Zealand Capital Markets Day 2018: NDA for “HypoPal” dasiglucagon rescue pen expected in 2019/2020 (after congenital hyperinsulinism submission); Management highlights TRx growth for Soliqua; GLP-1/GLP-2 dual agonist to enter clinical trials in 2019 – January 30, 2018

Zealand hosted 2018 Capital Markets Day in New York City last week, featuring remarks from CEO Ms. Britt Meelby Jensen, CSO Dr. Andrew Parker, CMO Dr. Adam Steensberg, and Dr. Jessica Castle (on dual hormone AP). This report covers our top seven highlights from the event, plus relevant Q&A. For even more detail, click through Zealand’s presentation decks on business highlights, Zealand’s preclinical and early-clinical peptide platform, and the company’s flagship liquid-stable glucagon analog dasiglucagon. For more on Zealand, check out our coverage of the company’s 3Q17 update. We look forward to hearing more in the company’s 4Q17 update, scheduled for March 7.

Top Seven Highlights

1. Introducing HypoPal, the Dasiglucagon Rescue Pen; Zealand Targeting 2019/2020 for FDA Filing

CMO Dr. Adam Steensberg announced the hopeful brand name for Zealand’s phase 3 dasiglucagon rescue pen: HypoPal (we love this!). Management further confirmed that NDA (for the US market) and MAA (for Europe) submission is slated for 2019 or 2020, provided that data from ongoing phase 3 studies is positive. See the presentation slides from Capital Markets Day focused on dasiglucagon here. A pivotal phase 3 trial (n=156 people with type 1 diabetes) for dasiglucagon rescue treatment was initiated in 4Q17, and results are expected in 4Q18. However, it’s important to note that this study uses syringes to administer the liquid-stable glucagon, not the Epi-Pen-esque HypoPal device. Since the company plans on commercializing dasiglucagon as a rescue pen, Dr. Steensberg has previously outlined that Zealand will either run another full-fledged phase 3 trial with HypoPal, or will conduct a small bridging study to show comparable efficacy of the pen vs. syringes – this will ultimately depend on conversations with FDA. A phase 3 immunogenicity trial (n=112) of dasiglucagon is also ongoing, with results expected in 2Q18 (this study also uses traditional syringes rather than the HypoPal device). Dr. Steensberg pointed out that this is a high growth-potential area: The hypoglycemia rescue market is predicted to surpass $700 million in 2025, from its current value of $300 million (slide 16). For more on next-generation glucagons in development, see our competitive landscape – Lilly currently leads with a planned FDA filing of its nasal glucagon in 2018. This progress on more advanced hypoglycemia rescue treatment (from Zealand, Lilly, and Xeris alike) is so important for patients, considering that current glucagon kits are complex and error-prone.

• Zealand is also developing dasiglucagon for congenital hyperinsulinism (CHI), a rare genetic condition characterized by excessive insulin secretion. According to Dr. Steensberg, the company is going all in on the phase 3 program for CHI to secure a rare pediatric disease priority review voucher upon NDA submission. This voucher would ensure a faster six-month FDA review period, and would grant Zealand several additional years of patent exclusivity. This strategy could also benefit Zealand in the diabetes market, as the approval of dasiglucagon for CHI will likely pave a smoother path for the approval of dasiglucagon as a hypoglycemia rescue treatment. Dasiglucagon has an orphan drug designation for CHI in both the US (as of August 2017) and EU (as of May 2017). One recently-initiated phase 3 trial will enroll up to 32 children with CHI between the ages of three months and 12 years. A complementary phase 2/3 trial to begin in 1H18 will enroll up to 16 neonates between the ages of one week and three months. In both studies, dasiglucagon will be delivered via pump, a paradigm that has already been attempted for CHI, Dr. Steensberg explained, but with reconstituted glucagons that did not function optimally in a pump. Results from both trials are expected in 2019. Assuming positive results and a fast approval process, dasiglucagon could be launched for CHI as early as 2020.

2. Zealand Forges Full Speed Ahead with Dasiglucagon for AP Systems; Will Look for New Partners (In Addition to Beta Bionics) 2018-2020; Dr. Jessica Castle on Promise of Dual Hormone vs. Insulin Only

Dasiglucagon is in phase 2 as a component of a dual hormone artificial pancreas system, and Dr. Steensberg framed this as a “highly attractive value opportunity” given the rising number of type 1 pumpers (expected to reach 700,000 in 2025) and the disruptive potential of a dual hormone (as opposed to insulin-only) system. He estimated that if a modest 10% of pumpers use a dasiglucagon-containing pump in 2025, Zealand could record $300 million revenue – and that’s under the conservative assumption that the dasiglucagon cartridge will be priced on par with insulin. A Beta Bionics-partnered phase 2b trial of dasiglucagon in the fully integrated, dual-chamber iLet device is slated to begin this year. The 4-6 week trial will compare iLet in insulin-only and dual-hormone configurations. This comes on the heels of positive phase 2a results from a Beta Bionics-partnered eight-hour safety study investigating dasiglucagon delivery via pump. Dr. Steensberg has previously claimed that “our ambition is that this [phase 2b] data will be the best data ever seen in automated insulin delivery in type 1 diabetes.”

• Dr. Steensberg shared that Zealand will seek additional commercial partners beyond Beta Bionics between 2018-2020, developing dasiglucagon cartridges that are compatible with various other dual hormone systems. If all goes according to plan, the dasiglucagon cartridge will be launched in 2022 or 2023. To be sure, there will be a need for many automated insulin delivery systems on the market, allowing patients, HCPs, and payers to decide on the right balance of cost, glycemic outcomes, user hassle, training, etc. To this end, it’s great to see Zealand open to additional partnerships (we think this is a smart strategic move for the company as well), and we’ll be keeping an eye out for announcements starting this year.
• A featured speaker at Zealand’s Capital Markets Day, Dr. Jessica Castle highlighted the promise of dual hormone AP systems (expected to reach the market in 4-5 years) as a step above insulin-only systems (expected to reach the market in 2-3 years). Dr. Castle cited a 2017 meta-analysis (covering 27 studies and 585 participants) showing how dual hormone systems resulted in a greater improvement in time-in-range vs. single hormone systems (20% vs. 11%, p=0.006). Soon-to-be-published research (n=20) from Dr. Castle’s lab demonstrates that a dual hormone system reduces the amount of time spent in hypoglycemia 200 minutes post-exercise: 3% (six minutes) with a dual hormone system vs. 8% (16 minutes) with a single hormone system (p=0.009).

3. Continued Optimism for Sanofi’s Soliqua; Improving Reimbursement and Growing TRx Remain Key Goals in Light of Sluggish Sales Thus Far

Despite sluggish Soliqua sales since early 2017 launch, Zealand management maintained optimism for continued improvement in US payer coverage, and CEO Ms. Britt Meelby Jensen noted that the basal insulin/GLP-1 combo “holds great promise” in terms of royalty revenue. As of January 2018, Soliqua reimbursement is secured for 65% of the commercially insured population and 25% of the Medicare population – these are the same numbers we heard on Sanofi’s 3Q17 earnings call. Ms. Jensen emphasized that Soliqua’s total prescription volume (TRx) has experienced healthy growth since product launch, climbing from 500 average weekly prescriptions in 1Q17 to 1,358 in 2Q17, 2,057 in 3Q17, and 2,813 in 4Q17 (slide 14). We imagine uptake could accelerate in 2018 due to ongoing payer negotiations, Sanofi’s concerted efforts in peer-to-peer medical education to promote familiarity with the concept of fixed-ratio combination therapy, and the initiation of European rollout (Suliqua was approved by the EMA in January 2017). In contrast to the US product label indicating the agent only for type 2 diabetes patients not at goal on basal insulin or lixisenatide monotherapy, Suliqua’s EMA-approved label also positions Suliqua as a second-line option after metformin. With this broader/more flexible indication, it’s our sense that early uptake of Suliqua could be stronger in the EU than it has been in the US – potentially a major boon to the franchise, though clinical inertia remains a challenge.  

• In general, our view is that the commercial performance of Soliqua (and indeed, of the wider basal insulin/GLP-1 agonist class) has not lived up to the clinical hype. In 3Q17, pooled sales of basal insulin/GLP-1 agonist fixed-ratio combinations (Soliqua and Novo Nordisk’s Xultophy) totaled only $37 million, up just 12% sequentially from $33 million in 2Q17, which marked a 75% sequential increase from $19 million in 1Q17. This financial performance is underwhelming for products so early in their launch cycle, especially considering the remarkable clinical utility of these agents, which surpasses what we’ve seen from any other diabetes drug in recent history. What’s missing is reimbursement as well as uptake from real-world HCPs: We’ve gathered that providers are unfamiliar with the concept of a fixed-ratio combo, and that they’re worried about side-effects and attributing adverse events to one molecule or another (the irony, of course, is that both combos offer milder side-effect profiles vs. component monotherapies, including fewer GI symptoms and less hypoglycemia). It’s a travesty that these highly-effective, highly-anticipated new drugs are finally out there, but are reaching so few patients in-need. That said, we appreciate that Sanofi and Zealand have invested in Soliqua’s launch and continue to show optimism. In contrast, Novo Nordisk has made an explicit strategic decision to de-prioritize Xultophy in favor of its component monotherapies Tresiba (insulin degludec) and Victoza (liraglutide). We look forward to seeing whether full-fledged commercial commitment from both companies can move the needle on reimbursement and clinical inertia for the entire class.
• Zealand also collects royalty revenues from Sanofi for standalone GLP-1 agonist Adlyxin (lixisenatide), but this received no mention during Capital Markets Day. This reinforces our longstanding view that Soliqua is the main focus for Sanofi’s GLP-1 business. Adlyxin claimed <1% of the pooled GLP-1 agonist market in 3Q17 ($8 million of a $1.6 billion market).

4. Zealand’s Business Strategy: Develop Rare Disease Indications In-House, Partner for Diabetes/Obesity and Other Broader Indications

CEO Ms. Britt Meelby Jensen reviewed Zealand’s dominant business strategy: Develop products in-house for rare diseases, but pursue partnerships for products with broader indications. In Ms. Jensen’s words, this strategy will ultimately “bring the most value to patients.” Dasiglucagon is a good illustration of this – Zealand has decided to develop the product in-house for the rare genetic disease congenital hyperinsulinism (CHI), but the company will partner in developing its liquid-stable glucagon for diabetes. To incorporate dasiglucagon into dual hormone AP, Zealand is partnered with Beta Bionics and other partners could be announced 2018-2020; a partnership search is also ongoing for the single-dose hypoglycemia rescue pen. We view this as a wise strategy: R&D innovation is where Zealand’s strength lies, and a steady stream of milestone and royalty revenues for Zealand products out-licensed for broader indications could fuel further development of next-gen, advanced therapies (possibly with novel drug targets). That said, we do anticipate that Zealand will allocate more resources to commercialization in the near-future. Mr. Ivan Møller was just appointed SVP of Technical Development and Operations – a new position that involves supporting product launch readiness and helping to prepare commercial manufacturing capabilities. Presumably, this means Zealand will play a distinct role in commercializing dasiglucagon, as this is the most advanced product in the company’s pipeline, but it’s possible that Zealand focuses on the CHI indication and leaves diabetes marketing up to a partner company. Time will tell.

• CSO Dr. Andrew Parker emphasized that the company’s focus will remain on developing peptide analogs. Zealand’s experience and infrastructure in peptide development is certainly an underlying reason for this, but Dr. Parker further contextualized that peptide drugs offer many advantages over small molecules and other modalities – high biological specificity (and therefore lower risk of toxicity and side-effects), predictable metabolism, and ease of tailoring half-lives in order to support less frequent, more adherence-friendly dosing. He also pointed out that peptide drugs are a strategic investment given their higher rate of regulatory approval than other therapeutic compounds (an impressive 90 peptide drugs were approved in 2017).

5. New GLP-1/GLP-2 Dual Agonist ZP-GG-72 Could Enter Phase 1 in 2019; Preclinical Studies Show Glycemic Efficacy Comparable to GLP-1 Agonist Liraglutide

In a session on Zealand’s peptide platform, CSO Dr. Andrew Parker announced that a preclinical GLP-1/GLP-2 dual agonist could be ready for phase 1 trials as early as 2019. He explained that Zealand scientists have optimized the compound ZP-GG-72, which could be used to treat GI and liver-related diseases. Dr. Parker provided no further details on the precise indication for this candidate, but we see definite potential in diabetes, obesity, and NASH. At ADA 2014, Zealand’s Dr. Rasmus Just presented preclinical findings: ZP-GG-72 showed glucose-lowering efficacy on par with GLP-1 agonist liraglutide (Novo Nordisk’s Victoza). Interestingly, a growing body of research suggests that GLP-1/GLP-2 dual agonism may improve metabolic syndrome via interactions with the intestinal immune system and gut microbiome. As we learned at the 2014 ADA/JDRF Research Symposium on Diabetes and the Microbiome, evidence from animal models indicates that the leakage of bacterial cell wall components such as lipopolysaccharide (LPS) across the intestinal wall can cause “metabolic endotoxemia,” characterized by insulin resistance and low-grade inflammation throughout the body. By improving the integrity of the gut wall and reducing inflammation, GLP-2 agonism could help stop the metabolic cascade that ultimately leads to diabetes and its complications. The combination of GLP-1 + GLP-2 would presumably be synergistic. We have much more to learn on this very new GLP-1/GLP-2 class, and while the science and mechanism are intriguing, we note that this area is in the very earliest stages of clinical development.

6. Management Shares High Hopes for BI-Partnered Obesity Program

CSO Dr. Andrew Parker highlighted Zealand’s two BI-partnered phase 1 candidates for obesity: (i) a GLP-1/glucagon dual agonist and (ii) a long-acting amylin analog, both with once-weekly dosing. Through this strategic collaboration, BI will fund all R&D and commercialization activities and Zealand is eligible for milestone and royalty payments. Both candidates entered phase 1 in early 3Q17, with topline results expected in late 2018. A great deal of interest surrounds both GLP-1/glucagon dual agonists and amylin analogs for obesity. The GLP-1/glucagon dual agonist competitive landscape is robust, with candidates from Novo Nordisk, OPKO Health, AZ, Sanofi, and Lilly, among others. On the amylin front, Novo Nordisk has a once-weekly amylin analog in development for obesity and Lilly is developing dual amylin/calcitonin receptor agonists for type 2 diabetes in partnership with KeyBioscience (announced shortly after Zealand went public with amylin as the biologic target for its 2014 cardiometabolic partnership with BI).

7. New Phase 1 Candidate to Be Announced in 2018 – An Incretin Multi-Agonist?

In closing remarks, CEO Ms. Britt Meelby Jensen shared that Zealand will announce its next therapeutic agent to enter clinical-stage development by the end of 2018. We suspect that the new phase 1 candidate will be an incretin-based multi-agonist, based on CSO Dr. Andrew Parker’s detailed overview of Zealand’s preclinical portfolio of GIP, GLP-1, and glucagon analogs and their potential for combination as dual or triple agonists. This was the first update we’ve heard on Zealand’s preclinical projects in quite some time. In our view, this would solidify the company’s commitment to metabolic disease treatment, given the increasing buzz around gut peptides and dual- or triple-agonist approaches to diabetes, obesity, and even NASH (see our competitive landscapes on GLP-1/glucagon and GLP-1/GIP). Thought leaders have expressed optimism that these emerging drug classes could represent the next wave of advanced therapy – as just one example, Prof. Melanie Davies shared enthusiasm for the potential of a GLP-1/GIP/glucagon tri-agonist to treat obesity at EASD 2017. Zealand’s expertise in incretin analog development (e.g. GLP-1 agonist lixisenatide, now licensed to Sanofi as Adlyxin and combo product Soliqua) will play to the company’s advantage. On the other hand, Zealand may face a challenge in differentiating its candidate from more advanced compounds in this class: OPKO Health and AZ have GLP-1/glucagon candidates in phase 2. Sanofi will launch phase 3 studies of its GLP-1/glucagon dual agonist in obesity come 2H18. Novo Nordisk has both a GLP-1/glucagon dual agonist and a GLP-1/GIP/glucagon triple agonist in phase 1 for obesity. Consistent with Zealand’s business model, Dr. Parker suggested that Zealand will take the lead on early studies of any incretin dual or triple agonists, but will eventually seek a dedicated partner for larger, later-stage studies and commercialization.

Table 1: Zealand Pipeline Summary

Questions and Answers

Q: What’s the game plan for dasiglucagon submission? Are you going to postpone the NDA for the HypoPal pen in order to first finalize the CHI submission in order to secure orphan drug designation?

Dr. Adam Steensberg (CMO, Zealand): What you’re talking about is our strategy to achieve a rare pediatric disease voucher. We anticipate very fast enrollment in the CHI study and therefore fast submission for this indication. This voucher would be of enormous value and we think we’d be eligible for it if we succeed in the CHI clinical program. We’re focusing right now on speedy recruitment in the CHI trial in order to get that NDA in (with the voucher) before submitting the NDA for the rescue pen.

Q: If you get the glucagon element into the artificial pancreas system, would you risk a rollercoaster effect of blood glucose going up and down?

Dr. Jessica Castle: This comes down to the design of the algorithm. You don’t want to dose insulin based on the rise of glucose because of glucagon. We hope to be able to integrate automated exercise detection – it’s feasible that integration with Fitbit or some other type of technology would help inform this.

-- by Abigail Dove, Payal Marathe, and Kelly Close