Zealand Pharma A/S (ZEAL) Q1 2019 Earnings Call Transcript

Zealand Pharma A/S (ZEAL)
Q1 2019 Earnings Call
May 16, 2019, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Lani Pollworth Morvan -- Head of Investor Relations and Communications

Welcome to Zealand Pharma's first quarter conference call for fiscal year 2019. On today's call, I'm very pleased to welcome Emmanuel Dulac, Zealand's new President and CEO, as well as Adam Steensberg, Zealand's Chief Medical and Development Officer. Emmanuel will provide business and financial highlights for the first quarter and period thereafter. Adam will follow with highlights from our research and development programs.

After the prepared remarks, we will open the call to take your questions. Joining for the Q&A will be Ivan Møller, Senior Vice President of Clinical Development and Operations, who is further responsible for duties as Interim Chief Financial Officer, and Marino Garcia, Senior Vice President of Corporate and Business Development.

You can find the company announcement containing the Q1 interim report, corporate presentation, and additional supporting information in the investor section of our website at zealandpharma.com.

As a company headquartered in Denmark, our financials are reported in Danish krones, also referred to as kroner. Key figures may have been converted to US dollars for convenience. On page one, I will 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 unless except as required by law. Please refer to the company's recent filings for a more complete picture of risks and other factors.

Advancing to page two, I will now turn the call over to Emmanuel. Welcome, Emmanuel.

Emmanuel Dulac -- President and Chief Executive Officer

Thank you, Lani and thanks to everyone for joining me for today. It's a real pleasure. It's been several exciting weeks serving at Zealand. I'm honored, actually, by the opportunity to lead this impressive team with a strong track record and I look forward to building upon these relationships with all the key stakeholders and investors. So, I look forward to meeting all of you soon.

Moving ahead to page three, you will see highlights from Zealand in 2019. In the first quarter, Zealand had net operating expenses and equivalent operating loss of 135.8 million Danish kroner. We had strong financial position at the end of 2018 and the first quarter increased to almost 1.3 billion kroner in cash and securities. The upfront payment and [inaudible] proceeds from Alexion contributed to this increase.

I'd like to add as well that progress continued across our early and late stage [inaudible] of next generation [inaudible]. We achieved a number of milestones during the quarter, including initiating the pivotal Phase 3 trial of dasiglucagon to treat congenital hyperinsulinism, known as CHI, and Phase 3 extension studies for both glepaglutide and dasiglucagon in CHI.

At the start of the quarter, we finalized the equity investment to strengthen our partnership with Beta Bionics. This project investment and the use of dasiglucagon to help Beta Bionics maintain its leadership position in the clinical development of their dial-hormone artificial pancreas.

Finally, two days ago, we received results from the complementary Phase 3 trial of dasiglucagon to treat severe hypoglycemia administered in the high-profile [inaudible]. Adam Steensberg, our CMO, Chief Medical Development Officer, we will describe these topline results with you in two minutes.

Based on these results, we are even more confident that the HypoPal rescue pen can become the official choice for patients and families having to deal with severe hypoglycemic events. HypoPal as proved to be both fast and [inaudible] for one of the most severe aspects of living with type 1 diabetes.

On page four, we review details of our Collaboration with Alexion. It is a good example of how we can engineer superior [inaudible] with our platform, be recognized by market leaders such as Alexion, and establish mutual beneficial collaboration. Levering Alexion's leadership in treating [inaudible], we have an outstanding opportunity to reach more patients and help improve more lives affected by a broad area of [inaudible].

On page five, we can see a summary of our financial results for the first quarter ended March 31st, 2018. I point your attention to the [inaudible] and the related expense is attributed to actually having sold to the royalties related to Soliqua and Lyxumia. The net results for the quarter was a loss of 128 million kroner compared to the loss of 97 million kroner for the same period of 2018.

Move to page six, which illustrates Zealand's sustained strong financial position. The year over year increase in the net operating expenses is in line with our guidance and it reflects the clinical activity online in five clinical programs, which includes three Phase 3 programs and continuing to support our pre-clinical research activities.

Turning to the balance sheet, we know it's a very healthy increase, which parallels the growth of the operating expenses. For the first quarter, we reported securities, cash, and cash equivalents of 1.3 billion kroner or $190 million. We believed our current capital resources put us in a strong position to fund our programs and operations.

Our 2019 financial guidance on page seven is unchanged. We estimate that total operating expenses in 2019 are stagnant within the range of 550 million to 570 million kroner, or $85 million to $88 million.

On page eight, I ask that ask that you please hold any questions until later during the call. I will now actually hand to Adam to discuss our pipeline in greater detail. Adam?

Emmanuel Dulac -- President and Chief Executive Officer

Thank you, Emmanuel. On page nine, we have an overview of Zealand's extremely robust pipeline. Our coverage of the late-stage programs are in the next slide, but I would like to turn my attention to the early clinical programs here. Two of the earlier programs are being developed in partnership with BI.

The first one is a once-weekly GLP-1 dual agonist for the treatment of obesity and/or diabetes. We expect BI to conclude the Phase 1 studies this year and on this novel once-weekly amylin analog also for the treatment of obesity and/or diabetes, which we expect BI to take into Phase 1 trials this year.

From our early pipeline, we are also looking very much forward to advancing 7570 into Phase 1 starting this year as a potential next generation therapy for short bowel symptoms. For our complement inhibitor program, we are in discussions with Alexion about the progress toward Phase 1 in 2020.

Please turn to page 10. Glepaglutide is our long-acting GLP-2 analog in development in an auto-injector with potential for convenient weekly administration. In 2018, we initiated a pivotal Phase 3 trial. The trial remains on track to be announced in 2020 with 16 patients randomized as of the beginning of May and a significant number of new potential patients in the screening phase.

Earlier this month, we initiated the Phase 3 extension study to evaluate the long-term safety and efficacy of glepaglutide. We see the transition of the SBS patients from the earlier clinical trials into this extension study as a very positive sign for tolerability of the drug and good starting point drug.

With an effective half-life of approximately 50 hours, glepaglutide has the potential to become the best in class GLP-2 therapy for short bowel syndrome patients, providing a fast, reliable, and well-tolerated treatment option.

Please move to page 11. Dasiglucagon is a potential first in class stable glucagon analog intended and development by Zealand in the ready to use HypoPal rescue pen for easy, fast, and effective treatment of severe hypoglycemia. Earlier this week, we announced key results from our confirmatory Phase 3 trial, which we iterated dasiglucagon's fast onset of action and efficacy in treating hypoglycemia.

Both the pivotal and this confirmatory study reported the median time for plasma glucose recovery of 10 minutes from time of injection. The confirmatory trial also and importantly demonstrated that there also is a divide in [inaudible] for accuracy and easy administration.

The ongoing Phase 3 periodic trial using the same dose as administered to the [inaudible] is expected to record results in September this year. That is slightly later than originally anticipated. And is [inaudible] a critical path for the plan, NDA submission, the US FDA, that has been adjusted to early 2020.

Page 12 -- we highlight the upcoming Phase 2 trial with Beta Bionics to develop an [inaudible] bionic pancreas system. This Phase 2 study will compare the performance of the dual-hormone versus the insulin only artificial pancreas pump in people with type 1 diabetes. Our development of dasiglucagon in [inaudible] for use in dial-hormone artificial pancreas pumps continues to make firm progress and we look forward to this start of the Phase 2 home use study and to report the results from this study later this year.

I'm going to page 13. Earlier in the first quarter we've advanced dosing to children with dasiglucagon in the first two Phase 3 trials for this indication. The first trial will evaluate the potential for dasiglucagon as a new treatment for CHI to prevent episodes of hypoglycemia. Continuous low doses of dasiglucagon will be infused via subcutaneous pump in the trial.

I'm very happy to announce that the first trial that successfully completed dosing in this pivotal Phase 3 trial with the investigator and the investigator has now decided to enroll this patient into the long-term safety and efficacy trial.

The second phase 3 trial for dasiglucagon in CHI is expected to start in September '19 and will load up to 12 children with CHI [inaudible]. This study will evaluate the ability to reduce the dependency on intravenous glucose.

Now, on page 14, I would like to return the call to Emmanuel for his concluding remarks.

Emmanuel Dulac -- President and Chief Executive Officer

Thanks, Adam. This progress is [inaudible]. So, two more slides to show -- on page 15, it shows the objective for 2019. I've provided clear guidance to our internal term and they will remain set for the rest of the year. So, we continue threading our clinical pipeline with several phase two and three studies at one group and look forward to announcing results this year.

In our early pipeline, we look forward to less ZP7570 entering Phase 1 while continuing the productive partnership with Boehringer Ingelheim and Alexion on early and quickly [inaudible]. Finally, progress continues on creating and operationalizing our US commercial footprint. We look forward to providing more specifics around our intentions throughout the rest of the year.

Next page, page 16, provides an overview of activities for 2019. This is a rich year in [inaudible] and supporting activity. We have already achieved progress in our development activity and we believe there are [inaudible] on the horizon to create further value for our shareholders. Zealand continues on a clear path toward achievement for 2019 and we are very enthusiastic about the progress we've made.

This concludes our prepared remarks. Thank you for your attention. Now, we'd like to ask the operator to open the line for questions.

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer session. As a reminder, if you wish to ask a question, please press *1 on your telephone and wait for your name to be announced. Please stand by while we compile the Q&A queue. This will only take a few moments.

Your first question comes from the line of David Lebowitz. Please Ask your question. Your line is open.

David Lebowitz -- Morgan Stanley -- Analyst

Thank you very much for taking my question. First, on the pediatric trial, what's the reason for the short delay?

Emmanuel Dulac -- President and Chief Executive Officer

Thanks for your question. The question is on the delay for the pediatric study. I will ask this question to Adam.

Emmanuel Dulac -- President and Chief Executive Officer

The simple reason is that the last trial, there was actually three of them ready to be randomized decided not to participate. Their parents decided to forgo the trial. That means that we had to screen again and then round up new patients. So, there was a slight delay.

David Lebowitz -- Morgan Stanley -- Analyst

Okay. Makes sense. And then looking to some of your candidates, you have data coming from the long-acting GLP-1 dual-agonist. What should we expect to see from that data being presented mid-year?

Emmanuel Dulac -- President and Chief Executive Officer

This is, of course, our partner Boehringer Ingelheim who is responsible for this study. We, of course, expect them to, once they're concluded, to make a decision to -- we hope they'll make a decision to move into Phase 2, but this is again where they are in control. The dialog we had, we expect them to conclude the Phase 1 studies and then make the decision to make steps later this year. We will inform the market. As you know, Boehringer is not a public company. They don't have any exposure that we have. When we know about that decision, we will disclose it.

David Lebowitz -- Morgan Stanley -- Analyst

And then as far as your short bowel dual-agonist follow-on, what advantages could a dual agonist have on the long-acting GLP-2 analog?

Emmanuel Dulac -- President and Chief Executive Officer

I think it actually potentially has many advantages. I think the very interesting thing is there's already to some degree clinical proof of concept in that investigator [inaudible]. But basically, what we believe, the introduction of this new component, that is very strong in increasing [inaudible] barrier and also increases intestinal blood flow, which is beneficial in these patients. The GLP-1 component closed down aspect motility, along the food and [inaudible], etc. to spend more time in the intestines and more time for [inaudible]. That is a key parameter.

The other thing that GLP-1 is doing is it causes the pancreas to release more insulin and thereby making the liver more effective in handling the [inaudible]. So, you have probably four key mechanisms with the two receptors. That is why we view it as much more effective. It will have more effect on ability to reduce [inaudible] but also and importantly much less diarrhea in patients.

Operator

Your next question comes from the line of Graig Suvannavejh. Please ask your question.

Graig Suvannavejh -- Goldman Sachs -- Analyst

I have several questions. My first has to do with dasiglucagon. The CHI indication is very interesting. I know you're just starting out, basically, but when do you think we will see first data from that program?

Emmanuel Dulac -- President and Chief Executive Officer

Hi, Graig. The question is related to the results released of the CHI indication. So, I will pass this to Adam.

Emmanuel Dulac -- President and Chief Executive Officer

 [Inaudible] the guidance on this now because [inaudible] studies with children. So, we actually see a lot of interest and a strong commitment from investigators. As we said, we have the first and several now at the beginning phase. It's a [inaudible] study, but we have an interim readout planned after 16 weeks that would allow an early [inaudible] for efficacy.

Graig Suvannavejh -- Goldman Sachs -- Analyst

My next question and maybe, Emmanuel, you can answer this question given your background, but as you've got dasliglucagon being redeveloped across three indications, how should we be thinking about pricing across the three different indications or product presentations? Assuming success in all three, how are you thinking about that pricing dynamic as each of those products come to market?

Emmanuel Dulac -- President and Chief Executive Officer

Again, I think the first indication is the one that defines the price for the drug. You have to look at the value of the drug you bring as well as the existing approved products. So, that answers kind of your other question. How do we price the other indication?

Between the rescue pen and the [inaudible], these are two different products for two different uses with different dosing. So, this was actually combined with different prices. In some key markets, in Europe, for example, sometimes they go from milligrams, price, but I don't think this was the case here, even in these markets, just because the use and the dosing and the packaging.

So, we haven't answered yet these pricing questions and we are not there yet. We will be within two more months for launch based on the market dynamics, but it's better [inaudible] and right now, we're just using guidance price for a forecasting matter, but we are nowhere near the final pricing strategy that we are going to take to market. It's an ever-evolving environment. We will adapt. The plan is to be really innovative, as innovative as we have been in the research side. More to come.

Operator

Your next question comes from the line of Alan Carr. Please ask your question.

Alan Carr -- Needham and Company -- Analyst

Hi, thanks for taking my questions. A couple follow-ups to previous questions and then another one -- coming back to strategy, Emmanuel, coming on board, did you have any sense of what sort of things might need to change? Then also, around the pen, you all have been putting partnership as the primary goal at this point. It seems like that's fair to say, but if you don't identify a partner, can you all describe and review for us what the process would be in terms of getting ready to commercialize that on your own? When do you think you have to start that -- that process?

And then Adam, around the interim analysis for your CHI program, can you tell us more about, um, what the endpoint there is, thresholders and that sort of thing? Thanks.

Emmanuel Dulac -- President and Chief Executive Officer

Thank you, Alan. The first question was related to my observations moving in. I must say that I've been probably still in the honeymoon period, but I'm very positively survived with the talent of the team.

The team has proven itself over the last 20 years by developing these drugs, but as well has remarkably brought enough excellent talents so that they have great insights into what it takes to get to the next step. That's an amazing situation to step in. Again, kudos to the previous leadership team and previous CEO for doing that early.

We still have to bring a lot more talent to actually penetrate the US market with the expertise and being underground in the US, you can't really do that remotely. But again, the collaborative nature of the team, I would say the ability to engage each other and challenge each other is present, which is a remarkable culture. I will work and use my time and my efforts to maintain that and transfer these traits to the US entity that we are going to build.

Related to the partner, we are pursuing partnership and discussions are ongoing. If we have enough cash to carry through, I cannot speculate whether or not we will and we will not and if we don't -- we are actually working on opportunities and cases. I see everything as an opportunity. So, again, this is a fantastic product. We released amazing results two days ago and this is actually considering to grow and strengthen.

Related to the CHI, I will pass this one to Adam.

Emmanuel Dulac -- President and Chief Executive Officer

On the planned interim readout, it's based on efficacy and it's something the FDA asked us to do. As you know, it's the first time we actually tested that drug in CHI patients. It's an open label study. So, it's a closed study if we see effect carry over. I would put it this way, that if we [inaudible] in a readout from efficacy, it's not something we expect to see because the T value would have to be enormously high, a few patients, but I think it underscores the confidence in their approach, I would say, that they have this readout. Yeah, built in efficacy readout.

Alan Carr -- Needham and Company -- Analyst

Okay. Emmanuel, you said something about having enough cash, did you say you have enough cash to bring the pen program forward on your own to commercialize on your own or did I misunderstand you?

Emmanuel Dulac -- President and Chief Executive Officer

No, it's to the market, to registration to the market.

Alan Carr -- Needham and Company -- Analyst

Thank you.

Operator

Your next question comes from the line of Lucy Codrington. Please ask your question.

Lucy Codrington -- Jefferies -- Analyst

Thanks for taking my questions. Just a quick one -- given that the HypoPal pediatric study has now been delayed, whether you're still considering potentially delaying that filing until you have the CHI data in order to file in that indication first and therefore potentially get a proprietary review as a result. Secondly, the line unfortunately cut out -- roughly when did you say you might potentially expect to get the data, the first CHI data?

Emmanuel Dulac -- President and Chief Executive Officer

Thank you, Lucy. I will pass to Adam. I wanted to clarify your questions. You asked several. You asked about the CHI again, the timing between CHI and the pen. You asked about what would be the first approval if I correctly understand.

Lucy Codrington -- Jefferies -- Analyst

Yes, whether you would hold off in order to get the first approval, it has to be the first approval for that drug.

Emmanuel Dulac -- President and Chief Executive Officer

As we also said for the HypoPal rescue pen, it is a few months' delay that we are facing. So, we anticipate to be able to submit the NDA early 2020. For the CHI program, we do not, as it stands right now, expect Phase 3 data before 2020. I would say to kind of change the sequence of submitting these NDAs, that would probably introduce a quite significant delay.

So, you can say it's not the most likely scenario that we will do that. As it stands right now, we would probably have to have extraordinary improvement in the CHI study. We are, of course, entirely aware about the opportunity with the voucher. We'll continue to monitor that opportunity. That's probably what we can say.

Emmanuel Dulac -- President and Chief Executive Officer

These products are different. I think in terms of entry market and end pricing, they won't impact each other. In terms of pediatric voucher, you're right. The pediatric voucher would be a nice one to have. But as Alan said, I don't think we should delay further the pen just to get behind the CHI indication.

Lucy Codrington -- Jefferies -- Analyst

Thanks so much.

Operator

There are no further questions at the moment. Please continue. If there are no further questions, we would like to thank everybody for participating today.

Emmanuel Dulac -- President and Chief Executive Officer

Thank you very much, everyone. We look forward to potentially having following calls with you. Thanks again for joining and listening to us. We'll meet you soon. Thanks to the team as well. Bye, now. This call is closed now.

Duration: 40 minutes

Call participants:

Lani Pollworth Morvan -- Head of Investor Relations and Communications

Emmanuel Dulac -- President and Chief Executive Officer

Adam Steensberg -- Chief Medical and Development Officer

David Lebowitz -- Morgan Stanley -- Analyst

Graig Suvannavejh -- Goldman Sachs -- Analyst

Alan Carr -- Needham and Company -- Analyst

Lucy Codrington -- Jefferies -- Analyst

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