Zealand Pharma A/S

Good day and thank you for standing by. Welcome to the Zillian Farmer's second quarter 2022 financial results conference call and webcast. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. And to ask a question during the session, you will need to slowly press star 1 and then 1 on your telephone. You will then hear an automated message advising that your hand is raised. Please note that today's conference is being recorded. I would now like to hand over to your speaker, Anna Krasowska. Please go ahead.

Thank you, operator. Welcome and thank you for joining us today to discuss VLIN's second quarter results for 2022. I'm Anna Krasowska, Vice President of Investor Relations and Corporate Communications at VLIN. With me today are the following members of VLIN's management team. Adam Stainsbeth, President and Chief Executive Officer, Matt Dallas, Senior Vice President and Chief Financial Officer, and David Kendall, Chief Medical Officer. You can find the related company announcement and supporting information on our website at zeelandpharma.com. I would like to 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 except as required by law. Please refer to recent filings for a more complete picture of risks and other factors. With that, I will turn the call over to President and CEO Adam Sainstra. Adam?

Thank you, Anna, and thanks to everyone for joining today. Please turn to slide three. This has been a busy quarter for the company, and I'm really happy with the progress we have made on multiple fronts following the announcement of our strategy to prioritize investments into R&D. In light of these changes, I'm pleased that we completed the sales of Vigo to Mankind in May. For the Sigalock Rescue Pen, we are in advanced partner discussions, and I hope to provide an update on this front soon. In the second quarter, we strengthened our balance sheet. First, by amending the existing node purchase agreement with Oberland Capital, and secondly, by executing a private placement with certain institutional investors. This has extended our cash runway beyond important clinical milestones. As part of the restructuring activities, we continue to focus on improving our operational effectiveness and implementing corporate cost reductions. Earlier this week, we announced the decision to end the non-liquid ADS program, which has been in place since August 17. Today, the American depository shares accounts for less than 1.5% of the total share capital. And by consolidating our listing to Nasdaq Copenhagen, we believe we can maintain trading flexibility for global investors while achieving certain operating efficiencies for the company and reducing costs. Following those corporate updates, I would like to touch on the clinical pipeline to briefly review some of the progress and upcoming milestones before I turn the call over to David Kendall for additional details and color. Key priorities are shown on slide four. As we review the pipeline, I want to draw your attention to the revised timelines related to static lupine bi-hormonal artificial pancreas system. This is a consequence of focusing our resources as we execute our new strategy. and not a reflection of our for the program. In May, we announced positive results from the phase three trial of DASIGluogon in infants with congenital hyperinsulinism, or CHI. We are preparing a new drug application, or NDA, for DASIGluogon, and following our pre-NDA meeting with the FDA, we now anticipate submission in the first quarter of 23. At the scientific sessions of the American Diabetes Association in June, we presented Phase 1 data for dabiglutide, our long-acting DLD1-DLD2 dual agonist, showing encouraging weight loss in healthy volunteers. This data has given us the confidence to move this molecule forward in obesity, as also announced in June. In July, we achieved last patient last visit in EaseSBS1. our phase three trial with glipaglutide in short viral syndrome, and now look forward to seeing the results late in the quarter. At the upcoming European Association for the Study of Diabetes annual meeting in September, our partner, Boerner Ingelheim, will present phase two data for the gluagon GLT1 receptor dual agonist in patients with type two diabetes. And finally, we anticipate initial phase one clinical data from our Ameline analog later in the year. And with that, I will now turn over the call to David Kendall. David was appointed C-Lens chief medical officer in June, and for the past two years, he has been serving as a senior global medical advisor to the company. And before joining us, he has held senior leadership positions in clinical and academic medicine and in the biopharmaceutical industry. We're extremely excited to harness his broad experience in diabetes and metabolic diseases that spans more than 35 years. David.

Thank you for the kind introduction, Adam. I would like to begin by discussing the progress with our DASI-Glucagon program in patients with congenital hyperinsulinism, or CHI, an ultra-rare pediatric disease in which patients suffer from recurrent and persistent hypoglycemia due to excessive insulin production. On slide five, we have summarized key data. As you may recall, we previously reported data showing a clinically meaningful reduction in rates of hypoglycemia measured by continuous glucose monitoring in the phase three trial in older children when treated with dosiglucagon added to standard of care, shown in the left-hand panel. In May, we announced positive top-line results from the phase three trial in 12 infants up to 12 months of age with CHI who required continuous intravenous glucose support to prevent or manage hypoglycemia. The focus of this trial was to evaluate the ability of dosiglucagon treatment to reduce and eventually remove the need for continuous IV glucose infusion. The trial met its primary endpoint, demonstrating the dosiglucagon delivered as a continuous subcutaneous infusion by a pump resulted in a statistically significant and clinically meaningful reduction in the requirement for IV glucose when compared to placebo. Numerically, dosiglucagon treatment reduced the mean glucose infusion rate to 4.3 milligrams per kilogram per minute, compared with 9.5 milligrams per kilogram per minute with placebo, a treatment difference of 5.2 milligrams per kilogram per minute, which is a 55% reduction in the requirement for glucose by IV infusion. It is also worth noting that 11 out of the 12 patients participating in the trial subsequently enrolled into the ongoing long-term safety extension study. We look forward to presenting the full trial results of study 103 at the European Society for Pediatric Endocrinology, or ESPI, annual meeting in mid-September. We anticipate the data from this phase three trial, along with data from the previous phase three trial in older children, as well as the information derived from the safety extension trial, will form the basis of an NDA for dosiglucagon in CHI, and we expect to submit in the first quarter of 2023. We had previously projected a submission in late 2022. However, as the NDA preparation is now underway, the revised timeline reflects the comprehensive analysis for individual patient outcomes that we believe are essential for our submission. which we further believe will ensure as complete a data set as possible for our NDA targeting this ultra-rare disease. Turning to slide six, our full pipeline is shown here, and I will highlight a few of our programs. First, I would like to share an update on another of our dosiglucagon projects, namely the bi-hormonal artificial pancreas program, which, as many of you know, is being performed in collaboration with Beta Bionics. We have recently aligned with our partners on a sequential approach for the Phase III Pivotal Program. The Phase III Program now consists of three sub-trials designed to support the marketing application for the bi-hormonal islet bionic pancreas, known as the islet duo, and an NDA for the use of dosiglucigon in bi-hormonal artificial pancreas systems for the treatment of type 1 diabetes. Our two companies have agreed that the smaller crossover study of 60 patients to assess safety and efficacy of the bi-hormonal islet duo and insulin-only configuration, known as the islet, will now be completed prior to initiating the two larger randomized controlled Phase III trials, which will include 350 adults and 350 pediatric participants. Importantly, the sequential approach allows for an initial assessment of clinical outcomes from the shorter-term comparative trial prior to initiation of the main pivotal trials. The clinical protocols are being updated accordingly, and we expect Beta Bionics to initiate the small crossover trial in early 2023. We believe the sequential approach will allow us to optimize Phase III execution and use our resources most effectively. Moving on to glopaglutide, our long-acting GLP-2 analog being investigated for the potential treatment of short bowel syndrome. The pivotal Phase III Ys I study is designed to allow us to demonstrate a significant reduction in the need for parenteral support for people living with SPS. A once- or twice-weekly fixed-dose injection of glopaglutide delivered by a ready-to-use autoinjector can provide clear and very important features of differentiation from the currently approved product. We are excited to report that we have recently achieved last patient last visit in the Phase III EASE-1 trial, and our expectation is to have top-line results available by the end of September or early October of this year. Pending review of these data, we anticipate that this randomized controlled trial will serve as the basis for our planned NDA for glabaglutide. Moving to a discussion of our work in obesity, we believe we have a number of novel and exciting assets in our current portfolio, and we are pleased to be advancing this clinical portfolio, including our GLP-1, GLP-2 dual agonist, our novel long-acting amylin analog, and the dual glucagon GLP-1 receptor agonist, all assets generated from our peptide platform. Initial data from the clinical studies of our GLP-1, GLP-2 dual agonist Dapiglutide, reported at this year's American Diabetes Association scientific sessions, demonstrated weight loss of up to 4.3% from baseline after only four weeks of treatment in a Phase I trial of healthy volunteers. Our novel long-acting amylin analog is currently under study in Phase I clinical trials, and we expect data from the Phase I single ascending dose trial by the end of 2022. This amylin acid is differentiated by virtue of design characteristics that both allows for once weekly dosing and for formulation and co-formulation with other peptides in the physiologic pH range, a feature that should facilitate the potential for development of combination therapies. Additionally, initial data readouts from the Phase II program for the long-acting dual glucagon receptor GLP-1 receptor agonist, also known as Bi456906, being developed with Beringer-Ingelheim, will be disclosed later this year. Initial data from the Phase II trial in type 2 diabetes is scheduled for presentation at the European Association for the Study of Diabetes in September, highlighting the primary endpoint of the trial, dose relationship of treatment on hemoglobin a1c from baseline to 16 weeks relative to placebo along with our bi colleagues we also anticipate presentation of the secondary endpoints of the type 2 diabetes trial assessing the effect of change on body weight at a scientific congress later in 2022. In summary, it has been an incredibly active, exciting, and data-rich time for our clinical development programs, and the second half of the year looks to maintain this strong momentum across our entire research and development platform. Now I will turn the call over to our CFO, Matt Dallas, to walk us through our half-year financial results. Matt?

Thanks, David. In the first half of 2022, we initiated our organizational structure. taking steps to strengthen our financial future and ensuring that Zeeland can continue to discover and develop innovative new peptide therapeutics. In addition to the 90% workforce reduction implemented in the United States, in the second quarter we amended our loan agreement with Overland Capital and raised 274.8 million Danish kroner in a direct private placement. With these events and the consolidation of the exchange listings, as mentioned at the beginning of the call by Adam, the company is well positioned to execute on the strategy. On slide 7, you will see Zegelog's income statement for the first six months of 2022 and how it compares to 2021. Total revenue for the first six months was 43.5 million Danish kroner, or 6.1 million USD. This was driven by net Zegelog product revenue and partnership revenue from our collaboration with Alexion. The operating result for the period was a loss of 539.2 million Danish kroner, or 75.3 million USD. Sales and marketing costs mainly relate to the commercial infrastructure in the U.S. to support Zegelog, while R&D costs mainly primarily relate to our late-stage clinical programs. As a result of our announced restructuring, all gross margin and operating expenses related to VGO are accounted for as discontinued operations. Total discontinued operations for the first half of 2022 were a loss of $97.99 a day, or $13.7 million USD. Slide 8 illustrates our financial position and the ability to support our growing business through continued investments. Total operating expense for the period was 577.4 million Danish kroner, or 80.6 million USD. Included in the operating expenses for the period are 75.8 million Danish kroner related to our announced restructuring. And cash on hand at the end of June 2022 was 864.4 million Danish kroner, or 120.7 million USD. Turning to our financial guidance on slide 9, The company anticipates that net product revenue from the sales of Zegalog is expected to be 11.5 million Danish kroner plus or minus 10%. This is a reduction of 7.5 million Danish kroner from our updated guidance issued on May 12th. With the completion of the asset purchase agreement for Vigo with Mankind Corporation, the company will no longer provide guidance on net product revenue associated with sales from that program. Zegalog Farmer expects revenue from existing license agreements. However, since such revenue is uncertain in terms of size and timing, We do not intend to provide guidance on such revenue. Net operating expenses in 2022 are expected to be 1 billion Danish kroner plus or minus 10%. This is unchanged from our prior guidance and is a decrease of 200 million Danish kroner from the original guidance issued on March 10th. With that, I will now turn the call back to Adam.

Thank you, Matt. As previously announced, Matt, he will be leaving Sealand by the end of August and this will be his last quarterly call. I would therefore like to thank Matt for his leadership and many contributions over the last few years, and I wish him all the best with his next challenges. In light of Matt's departure, we have been conducting a search for a new CFO for the company, and we expect to be able to make an announcement soon. Turning to slide 10, the second quarter has delivered on several fronts. And we believe CELAN is now well positioned to leverage the value of our pipeline. We have some exciting months ahead of us with significant number of important milestones, which should further clarify the potential of our many new product opportunities. Thank you all. I will now turn it over to the operator for questions.

Thank you, sir. As a reminder, to ask a question, you will need to slowly press star one and then one on your telephone and wait for your name to be announced. Once again, it's star one and then one on your telephone and wait for your name to be announced. Please stand by while we compile the Q&A roster. This will take a few moments. We are going to proceed with the first question. The first question comes from the line of Joseph Stringer from Ningham and Company. Please ask your question. Your line is open.

Hi, thanks for taking our questions. Heading into the SBS readout here, can you provide your thoughts just based on feedback from physicians? Which efficacy endpoint is most important for potential widespread adoption or uptake in the SBS market? For example, from a registrational perspective, obviously your primary endpoint is absolute change in PS. GAT text was approved in part on a different endpoint, the responder analysis greater than 20% PS reduction. But are there other key endpoints such as number of patients completely weaned off PS or change in other PS metrics that you would consider important from a potential commercial perspective? Thank you.

Yeah, this is David Kendall. Thanks for the question. And you very nicely summarized both what was part of the previous regulatory approval for Taduclatide. And given the construct of our trials, obviously the statistical power for registration is tied to reduction in the volume of parenteral support. And secondarily, looking at a similar proportion reduction in that parenteral support. But I think you also make a very important distinction, which is the potential to reduce the number of days on parenteral support. Discontinuing parenteral support either on a given day or a series of days will be critically important. Powering a study for regulatory review based on the latter has its challenges, given that this is a rare disease, and having adequate numbers of subjects to demonstrate that with clarity or certainty could be challenging. However, we will be collecting just that in our clinical program to assess whether there are meaningful reductions in the days off of parenteral support. So I think all three go well beyond just achieving a regulatory endpoint and are critically important both to the burden of SBS and ultimately to the significant burden of days on parenteral support.

Great. Thank you for taking our question.

We are going to proceed with the next question. The next questions come from the land of Lucy Codrington from Jefferies. Please ask your question. Your line is open. Hi, thanks for taking my questions.

I've got a few. Just still on the glyphosate 3 and the expectations going into the data. So just in terms of setting our expectations, should we be looking at the kind of 1.6 to 2 litre reductions in parental... nutrition volume seen with GATEX in their phase three and the 30 to 40% placebo-adjusted response rate. So sensible bars for efficacy. And then related to that, can you remind us of any stratification by remnant bowel anatomy in your trial Does that differ to that used in the GATx Phase 3s, and could that have any influence when we're looking at the data sets together with the caveats of cross-trial comparisons, of course? And are there any other differences between the Phase 3s that we should be aware of? And I'll stop at those two and jump back into it.

Very good. If I can test my short-term memory and recall those. I think your first question to the proportional response, if you will, in reduction of parenteral support. We know that glipaglutide, glipa, is a GLP-2 agonist just like taduglutide. So while these are not comparative studies, obviously this is placebo-controlled, we would estimate that at least qualitatively reductions that have been seen with the other GLP-2 receptor agonist would be those that we would expect. But obviously to go further and try to predict at this point what those data may show would be both premature and speculative only. I think that is a reasonable starting point, certainly. And I think I wrote it down, but I've already lost the second half of that question.

Just whether there was any stratification via anatomy.

So, we do have so-called kick or colon incontinuity subjects as well as stoma patients within the trial. But there is no a priori, at least primary endpoint for assessing differences. But obviously, this will be a part of the secondary analyses that we will undertake. Obviously, understanding that those two populations can behave differently particularly when it comes to completely withdrawing parenteral support. So yes, that will be part of our analysis. It is not obviously part of the primary endpoint.

And so just to be clear on the differences between those, you would expect those with continuity to respond less, is that right?

Yes, correct. Okay.

Great. And then just my last question just relates to the dapaglutide obesity trial. I believe from reading the press release that it's going to be an investigator-sponsored study. Does that just reflect resource prioritization rather than you conducting the trials yourself?

I think it is not solely a resource utilization question. Obviously, there will be more than just efficacy endpoints and opportunity to explore mechanistic components of how the compound acts, which are obviously done most effectively in a well-established academic Center which does trials looking at complex mechanistic responses to the incretin hormones so I think beyond some efficiencies of being able to initiate this earlier for a relatively more efficient cost in the setting of an investigator led trial it will also allow for that detailed look at potential mechanisms which may be at play for this very novel agent.

Okay. Very helpful. Thank you.

Yeah. Thank you.

We are going to proceed with the next question. Please stand by. We have the next question coming from the line over. Michael Novot from Nordea. Please ask your question.

Thanks a lot. It's Michael Novot from Nordea. So three questions. First of all to the BI-45 compound, the GLP-1 glucagon co-agonist. So I can see that the abstract is already titled in the abstract book. So maybe just to sort of gauge your confidence in the safety, because we have had a lot of discussions around glucagon safety. We've seen a publication by NOVA with their glucagon which didn't sort of look too promising in terms of safety. So just gauging your confidence on the safety side going into the ESG. I know you can't comment on the specific data. Then secondly, on Zika log, maybe, Adam, you can give a bit of extra color on the potential timing of a licensed deal for this asset. And then lastly, also, in respect to glipaclutide, How should we think around timing with regard to also a license deal on this, given that you are sort of progressing if data is positive towards submitting an NDA? I guess a potential partner would like to be active on that side as well. Or how do you think about timing for GLIPA? Should data be positive?

This is David. I'll start with the BI 456906 question and the safety profile. Obviously, Phase II is really the first more comprehensive look at efficacy and safety, and I think, as you suggested, having the posted abstract for the BI compound is both exciting for us, and we look forward to seeing the full details of the glycemic outcomes at EASD. And I think it would be premature to further speculate on behalf of our BI partners on the comprehensive safety. But obviously, we fully expect that tolerability and safety will be detailed in that presentation. But given that we've now completed that phase two in the type two population, it suggests that at least completion of the trial supports its utility. To go beyond that, I think I'd be getting ahead of the formal presentation and speculating on the safety outcomes.

Yeah, and maybe also just to follow up on David's note here, which I completely agree with, I think at the American Diabetes Association meeting in June, BI did show some more details on the molecule, including the ratio of luvagon and CLP1 and so on. So I think you should be careful to compare across these molecules, even though they are they named glue up on a group until the one that could be different ratios and very quiet in the individual observations for each molecule so. So I would also ask you to draw the attention to the presentations that he I made at the American diabetes association mean then for for see a lot. As I said, we are in advanced discussions and I've said all the time that it's our ambition to complete a deal before we leave this quarter. And this is still the ambition for the company. And I think it's premature to comment more on this until we can announce something, hopefully. On the last one for glipaklutide. The key focus for us is to get to the key results and then engage with FDA. And on the partnering front, our key focus right now is to complete our discussions on SeekerLog. And then we also have CHI, as you know, coming up. So it's not that we are in a hurry. We think we have our plans in a good place. As I've also shared at prior calls, we have had quite a significant inbound interest in the program. So we will kind of take it from there, but we will not advance these discussions until we have seen results for sure.

Thanks a lot. Thank you.

We are going to proceed with the next question. The next questions come from the line of Thomas Powers from Danske Bank. Please ask a question. Your line is open.

Yes, great. Thank you very much. A couple of questions from my side here. So can you maybe just give us a little bit of color on the USD listing, so in terms of annual cost savings, so including fees and insurance and legal stuff. So that was the first question. So just then, just to follow up on SeekerDocs, Can you maybe just remind us on the commercial commitments you have here now going into August? So is there anything that makes things a little bit more difficult for you? And also, in addition to that, the recent capital infusion. So I'm just wondering whether you are maybe looking more into sort of an out-license with royalties involved. compared to sort of a one-time upfront payment from just selling the asset. And then my last question, just on BI45, just wondering in regards to, of course, we're all awaiting the phase two, but I mean, Berger, a private company, they could also make a decision prior to those phase two data and then go into or announce phase three. So I'm just wondering whether you have any information or we maybe even could potentially see Berger take that decision prior to the phase two data, if that's possible. Thank you.

So maybe I will address Segalog and DI and then turn over the ADR question to Matt on the potential cost savings. But if we take DI, of course, you can say we would expect bi to inform us when they take that decision and we will probably also inform the market if the decision would be taken on the initiation of phase three and we cannot comment further on when they will take this decision right now if they will do it before after they have also seen the phase two data from the obesity study i remind you that it's the type 2 diabetes study that is being presented at esat and and also later this year so but we do expect them to see the full data from the obesity study as well. So this is really up for BI to decide, and we will, of course, inform accordingly. For Sigaloc, I really can only, you can say, confirm that we are in advanced discussions. We are keeping the product on the market. We are supporting the product from all the regulatory, medical, and supply aspects. have very little sales support, as you can also see from the numbers now. So it's completely in line with the restructuring that we announced. And that's, of course, also why we have a key focus on completing a potential agreement before we leave the quarter. And I will not comment more on the potential deal structures or focus for us at this time. over to you on the ADR, potential cost savings.

We have not publicly stated what our exact expectations are on a per dollar basis, but I can tell you that the cost of maintaining the U.S. listing requires significant external legal and audit requirements due to the regulatory reasons, as well as significant internal time, costs, and efforts in finance, legal, risk management. As this delisting takes place and occurs, we will see significant costs reduced from those areas as well as, again, from internal kind of focus as well. Okay, Carla.

Thank you very much. Thank you.

We are going to proceed with the next question. The next questions come from the line of Lucy Codrington from Jefferies. Please ask your question. Your line is open. Hello, Lucy. Your line is open. You may ask your question. Oh, apologies.

Just if I may, is it possible to get an updated cash runway guidance now following the... listing and the debt restructure and the capital raise. And then in terms of potential near-term milestones that are not included in guidance, is there anything that we should be aware of that could be a possible near-term milestone? Thank you.

Matt, will you start on this one?

Yeah. So right now, the current cash runway, and this is based on just as the company stands at this very moment, takes us into Q2 of 2023. This does not include potential Zika lock partnerships, does not include any future milestones, such as from our partnerships with BI or Alexion or any additional partnership cost savings from any of the other additional programs with obesity and SBS. It also includes the full burden of maintaining the dual listings. The dual listing has not been yet completed. So, as we move into the next period and the updated guidance on that side, all of those costs will be filtered through and will be reflected in future announcements.

Great. Thank you.

Thanks.

We have no further questions at this time. I will now hand back the call to Mr. Adam Steinberg, CEO for Closing Remarks. Please go ahead.

Okay. With that, we would like to thank you all for attending and for your questions. We look very much forward to connecting on future announcements and updates. Have a good day.

This concludes today's conference call. Thank you for participating. You may now disconnect your lines.