pediatrics, head toward 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 likely 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. 

Questions Answers:

Operator

[Operator instructions] And we'll take our first question when Alan Carr with Needham & Company. Please, go ahead.

Alan Carr -- Needham & Company -- Analyst

Hi. Thanks for taking my questions. Can you tell us more about the two-pump program with dasiglucagon? A bit more about this -- the bridging study that you're talking about, and then what your plans are for the trial after that. I know you've had some discussions with the FDA, and they're more about what they want to see.

And the other one, actually, for Mats, with this, can you guide us on, I think, there's some milestone payments due from Boehringer on your 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?

Britt Jensen -- President and Chief Executive Officer

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

Mats Blom -- Chief Financial Officer

Yes. I can start on the milestone question on the BI. I mean, we have two separate licenses with BI. So it's two completely separated programs, both of which have significant milestones at start of Phase 2.

And it's hard to guide. But as it looks right now, the GLP-1 glucagon is ahead, and if that's positive, we'll probably head into Phase 2 first. While of course, if we're starting within now new stronger from data on amylin program, the possible Phase 2 has been moved more to the future. But the principle -- we're really happy with the post-program progresses.

And with the cash position we have right now, we're not that dependent on these milestones quickly.

Adam Steensberg -- Chief Medical and Development Officer

OK. And if I should follow up on the development, on the collaboration we have with Beta Bionics and the dual hormone pump activities, then you can say, we've already discussed also in our Q2, we've had some very good and fruitful discussions with the FDA about what is actually required to go into Phase 3 in this pump setting. And we had originally anticipated a larger Phase 2b study would be needed in order to bridge between the initial phases that we have generated, and then before Phase 3, where that analog that we have right now is a much more limited study that, basically, a bridging study, which will just demonstrate the functionality of the pump together with dasiglucagon. So this is why we cannot be more clear at this time point on the exact study design, but I can say, we are very encouraged by the dialogue and we just need to have the final details in case, and then we can communicate about it.

But as it looks right 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 is -- could be a very big win for Zealand.

Alan Carr -- Needham & Company -- Analyst

So you mentioned -- Britt, you mentioned that you've brought in someone to help with business development and sort of thing, is the -- is running a Phase 3 on your own with this program feasible after your -- after this information from your discussions with the FDA? Or do you need a partner for the Phase 3?

Britt Jensen -- President and Chief Executive Officer

Thanks, Alan. That's a good question. So, actually, right now, you can say we are -- I mean, we have a very strong collaboration with Beta Bionics, and as Adam mentioned, and also a very good dialogue with the FDA, both the drug and the device division. And you can say, I mean, with Beta Bionics, they have quite a sizable 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 intensive insulin Type 2 patients. So therefore, we -- I mean, we are building value on this right now, and I think the progress we've seen over the recent months, both with the initiations with the FDA having -- I mean, this brand and also the financial position of Beta Bionics who has raised 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, ourselves.

Alan Carr -- Needham & Company -- Analyst

And then one last one. You have a few trials that looks like supportive trials on clinicaltrials.gov for the HypoPal program. What sort of -- what extra supportive clinical work is needed for the NDA next 4Q '19? Besides the pediatric trial that you started, what else do you have going on there? What's needed for the NDA?

Adam Steensberg -- Chief Medical and Development Officer

Yes. So I can take that for you. So the genetic trial that is, the trial that we see being on critical path for the NDA submission, so that's why we have put so much focus on that one. What you can also see from clinicaltrials.gov right now is that we are conducting an additional smaller Phase 3 trial with the actual auto-injector, that is -- you can see our regulatory requirements that we need to confirm the data that we 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. And we are conducting some additional classical safety studies of PK Phase 1 studies just to show the IV and PK data profile described, the PK profile. This, you can say, are Phase 3 studies. And then we anticipate to start one extra study within a month or so, which will support -- fully support the dual source conditions that we are going for with this product.

So -- but these are studies that are studies that are not on critical path, and you can say, more supportive studies to the Phase 3 program.

Alan Carr -- Needham & Company -- Analyst

Thanks for taking my questions.

Operator

We will take our next question from David Lebowitz from Morgan Stanley. Please, go ahead.

Ishmael Asante -- Morgan Stanley -- Analyst

Hello. This is Ishmael on for David. Two quick ones from us. What changes are being made to the hyperinsulinism Phase 3 trial, post FDA input, simplifying the improvement program? And second, quickly, could you speak to the size of the market opportunity?

Adam Steensberg -- Chief Medical and Development Officer

OK, thanks. I can take that question. So we have actually had a very good dialogue over the year with the 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 the FDA, they have actually been reaching out to key specialists and stakeholders in the CHI community to better understand the unmet medical need 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 say, endpoints to be the primary endpoints in the study. Before, we have had discussions with the 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 as also rare 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 and we see an opportunity to generate significant value in a very limited amount, a group of patients, we expect, perhaps, around 300 patients being eligible in the U.S. and Europe.

Ishmael Asante -- Morgan Stanley -- Analyst

Thank you.

Operator

We'll take our next question from Peter Sehested with Handelsbanken.

Peter Sehested -- Handelsbanken -- Analyst

Yes. Hi, it's Peter from Handelsbanken. Thanks for taking my questions. I have 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 the general understanding was that you will 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 received $205 million, i.e.

DKK 1.3 billion and now we are seeing that the actual income is, I mean, substantially lower than that due to cost. I mean, could you just elaborate, I mean, $200 million cost seems a bit high, could you give an explanation for that? And thirdly, with respect to CHI, give an update on what you believe are the potential for a pediatric review voucher in this indication?

Britt Jensen -- President and Chief Executive Officer

And 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, the GLP-1/glucagon, so given that they are now in -- have progressed from Phase 1a to Phase 1b, you can say, which they should be able to report on sometime 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 dive 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 very well be the case. And then, as Mats also elaborated on the amylin program, given that they went with another lead molecule or lead candidate, which they thought was better, you can say that, of course, it's a 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 still -- I mean, that's in early drug development, that's where you, I mean, see these things happening.

We are still very excited to see that they're fully committed to the amylin program. So that is, I think, all good news and also as expected. Mats, do you want to comment on the details of the gross to net?

Mats Blom -- Chief Financial Officer

Yes. We did present the gross to net in September as well. And the reason is, as you know, we have, on all royalties and milestones that we have received from Sanofi, we paid 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 the absolute majority of these costs.

And the remaining costs are the cost for the actual transaction. So that explains this gross to net. And from a cash point of view, we then used some of these proceeds to repay our debt, but that's, of course, a different story.

Adam Steensberg -- Chief Medical and Development Officer

And then maybe to your last question, on the CHI and potential to obtain a rare disease pediatric voucher. So now that you can say the dialogue with FDA, we feel that we are getting very close to having a very good understanding about what we would be needed for approval. I think it's also a good time to start talking about that designation with FDA. So we, as we have seen and as we've said all the time, are very confident that we will get the designation.

And with regard to the voucher, which requires that it will be the NDA, that will then become some very, you can say, significant decisions that Zealand will have to take by the yearend of '19 because that will 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 -- Handelsbanken -- Analyst

Thank you.

Operator

[Operator instructions] We'll hear now from Eric Le Berrigaud with Bryan Garnier.

Eric Le Berrigaud -- Bryan, Garnier & Co. -- Analyst

Yes. Good afternoon. Two questions. First is on dasiglucagon rescue.

My understanding was that you wanted to go as quickly as possible toward filing, and I thought could have happened by the end of this year, even before discussing the potential partnership. Seems also, both Lilly and Xeris filed in the middle of this year. And is this correct that maybe in that late last line before filing, then you realized 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 than by the end of '19? Could we expect a filing in the first or the second part of '19? And the second question relates 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 a 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 four times 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.

Britt Jensen -- President and Chief Executive Officer

Thanks, Eric, for the questions. I can start, and then my colleagues can add. So on dasiglucagon HypoPal, so we have -- I mean, just to clarify also the time line. So we have -- I mean, the plan has actually been all along that we, in the second half of this year, so of '18, we would have the pivotal Phase 3 results, which we reported on in September, and then, we would 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 Xeris 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 on to the rescue, which is the key parameter when you have a severe hypoglycemia, it's to make sure that you're rescued fast. So this is really where we are and how we look at this program. And then, I mean, we have had and have ongoing discussions in terms of commercial partnering because our strategy for this program is to have a partner commercialized. But all along, our focus has been to get through the registration ourselves, mainly because of speed and also because we -- because it was really a low-cost and straightforward for us how to do that.

So that's really how we focus on this one.

Eric Le Berrigaud -- Bryan, Garnier & Co. -- Analyst

So Britt, if I may. Can I ask for -- if you now plan to file end of '19 and you still plan to do that yourself, that means that it's unlikely now that we're going to get a partner in the course of '19?

Britt Jensen -- President and Chief Executive Officer

No, not necessarily. So you can say, 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 the partnership next year, so that's not -- I mean, that's still a very high possibility.

Adam Steensberg -- Chief Medical and Development Officer

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'd say is -- what I can say is the cost did go up for the reasons you said. It would probably be the peak cost year for Zealand, with all these Phase 3s.

And I can also say, it will not go up by 30%. And I'll state -- that's what we can say today.

Britt Jensen -- President and Chief Executive Officer

Maybe to add to that. Also, if you look at our cost for 2018, we have actually taken significant cost of the clinical programs this year, both for -- I mean, the majority of the Phase 3 cost for the dasiglucagon HypoPal Phase 3, which has concluded. And also, we have initiated the Phase 3 for glepaglutide, where we've also taken quite -- I mean, part of the cost for the initiation.

Eric Le Berrigaud -- Bryan, Garnier & Co. -- Analyst

I'd like to be sure, Mats, did you say the peak was in '18 or will be in '19?

Mats Blom -- Chief Financial Officer

It will be in '19. Our cost will go up next year, but they will not going to affect the system.

Eric Le Berrigaud -- Bryan, Garnier & Co. -- Analyst

OK. Got it. Thank you.

Operator

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

Thomas Bowers -- Danske Bank -- Analyst

Yes. Thank you very much. Just a few follow-ups. Just to be sure on the CHI indication, the slight change of the Phase 3 design, does that lead to any change in time lines just to say that it's more simple? So -- but then, of course, also, to date, with the engagements, could you give us any color on when do you expect to report data from both of those of Phase 3 studies getting started? And then secondly, just on the partnering discussion, you also mentioned in the prepared remarks, I just want to be sure, you only referred to the rescue pen discussions, or are you also talking more broadly? So are you also in initial talks with the glepaglutide for potentially regional deals? And then last question, just on the BI collaboration.

So just to understand this correctly, you mentioned that you -- the Phase 1b will potentially be a fast study here and already be able to read out in H1 '19. So is that still some sort of a relative opportunity for a potential milestone when entering Phase 2 already in '19? I think that is all.

Adam Steensberg -- Chief Medical and Development Officer

OK. Thank you, Thomas. Maybe I'll just add 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 readout in the first half of '19. And if that looks positive, there is a chance that it could -- that the Phase 2 could be initiated in '19. 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 we'll get into that. But, of course, it's a -- if we have good data in the first half, then we could start Phase 2 in the second half.

But we are not guiding on that. And the CHI program and speed, again, here, we are a little careful because now we want the 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 this study, so we can secure fast recruitment into the CHI program because it is pivotal for us to get fast recruitment if we are to get the voucher. Whether the changes from the FDA has eased the requirements, I would say, especially for the -- it has -- the first Phase 3 trial looks more or less the same, a small change of endpoints maybe, but that's also in where we do not -- where we are not as concerned with time lines.

But the smaller children, I think, it could actually provide significant benefits to the time lines of recruiting these children, but that's a study we plant to start now in the first quarter of '19. So overall, I think it could be a faster program, but we have faced start delays and delays in initiation.

Britt Jensen -- President and Chief Executive Officer

And then, Thomas, maybe to comment on the partnering. So what we're looking at right now -- I mean, as I mentioned, our strategy is go with our commercial partner for the rescue pen. And then in terms of glepaglutide for the short bowel syndrome, our clear strategy that we would like to go along in the U.S. market because we see, actually, a huge potential there and also that, I mean, with the very concentrated prescriber group, where we will know the key prescribers from the Phase 3 program, that we may -- we believe is doable.

But in terms of development, our focus is on U.S., where 90% of the revenue is today, and then also Europe. But outside these areas, there's also attractive markets, Japan being one, who has a very high -- which has a very high prevalence of TI 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 complexity and to -- I mean, get an upside on this, that's where we believe that it makes sense to engage with a partner.

And then you can say, 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 GLP-1 program in -- that is late preclinical in our pipeline. And as you may recall, that's where Lilly announced very positive data at the EASD about a month ago. So that's of course an area with increased interest and where we're also engaging in partnering because that program that will not make sense for us to progress ourselves given that it's two broad indications.

Thomas Bowers -- Danske Bank -- Analyst

OK. Can I just follow up then on the Japanese market? So I guess, the Phase 3 with the glepaglutide will recruit -- there will be recruitment in Europe and U.S., so I expect that's doable and anticipate that you will not stop the recruitment of Asian 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's potentially due prior to Phase 3 readout, is that correct?

Britt Jensen -- President and Chief Executive Officer

Yes, you can say it will require a separate smaller Phase 3 trial. I mean, as an example, you can say Gas-X have conducted an 11-patient study. And then to your question on whether to do it before or after, I mean, I think that's -- I mean, there are different on that. But 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 also on the safety, I mean, it could be possible to initiate it before we have results, but no -- I mean, on all the circumstances, it will be with a partner that we engage with that will take part in conducting or fully conduct the Phase 3 trial in the Japanese patients and market.

Thomas Bowers -- Danske Bank -- Analyst

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

Operator

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

Britt Jensen -- President and Chief Executive Officer

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

Adam Steensberg -- Chief Medical and Development Officer

OK. Thank you.

Operator

[Operator signoff]

Duration: 56 minutes

Call Participants:

Britt Jensen -- President and Chief Executive Officer

Mats Blom -- Chief Financial Officer

Adam Steensberg -- Chief Medical and Development Officer

Alan Carr -- Needham & Company -- Analyst

Ishmael Asante -- Morgan Stanley -- Analyst

Peter Sehested -- Handelsbanken -- Analyst

Eric Le Berrigaud -- Bryan, Garnier & Co. -- Analyst

Thomas Bowers -- Danske Bank -- Analyst

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