Memorandum

Zealand 1Q20 – Dasiglucagon HypoPal rescue pen scheduled for early 2021 launch; Partnered GLP-1/glucagon dual agonist enters NASH; Dual hormone AP system on track for “late 2020” phase 3 start with Beta Bionics – May 14, 2020

Zealand provided its 1Q20 update today in a call led by CEO Mr. Emmanuel Dulac – see the press release and slides/webcast.  

Despite the challenges of COVID-19, 1Q20 was undoubtedly a very productive quarter for Zealand, as the company delivered on a number of goals laid out in 4Q19 – we recommend listening to this call to get a very good idea of all the opportunities. At the forefront, Zealand submitted its NDA for the dasiglucagon HypoPal rescue pen to FDA in March 2020 and completed the acquisition of Valeritas, maker of the 24-hour type 2 V-Go patch pump, in April 2020. In addition, Mr. Dulac celebrated the securement of ~$20 million (DKK 137 million) in additional funding from an unnamed US-based investor, “during a time when many investors had paused activity.”

Financially, Zealand ended 1Q20 with $189 million in cash, cash equivalents, and marketable securities – down from $207 million in 4Q19 and $190 million in 1Q19.

Top Five Highlights

1. Zealand and BI to Advance GLP-1/Glucagon Dual Agonist in NASH; First Dosing for Phase 2 in Diabetes and Obesity Expected in 1Q20

In R&D, management was most excited about Zealand’s ongoing partnership with BI to develop its phase 2 GLP-1/glucagon dual agonist (BI 456906). Earlier in March 2020, BI returned the rights to another Zealand-partnered compound, a second-generation Amylin analogue, in order to shift resources to the GLP-1/glucagon dual agonist in diabetes and obesity. The phase 2 study is “actively screening” patients, with randomization and first dosing expected “very, very soon,” within 1Q20.

Excitingly, CMO Dr. Adam Steensberg today announced that BI also intends to expand the development of BI 456906 into NASH. During Q&A, management was quite bullish on the future of BI 456906 in the liver condition, calling NASH “the indication to pursue with a dual agonist because of the role of glucagon in the liver.” Thus far, it seems that Zealand and BI are looking to apply the dual agonist towards the latter (and more challenging) end of disease progression, i.e. fibrosis, rather than on earlier metabolic endpoints like reduced inflammation or liver fat. Although we will have to wait and see whether these lofty goals can be achieved, promising phase 2 data for Novo Nordisk’s semaglutide already show that GLP-1s can effectively address the metabolic components of NASH, and a veteran company like BI should be able provide the resources and industry experience necessary to support the compound in this notoriously difficult field. Elsewhere in the NASH landscape, AZ, Lilly, and Altimmune are also pursuing GLP-1/glucagon dual agonists in NASH.

As BI controls when data will be released, no further timeline updates on either program were announced.

2. Management Bullish on “Late 2020” Start for Dual-Hormone Pump Phase 3 Trial with Beta Bionics

Despite concerns over the impact of COVID-19 on clinical trials during Q&A, management maintained that the phase 3 trial for its dual-hormonal artificial pancreas system being developed in collaboration with Beta Bionics will initiate by the end of 2020. According to Zealand leadership, Beta Bionics recently started recruitment for its insulin-only pivotal trial, in line with previous timeline announcements, and COVID-19 has had limited impact on trial proceedings. The two companies are currently in discussions with the FDA in regard to the bi-hormonal pivotal study design, and Zealand hopes to provide a “firm trial design” this summer. Of note, Zealand and Beta Bionics intend to use the same clinical trial sites in both the insulin-only and dual hormone studies, and because patients will be eligible for both studies, the dual hormone trial initiation will likely be relatively streamlined.

3. Zealand Ramps Up V-Go Production; Describe Baseline Revenue as “Not Huge but Not Negligible”

With the recent acquisition of Valeritas, Zealand has successfully delivered on its plans to transition into a commercial stage company. As expected, all 110 of Valeritas’ employees have been transferred to Zealand, establishing the company’s US operations in Cambridge, MA – they are getting an incredible team. More broadly, management highlighted the “synergistic effects” of V-Go with HypoPal, as V-Go commercialization will be used as a learning tool to better understand the diabetes customer base. Currently, the company is working to ramp up V-Go production to full capacity, following supply chain disruptions at the end of 2019.

On the financial side, Mr. Dulac described V-Go’s baseline revenue as “not huge but not negligible” and attributed limited uptake to “lack of awareness” for the product – we would add that increased marketing may help significantly since the word-of-mouth feedback is very strong among patients but not yet as much so among HCPs. Despite repeated questioning during Q&A, CFO Mr. Matthew Dallas maintained that the company is not able to give guidance on V-Go sales at this time due to limited commercial outreach during COVID-19 – this is very smart, from our view. We do think professional CGM should help them get greater awareness of who could be most helped with V-Go.

4. Dasiglucagon in Post-Bariatric Surgery Part of Larger Dasiglucagon Mini Pen Program; Potential Future in Type 1

Elsewhere in the pipeline, Zealand is advancing mini dose dasiglucagon to treat hypoglycemia post-bariatric surgery, following positive phase 2 topline results released in March 2020. The company plans to discuss the program with FDA, however management highlighted that the post-bariatric surgery indication is part of a larger program for Zealand’s mini dose dasiglucagon pen. Looking ahead, the company is also “considering next steps” for a type 1 diabetes mini pen, where they see a “huge pull from patients and prescribers” – certainly as a starting point, everyone who wears V-Go is someone who would benefit from a mini dose dasiglucagon pen are hypoglcyemia prevention.

5. HypoPal Rescue Pen Still on Track for Early 2021 Launch

Updates to the dasiglucagon HypoPal rescue pen were minimal, following NDA submission to the FDA in March 2020. Currently, the company still expects an “early 2021” launch in the US. If approved, HypoPal will be the third “next-generation” hypoglycemia treatment to hit the domestic market, on the heels of Lilly’s Baqsimi and Xeris’ GVOKE. For reference, Baqsimi delivered $6 million and $16 million in its first and second quarters on the market, while the GVOKE pre-filled syringe pulled in $1.6 million and $1.7 million in 4Q19 and 1Q20, respectively. Given Zealand’s smaller sales size and newer brand name, some expect HypoPal sales to be more in line with GVOKE’s performance – we think it’s very hard to know where sales will come in but certainly they should benefit from the market size and that the inventory of the “traditional approach of emergency glucagon should be sold through.  

Pipeline Summary

The table below reflects the latest updates, as far as we are aware, on Zealand’s diabetes pipeline products. Bullets highlighted in yellow indicate notable changes to the pipeline in 1Q20

Product

Product Details

Status

Timeline/Notes

Dasiglucagon (ZP4207)

Liquid-stable glucagon

Phase 3 as hypoglycemia rescue pen study complete;

Phase 3 for use in Beta Bionics dual hormone artificial pancreas system

  • HypoPal NDA submission in March 2020

  • Positive topline results from confirmatory phase 3 study testing autoinjector in adults reported May 2019

  • Phase 3 pediatrics study now complete; Positive results announced in September 2019

  • Phase 3 pivotal trial launched December 2017; Positive topline results announced in September 2018

  • Pivotal phase 3 trial set to begin in late 2020 for Beta Bionics AP system; Patient enrollment for Beta Bionics insulin-only AP system initiated in 1Q20; FDA Breakthrough Designation received in December 2019; Phase 2b trial announced June 2019; Approval targeted for 2022

  • Positive phase 2 PK/PD results released at ADA 2018

  • Orphan Drug Designation in US/EU for congenital hyperinsulinism (CHI); Phase 3 trial in up to 32 children with CHI initiated 1Q18, results expected September 2020; Second phase 3 trial in up to 12 neonates with CHI to initiate late 2019

  • Phase 2 dose-finding proof-of-concept trial in post-bariatric surgery hypoglycemia initiated in October 2019; Results expected in 2Q20

BI 456906 (partnered with BI)

 

GLP-1/glucagon dual agonist

 

Phase 2

  • Phase 1a safety/tolerability study completed February 2018

  • Phase 1b study initiated August 2018; Results in 3Q 2019 showed safety, tolerability, and weight loss

  • Phase 2 dose-finding and comparison trial for obesity and type 2 initiated in November 2019

  • BI to fund all R&D/commercialization activities

  • BI plans to advance compound in NASH announced in 1Q20

Second-generation amylin analog; replaced BI 473494 (partnered with BI)

Amylin analog

Preclinical

  • Expected to enter phase 1 in 2020

  • BI to fund all R&D/commercialization activities

  • BI returns rights to Zealand in March 2020

Undisclosed

GLP-1/glucagon/GIP mono, dual, and triple agonist portfolio

Preclinical

Select Questions & Answers

On Valeritas and V-Go

Q: Given that the [Valeritas] acquisition was completed, what are the state of the preparations? Obviously, that's part of what you're doing for potential dasiglucagon launch.

Emmanuel Dulac (CEO, Zealand): We are done with integration of the existing systems, the existing processes. We are actually now starting to deploy, we'd say, a stronger organization. So, hitting some of the gaps and adopting as well, to not only go back to growth, but as well, prepping the launch of the Rescue Pen. And so, as a result, we are actual now engaged in multiple efforts on the marketing side to be able to ready our teams and on the medical affairs side, as well as on the access side to ready the team for the launch of preparation for it.

…but I think it's probably like a lot of time spent on the V-Go. And there is actually a separate team on the marketing side working, I mean, 100% of the time on the HypoPal Rescue Pen.

Q: On the V-Go device, just what your plans are for this product and how important it is compared to the rest of the pipeline?

Mr. Dulac: So on V-Go for us, we present the first commercialized product. So, I think we are learning a lot from it. At the same time, this is a product which is commercialized in the exact same target audience that we will be marketing our rescue pen, HypoPal rescue pen. So, anything we do right now with V-Go has the synergistic effect with HypoPal rescue pen. So, this is very important for us to learn actually from that.

In terms of size, it's a small product right now. What I must say is that I think each time you look at V-Go, you can realize it's a very good product. V-Go demonstrated clinically relevant reduction in A1c with less insulin, for example. It is actually a small product. It's simple to use. It's delivering both basal as well as meal-time insulin in one product. It reduces the number of injections. It's, I think, been proven to be cost neutral with less injections and better insulin control.

So, when you look at the data attached to product, it's fully compelling, and I think there's a lot of work going on right now, so we don't have a full assessment, but I think it seems to be like there is a lack of awareness of the product. There is a lack of adoption potentially versus the potential of the market. So, we are learning, and so we will provide more insights as we develop our knowledge around these products.

But the good thing is that, again, we're playing in our field. This is exactly where we are going to operate with the HypoPal rescue pen. So, it's all – right now, it's all positive for us and plus it provides us like a baseline revenue that is not huge but that is not neglectable as well.

Q:  One quick one on V-Go. Are all the supply chain issues that were experienced by Valeritas – have those all been sorted out?

Mr. Dulac: Regarding the V-Go, I'm happy to share that actually the technical issues that led Valeritas to have their stock out and supply issue have been actually identified and solved. So, the matter now that we are dealing with is we are ramping back the production to the full capacity, and we are actually supplying – we're starting to supply all the orders, delayed orders, that we had, so that we can get the stock back to full orders.

But in terms of technical issues, I remind you as well that this issue did not trigger a safety report to the FDA, it was just a capacity issue. So, this is, I would say, work in progress… and the supply chain is actually working night and day to supply all the orders back.

We have seen very, very happy customers and seeing their stock back…Most of the patients had supply, so very few of them had discontinuation. I think the team did a fantastic job to make sure that there was no hoarding during that period of time, so that everyone could have their supply as needed. But this is constant work, so we are monitoring it, and we are working on it on a daily basis.

On BI 456906

Q: For the Boehringer products… do you think the first patient could still be within this quarter given COVID-19 disruptions or could that be delayed? And secondly, on that product, any read across from the recent semaglutide data reported yesterday?

Dr. Adam Steensberg (CMO, Zealand): If we just start with the BI question. So, first of all, with the long-acting GLP-1/glucagon asset where we announced that phase 2 has been initiated then, we can say we have active screening on patients right now, so we would definitely expect a randomization and dosing of a patient very, very soon and within this quarter. So, that study is actually actively recruiting.

And then on the data today on high dose sema, that, I think, is a very impressive data set. The trial started that BI is running actually includes sema compared to [BI 456906]. So, we will at least get some opportunity to compare efficacy once we get the results from the phase 2 study. What I would say again, what we are highly encouraged around is that that BI is also now pursuing NASH because if you look into the modality of a GLP-1 and glucagon analog, it really is very interesting biology when it comes to the liver.

On NASH

Q: Given that BI 456906 is a partner program, do you have a sense of when we could maybe see the data sets that have kind of informed BI on progressing to phase 2 and sort of their intent to expand into NASH?

Mr. Dulac: On the dual GLP-1/glucagon, it is up to BI to decide when to release data. And so, we cannot comment more on that. The only thing, as we have said before, is that we see a huge excitement in the team, and also it is a very strong signal from BI when they are communicating that they are also going to push this forward in NASH. We, at all times, had a high belief in the data, and I think there are other preclinical data available for other compounds with the same modality, which suggests that that mode of action of having both GLP-1 and glucagon actually is something that can provide very significant weight loss, also more than what you have seen with single-acting agents.

And when it comes to the nutritional status of fatty liver, then glucagon by nature is actually well into that liver from nutrition. So, that is I would say – that's the evidence we can talk about right now. And when BI is ready to share, the data from the lead molecule here? We cannot comment on that.

Q: On NASH, I appreciate all the comments you have made on the call. Just to put in perspective, I know BI is running it, but given all the things we've seen in the field – with Novo reporting data, and Genfit failing – how do you see that asset in the current evolving competitive field in NASH?

Mr. Dulac: We have a preclinical – I know it's also been published data on a formal lead, our once-daily analog – and I cannot speak for BI, I can only speak from a Zealand point of view, and perhaps my personal point of view is that if we… normally, I would be very skeptical around moving into NASH as a company because as you know, especially if you have had an anti-fibrotic agent in development for whatever disease, then people have already repositioned those for treatment of NASH because it's been such a hard area.

While we are starting to see some very significant and great results for GLP-1s, and addressing the metabolic component a little bit earlier than maybe when we start to address the fibrotic, and I think as you mentioned, that there are some companies showing some promising data there. It will take the dual agonist, and for the mechanism action of the dual agonist, probably NASH is the indication you should pursue with a dual agonist because of the effects of glucagon on the liver. And if you look into the pre-clinical data we have published obesity on the dual action agonist, then in my mind, it beats anything else that has been published with other single action agents. So that's why we feel that this is a potential future…

We will also understand that it's huge programs, and it requires a very committed player like BI is in that field. But it's fair to say that from a Zealand perspective, we are really, really happy to see that they are also pushing this forward in NASH because that is where we see very strong biology.

On Dual Hormone Artificial Pancreas

Q: On the dual-hormone pump. So, you're still expecting to start the trial in late 2020. I fully acknowledge that Beta Bionics is sort of screening patients, but isn't there a significant likelihood that this is going to at least move another six months?

Mr. Dulac: It is still set to start late this year, and as we have also said at Zealand Pharma, we are actually ready to support the start-up of that study, and we are not in a situation where we would change the guidance because what we see with Beta Bionics right now is that they are actually able to see these patients and have decided to open as planned.

So, in the best case and in a good case scenario, then they are also able to operate despite COVID-19. And of course, with the device that they're developing, it is helpful that a lot of that can be handled remotely. So, we are not changing our guidance soon.

Q: For the dual-hormone, I think Beta Bionics starting to try recruitment is certainly positive, but maybe if you could give us a sense of what types of conversation are currently ongoing with the FDA? And what kind of needs to get agreement on prior to starting the phase 3 program?

Mr. Dulac: On the dual hormonal artificial pancreas and the interactions with FDA, we do not have updates to the market right now that we can share. What we can share is that we are still progressing towards a single phase 3 study and are comfortable with the numbers that we are going to have in that study. And we expect to be able to provide, you can say a firm trial design around some of the issue in the summer.

On Mini Dose Dasiglucagon

Q: Around bariatric surgery, what's the next step there? What sort of trial are you all contemplating running here next?

Dr. Steensberg: On the post-bariatric surgery, next step is that, as I said, we will discuss with FDA. And as Emmanuel also highlighted several times, it is a program where we have a mini dose pen, so we actually have a pen that can give these mini doses. So, we should see the development activities we are going to do for post-bariatric surgery – the totality of what we're doing with the franchise. Meaning that we are also considering the next steps in the type 1 diabetes market with a mini dose pen where we see a huge pull from patients and prescribes. So, you could expect to see a broader development within that mini dose pen development.

Mr. Dulac: Yeah, and you will note that we're not calling the pen right now, the mini dose pen, our fifth product. We're awaiting to actually define a regulatory route for this product in the various potential indications. We can expect this product to be marketed. So that's why it's still, I would say, in development, I would say, right now.

 

--by Rhea Teng, Martin Kurian, and Kelly Close