Zealand Pharma (ZEAL) is a biotherapeutics company that specializes in peptide-based treatments for gastrointestinal, metabolic, and other specialty diseases. Founded in 1997 in Denmark, Zealand Pharma is currently working on novel analogs to glucagon, a hormone that increases blood sugar levels via the breakdown of glycogen. This product, Dasiglucagon, is modified to last longer in the human body than traditional glucagon.
On March 22, Zealand's stock price increased from $31 to $34 when news broke regarding the U.S. Food and Drug Administration's approval of Dasiglucagon for treating severe hypoglycemia. As of April 12, the stock is back above $32. For those who own the stock or are considering buying it, what lies ahead?
What is severe hypoglycemia?
Severe hypoglycemia is an emergency condition that is caused when there is not enough blood sugar circulating -- an issue diabetics may often face. Zealand expects to target Type 1 diabetics who cannot produce insulin and are at risk because of multiple daily insulin injections. To summarize, if a diabetic patient injects too much insulin into his/her body at once or takes too much diabetes medication, the risk of severe hypoglycemia increases. Defined generally as having a blood glucose level of less than 70 mg/dL, hypoglycemia can be fatal if left untreated, accounting for 10% of deaths among Type 1 diabetics younger than 50. (Severe hypoglycemia has a cutoff of 54 mg/dL.)
Setting a new precedent?
In the past, glucagon was the standard-of-care treatment for severe hypoglycemia. Before Dasiglucagon, only two companies, Novo Nordisk (NVO -0.18%) and Eli Lilly (LLY 1.66%), had glucagon emergency kits approved for use. Other types of glucagon that are currently commercially available include Eli Lilly's nasal glucagon, Baqsimi, and Xeris Pharmaceuticals's (XERS) stable glucagon injection, Gvoke.
In phase 3 studies, one trial arm received Dasiglucagon, another received placebo, and another received Novo Nordisk's version of glucagon (also known as GlucaGen). Using time to plasma glucose recovery (basically, time for the patient's blood sugar to stabilize at healthy levels) as a primary endpoint, Dasiglucagon reached a median of 10 minutes, glucagon reached a median of 12 minutes, and placebo reached a median of 40 minutes. After 15 minutes, 99% of Dasiglucagon patients versus 95% of glucagon patients had fully recovered. Side effects were similar between Dasiglucagon and glucagon trial arms, with nausea and vomiting being the most serious side effect and injection-site reactions occurring in several patients as well.
While the data comparing Dasiglucagon and glucagon emergency kits is quite similar, there is one advantage in store for Dasiglucagon: Traditional glucagon emergency kits require complicated mixing right before administering via injection, while Dasiglucagon does not. In fact, similar to Gvoke, Zealand's product is an injection pen that is stable at room temperature.
With glucagon use increasing by 10% during COVID-19, this represents an unique market opportunity for Zealand as more and more diabetic patients tough it out without seeing health professionals on a regular basis. Fears during COVID are not unwarranted; diabetics tend to have weaker immune systems and are therefore more susceptible to the disease. And even after coronavirus fades, severe hypoglycemia will still be a formidable issue, with 35% of type 1 diabetics reporting experiencing it. With phase 3 trials on another delivery system for Dasiglucagon about to commence this year, Zealand is looking forward to tumultuous news ahead.
As of December, Zealand had $157.6 million in cash and equivalents, $87.4 million in total liabilities, and $58 million in total revenues. When it launches this summer, Dasiglucagon will be its first product for sale. To do a quick comparison, Gvoke costs $280 per dose; if we multiply that by the 6.8 million total insulin users in the U.S. and divide the result by 14 (because 1 in 14 diabetics on insulin will experience at least one episode of severe hypoglycemia annually), that means a potential market of $136 million in sales per year. However, so far Xeris has only achieved about $20 million annually in revenue from the drug. Given that Xeris's market cap is only $263 million, it looks like Zealand's market cap of about $1.41 billion is premature at best.
Given the competitive landscape of the current severe hypoglycemia market, the lack of imminent Zealand catalyst readouts, and the fact that Dasiglucagon won't start selling until this summer, I would advise healthcare investors to be cautious before buying into Zealand, despite the recent approval. Sit tight until more positive news in Dasiglucagon sales or other Zealand products emerges -- perhaps phase 3 trial results on glepaglutide for short bowel syndrome.