Good afternoon, everyone, and welcome to Zealand Pharma's Q3 2021 financial results conference call. Today's call is being recorded. At this time, I would like to turn the call over to Matt Dallas, Senior Vice President and Chief Financial Officer. Matt, please go ahead.
Thank you, operator. Welcome, and thank you for joining us today to discuss Zealand's third quarter results for 2021. I'm Matt Dallas, Senior Vice President and Chief Financial Officer at Zealand. With me today are Zealand's President and Chief Executive Officer, Emmanuel Dulac, President of Zealand Pharma U.S., Frank Sanders, and Chief Medical Officer and Head of Development, Adam Steensberg. You can find the related company announcement and additional supporting information on our website at zealandpharma.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, Emmanuel Dulac.
Thank you, Matt, and thanks to everyone for joining today. The Q3 updates we will discuss on today's call underscore Zealand's evolution as a fully integrated biopharmaceutical company. In Q3, we continued to execute on our commercial goals following the launch of Zegalogue in the U.S., while also sustaining momentum across the rest of our pipeline by advancing multiple clinical and pre-clinical programs that leverage our innovative peptide platform to address unmet needs in type 1 diabetes and rare disease. This continuous progress positions us well to achieve our goal of offering 5 marketed products by 2025 to patients around the globe with high unmet medical needs. Slide 4 illustrates the development of our company in relation to the successful execution of our strategy.
Later in the call, our CMO and Head of Development, Adam Steensberg, will discuss these pipeline updates in greater detail, including updates on glepaglutide in the treatment of short bowel syndrome or SBS, information on clinical data from our amylin analog and clinical data from our GLP-1/glucagon dual agonist partnered with BI that were presented at the recent The Obesity Society annual meeting, more details on our collaboration agreement with DEKA Research & Development Corporation to advance development of an infusion pump to be used with dasiglucagon, currently under investigation as a potential treatment option for congenital hyperinsulinism. First, Frank Sanders, President of Zealand Pharma U.S., will discuss the work our commercial team has been doing on the ZEGALOGUE launch.
Thank you, Emmanuel. Since Zegalogue was launched in late June, the U.S. commercial organization has been focused on securing favorable coverage on the drug formulary plans of PBMs and commercial and Medicaid plans to ensure that appropriate patients can receive Zegalogue with ease when it's prescribed. This involves driving demand with prescribers to signal to payers that the desire to prescribe Zegalogue is high. In a moment, I will speak to our progress in generating demand and our progress in securing favorable payer coverage for Zegalogue. Please refer to slide five. I want to share that Zegalogue is being viewed as an attractive treatment option for severe hypoglycemia by payers, patients and their caregivers, and endocrinologists, both adult and pediatric endocrinologists. What's compelling about Zegalogue is the rapidity and consistency of recovery from severe hypoglycemia that was seen across all pivotal phase III studies.
This position, positioning is succinct and it's compelling, especially in the context of a severe hypoglycemic event, which can be terrifying for people with diabetes and their families. Rapid and reliable recovery from a severe hypoglycemic event in 10 minutes is important because during a severe hypoglycemic event, every minute matters. On slide 6, I'd like to take a moment to refer to the approved full indication and the important safety information for Zegalogue. On slide 7, I will speak to the demand, which has continued to increase over the first four months since launch. As I spoke to in my opening remarks, generating early demand from healthcare prescribers is essential because it helps inspire payers to act more expeditiously in their formulary review activities. In the third quarter, approximately 3,800 total prescription claims for Zegalogue were submitted to commercial and government payers.
Also, approximately 115 distinct healthcare providers wrote prescriptions for Zegalogue. Most of these prescribers were endocrinologists, both adult and pediatric, and 62% of the prescribers were repeat prescribers, writing Zegalogue multiple times in the quarter. On average, 1.9 units of Zegalogue per prescription were being dispensed. These are encouraging signs of underlying growth, which is observed to be increasing month-over-month. While demand continues to grow, it has not yet translated into a proportional level of revenue growth. What's different is that the rate of rejection of Zegalogue prescription claims by payers at the pharmacy is higher than we anticipated. We expect that this will begin to resolve as recent drug coverage decisions take effect. Please refer to slide eight.
Now I will speak to the results that our market access team has achieved since launch. ZEGALOGUE coverage was limited in the Q3 , its Q1 of launch, with only approximately 16% of commercial and 10% of Medicaid lives being covered. As previously mentioned, this level of coverage resulted in a higher than anticipated rate of rejection of prescription claims at the pharmacy. PBM and payer coverage has improved since launch. Recently, we've signed agreements with some of the largest PBMs and state Medicaid plans. The full impact of these coverage decisions will begin to be realized at the start of 2022, based on the timing of some of these arrangements. We will start the year off with approximately 70% coverage of commercial and 70% coverage of Medicaid lives having access to ZEGALOGUE.
This equates to approximately 130 million commercial and 50 million Medicaid recipients and will set the stage for growth in 2022. I want to thank our employees at Zealand for their work on building the U.S. commercial organization and executing the launch of Zegalogue. Zegalogue is an important launch on its own, but we expect that it's only the first of multiple potential new product launches in our near-term horizon. Now I will turn to Adam, who will provide an overview of the progress of our clinical development programs.
Thank you, Frank. Please go to slide 9. Here you can see our robust pipeline targeting areas in four medical areas of high unmet medical need. On the next slide, I'll take you through updates on several of these programs and begin with our efforts to transform management of type 1 diabetes. Please go to slide 10. A recent study found that despite the many innovations in insulin, current pumps, and continuous glucose monitors, only approximately 20% of people living with type 1 diabetes in the U.S. are at the recommended glycemic targets. As such, the majority of those people have elevated plasma glucose levels and therefore are at increased risks of long-term complications. Moreover, all are at risk of experiencing dangerously low blood glucose if they take too much insulin. We are currently developing dasiglucagon for potential use in a bi-hormonal artificial pancreas system.
In a smaller phase II trial, we showed that the iLet bi-hormonal artificial pancreas was able to achieve glycemic target for 90% of the participants. Importantly, this was achieved while only, on average, they spent 0.2% of the time in hypoglycemia, as seen to the right. We are therefore excited to confirm that we are moving towards start of phase III later this quarter. Please go to slide 11. The phase III program for dasiglucagon in the iLet bi-hormonal artificial pancreas system has been discussed in details with the FDA, and we are pursuing a broad indication with studies in both adults and children with type 1 diabetes. The program includes three sub-trials and will begin with a single-arm bi-hormone-only safety and test run trial. Following 3 weeks of dosing of approximately 40 subjects, we will begin the 2 randomized controlled trials.
With the primary endpoint for the randomized trials being HbA1c at 6 months, we seek to demonstrate superiority over insulin-only iLet and over standard of care. Further 6 months exposure to dasiglucagon will support the safety data needed for the NDA with the U.S. FDA. Please go to slide 12. Among the most advanced clinical programs in our pipeline is the evaluation of continuous infusion of dasiglucagon in children with congenital hyperinsulinism, or CHI, an ultra-rare disease caused by a defect in the pancreatic beta cells. We reported initial phase III results in December last year from the first phase III trial, and by year-end, we expect to complete enrollment into the second phase III trial in CHI children aged 7 days to 1 year, with results expected in the second half of 2022.
Pending positive results from this second phase III trial, we will work quickly and diligently towards an NDA submission to the U.S. FDA. In addition, we are excited about the agreement with DEKA Research & Development Corporation that was announced last week. Please go to the next slide 13, which illustrates the DEKA continuous infusion pump that we anticipate to utilize to deliver dasiglucagon as a potential treatment option for children with CHI. We believe that this pump has the optimal design and quality features to provide ease and confidence in the management of CHI. Please go to the next slide. On glepaglutide, our long-acting GLP-2 analog for treatment of short bowel syndrome.
During the quarter, we presented preclinical data that showed dose-dependent effects of glepaglutide on small and large intestinal growth and concluded the bridging trial that supports the use of the auto-injector for dosing of the growth drug. Please go to slide 15. We also initiated EASE-SBS 4, which is a phase IIIb trial assessing effects of once-weekly administration of glepaglutide on its energy and fluid uptake. Earlier in the year, we initiated EASE-SBS 3, which will contribute to the overall clinical program with long-term safety efficacy data. Importantly, throughout 2021, we have made good progress on the recruitment into EASE-SBS 1, our pivotal phase III trial, for which you can see the trial diagram on the next slide 16.
Based on parallel dialogue with FDA and the EMA throughout the year, we have decided to introduce an interim analysis that can allow for stopping the trial for efficacy or futility before the full 129 patients have been enrolled. If the interim readout is positive, we plan to pursue an NDA submission as a next development step based on these clinical data. We expect to have all subjects needed for the interim analysis enrolled by the end of 2021, with results being available in the Q3 next year. On slide 17, you can see the details on dapiglutide, our long-acting GLP-1/GLP-2 dual agonist, which is in development as a potential treatment option for SBS and other GI-associated diseases.
We have already reported a plasma half-life of 120 hours in a phase I A trial, and we look forward to reporting the results of the multiple ascending dose trial later this year. Please go to slide 18 and our efforts to target obesity and associated metabolic conditions. At the recent The Obesity Society annual meeting, we presented preclinical data on our amylin analog and clinical data on the GLP-1/glucagon dual agonist. Please go to slide 19, which shows data from the phase I clinical trial of BI 456906. In the trial, we observed clinically relevant body weight reductions of up to 13.7% with no unexpected safety findings after 16 weeks of dosing.
Earlier this year, our development partner, Boehringer Ingelheim, initiated two additional phase II trials, and we look forward to seeing the results from the trials in type 2 diabetes and obesity next year. Please go to the next slide 20. At Obesity Week, we also presented preclinical data as related to our amylin analog, either as a monotherapy or in combination with the long-acting GLP-1 molecule semaglutide. The combination therapy resulted in up to 20% weight loss. During that same week, we were thus excited to announce the dosing of the first subjects in the phase I safety and tolerability trial of ZP8396, and expect to share results from this study next year. I'll now turn over to our CFO, Matt Dallas, to walk us through 2021 year-to-date financials. Matt?
Thanks, Adam. On slide 21, you will see Zealand's income statement for the Q3 of 2021 and how it compares to the same period in 2020. Total revenue for the first nine months was DKK 238.6 million, or $37.1 million. This was driven primarily by net product revenue for the V-Go wearable insulin delivery device and Zegalogue, as well as partnership revenue from our collaborations with Alexion, BI, and Sanofi. The net operating result for the first nine months was a loss of DKK 762.6 million, or $118.8 million. Sales and marketing costs mainly relate to the commercial infrastructure in the U.S. to support the Zegalogue and V-Go commercial programs, while R&D costs primarily relate to our late-stage clinical programs.
Slide 22 illustrates our strong financial position and ability to support our growing business through continued investments. Net operating expenses for the first nine months were DKK 906.2 million, or $141.1 million. At the end of the quarter, we had cash equivalents and marketable securities, DKK 1.05 billion, or $163.3 million. Turning to our financial guidance on slide 23. For 2021, net product revenue from the sales of commercial products is expected to be DKK 190 million ±10%. This is a decrease of DKK 30 million from the guidance issued on March 11. The reduction in net revenue from the previous guidance was driven by lower-than-expected sales of Zegalogue for 2021.
Net operating expenses are expected to be DKK 1.25 billion, ±10%, and this remains unchanged from the financial guidance issued on March 11. We expect revenue from existing licensing agreements. However, since such revenue is uncertain because of size and timing, we do not intend to provide guidance on such revenue. With that, I will now turn it back to Emmanuel.
Thank you, Matt. Zealand's commercial and research team have established significant momentum across our metabolic and gastrointestinal programs during the first nine months of this year, as exemplified by the exciting third quarter updates discussed on this call. We look forward to closing 2021 out strong, carrying the momentum of this transformational year into 2022 as we continue on our journey to change the lives of patients by offering five marketed products by 2025. Thank you all. I will now turn it over to the operator for questions.
Thank you, sir. If you would like to ask a question, just press star one. If you want to cancel it, just press the hash key. Once again, please press star one to ask a question. Sir, your first question comes from the line of Lucy Codrington from Jefferies. Please go ahead. Your line is open.
Hi there. Thank you for taking my questions. Just a couple from me. On the dasiglucagon T1D agreement for the pump with DEKA, it's my understanding you had a prior agreement with Roche that has, and that's been used for the trial so far. Just wondering what kind of drove the change and will any additional studies be necessary, and could these potentially delay filing? On the glepaglutide side, will you press release when the required number of patients for the interim analysis have been recruited? For BI 456906, you might get phase II diabetes data potentially this quarter. Do you expect BI to disclose those data, or do you think, like in the past, they will save them for a conference? Thank you.
Thank you, Lucy, for your three questions in a row, and I will actually ask Adam to take all three.
Okay. Thanks for the questions. Regarding the pump that we are anticipating using for CHR, you're correct that we use the Roche pump right now. That has all the time just been an agreement where we would use it for the clinical study. We have, you can say, for a long time worked on establishing a commercial agreement, as we have done now with DEKA. That was the outset of the agreement with Roche. There's no changes there. Also, we do not expect to do any additional clinical studies with the DEKA pump as it relates to studies in humans. We will, of course, have to demonstrate the quality work, which we have already started.
We feel very comfortable there, and we do not expect that it will have any negative impact on NDA filing timelines. The good thing about the DEKA pump is that it's you can say only earlier this year it was approved by the FDA for administration of a different drug as a subcutaneous infusion. It's more or less the same use that we are going for here. It's a proven concept versus using an insulin pump, which is intended only for insulin. We actually see this as de-risking the project very much. For glepaglutide, yes, we will press release once we have reached the number of patients needed for the interim analysis.
Regarding the GLP-1/glucagon dual agonist that we have with BI, as you know, they did, you can say, complete enrollment into the study in the Q3 this year, and we would expect them to soon have the data. When they're going to release those data, we cannot comment on that, as it is their decision. As always, we will encourage them to do it as soon as possible.
Thank you, Adam. Thank you, Lucy, for your questions.
Thank you.
Once again, if you would like to ask questions, just press star one, and if you want to cancel it, just press the hash key. Sir, your next question comes from the line of Jasper Ilse from Carnegie. Please go ahead, your line is open.
Thank you so much. A question on glepaglutide, and then afterwards, one on Zegalogue. First on glepaglutide. First, you can just elaborate a bit about your decision to do this interim analysis. Firstly, how we should think about this impacting both the power and the stopping criteria for the interim analysis. Is it more difficult to now show positive data in the interim compared to, say, the full data set that you had before? Also one, just so I understand it, you do this and expect enrollment by year-end 2021. Does that mean that you do not expect complete enrollment before Q3 next year? Just to get my understanding. Is it because of the current COVID cases rising?
Also, how many patients do you actually need before you have final complete enrollment? Afterwards, on you know Zegalogue. It's not a key product for me, but launch is still pretty slow. What could or would you do to improve that traction when we do get into 2022? Thank you.
Thank you, Jasper. Again, Adam for glepaglutide, and maybe Frank will jump in for Zegalogue launch.
Hi, Jasper. Thanks for your questions. If I should start by addressing you can say the decision and the rationale behind the interim. At the outset of the COVID, FDA and actually also European authorities issued different guidance for how to act in this situation. Including in those guidances were statistical considerations for studies, which actually opened up for sponsors to introduce post-hoc analysis in the study. That's an important parameter that the guidance is in place. When we design studies, phase III trials, that should serve the purpose of an NDA submission, you need to generate sufficient data to address both efficacy and safety.
With the delays we have seen in glepaglutide, we have actually created quite an extensive safety database because we have patients who have been on drug for many years. That's also exemplified by EASE-SBS 3, which is an extension study to the originally expected extension study. We have patients who have been exposed for close to three years now in the study. You can say from a safety perspective, we actually have generated more data than we had originally planned for the NDA submission when we had these discussions on the size of the study with the FDA. With regard to efficacy, you of course have to design your studies also to address efficacy needs. You do that by having some assumptions around your effect size and, you can say, the standard deviations.
We of course were inspired by the data that we have seen from its glucagon and internal data on GLP. What I can say from an effect size point of view, the size of the interim analysis, we would not have introduced that one if we did not feel comfortable still that we can actually reach a positive decision on the efficacy and as well. Due to the effect size. You can also say we had very good effect at alpha for the original trial design, very much driven by the need for a safety database, which we have expanded by the delays.
We actually feel very comfortable with this one if the assumptions we had when we designed the studies hold true, and we have no reason to believe they don't. We will not announce the number of patients that goes into the interim, and I simply cannot do that because we need to keep the integrity of the trial. It will be a blinded data safety monitoring committee that evaluates the data and make a recommendation to us on with regard to start or stop or continue the study. As I said, we would not have introduced this interim if we did not believe the likelihood of stopping was very good.
I would also add that we will continue to enroll patients, even when we have reached the number needed for the interim. They will of course, these patients contribute to the data that we anticipate to submit to FDA in a potential NDA. I don't know if this addresses all your questions on the GLP or other.
Yeah.
Maybe Frank, you can answer on Zegalogue, and then Jasper can follow up if you have more.
Okay, good. Yeah. Thank you, Adam Steensberg. And Jasper Ilse, thank you for the question. Let me address our confidence in Zegalogue in 2022. As I had said earlier, our focus in the Q1 of launch is on securing favorable coverage on the drug formularies of PBMs, commercial and Medicaid plans, and driving demand. There's inherent tension, if you will, at launch between access and demand in that you need demand to help payers review products earlier to be able to gain access and coverage, and you need access to drive demand. What we have learned about this drug is that demand is growing month-over-month, but it's not yet translating into a proportional level of revenue growth.
Which makes sense when you look at the level of coverage in the third quarter, which is the first quarter of launch with having approximately 16% of commercial and 10% of Medicaid lives covered. That demand has helped the market access team secure favorable access in a really stepwise manner, where it moved from 16% commercial to 10% Medicaid towards 70% coverage for commercial and 70% coverage for Medicaid, as we enter 2022. It really presents a very different condition for us that will enable us to be able to take these positive patterns and underlying demand and really begin to translate this into recognized revenue and revenue growth by pulling through these favorable wins on major plans.
Okay, thank you. Just to follow up on the GLP. Do you see any increased risk in doing this interim versus just doing the entire study? Just touching on your confidence into the interim. Thank you.
Yeah. I mean, of course, when you do an interim, you do use some of your alpha. In that sense, you could talk about increased risk. On the other hand, as I said in the beginning, if the assumptions we had when we designed the study holds true, which we have no reason to believe they don't, then we feel we have very good power to conclude the study based on the interim readout. And of course we have a number of patients in the study, which we expect will provide that knowledge. You can also say it will also, to some degree, manage a potential risk of a third spike in COVID coming this winter. We would not like to enter the next three months with that uncertainty.
Net-net, we see this as a very positive decision for the program.
Okay. Thank you for
Thank you.
Thank you for answering my questions.
Thank you very much.
Once again, if you would like to ask questions, just press star one. Sir, your next question comes from the line of Michael Novod from Nordea. Please go ahead, your line is open.
Yeah, thanks a lot. It's Michael from Nordea. So, just two clarifying questions. First to the bi-hormonal pump. Do you already have the data from the insulin-only with Beta Bionics? Or was it just other data that you were referencing in the presentation? Then secondly on CHI, what is it exactly that drives a delay? We had expected the data here in Q4, and now it's moving into this H1 of next year. And also when exactly during H1 of next year? Is it Q1 or Q2? Just to get more clarity around when we're finally gonna get some data. Thanks.
Michael, your dual hormone pump question, is it related to the insulin only? Yeah. Okay. Adam will-
It was just the insulin-only data that Beta Bionics has been running. Yep.
Yeah. I mean, it's up to Beta Bionics to release and talk about their insulin-only data. If you look at the timelines on clinicaltrials.gov, I mean, we would expect them to have data available very soon. As we have said all the time, completion of that study has been the trigger for initiation of the bi-hormonal artificial pancreas study where we use two hormones. I cannot comment further on the data, but I've no reasons to believe that things are not progressing within Beta Bionics on the insulin-only studies as planned. For CHI, you can say personally, I'm also disappointed that we have not reached the last subject for this study yet. I had expected that to happen this quarter, to be honest.
As you know, these are neonates. We know the patients that are there. We are in constant dialogue, weekly dialogue with the sites and also potential patients that could go, just, I mean, hearing about potential patients that could go into the study. Reality is this is, as a family when you get to this situation where you have a child that is diagnosed with CHI, it's a very, very dramatic situation to be in. To then participate in a clinical study where there are significant requirements to actually adhere to study protocols and so on can sometimes be difficult. Personally, I would have expected us to have reached that last randomization based on where we were a few months ago.
We're not there yet, but we feel that we are very close. It's a condition that is very difficult to manage, you can say, and that's just the patient here on the newborns.
Okay. Okay, thanks a lot.
Thank you, Michael.
Your next question comes from the line of Joseph Stringer from Needham & Company. Please go ahead. Your line is open.
Hi, everyone. Thanks for taking our questions. Apologies, we were temporarily disconnected, so apologies if I repeat a question here. First one is on the interim analysis. Just curious around the stat plan for this in terms of you know your previously guided for full results or excuse me the top line results from the full number of patients in 2022. Just curious you know why not wait if you have to spend the alpha on the interim analysis for the full results? On the interim analysis, is it analysis of each the once weekly and the twice-weekly arms, or is it some type of pooled interim analysis on both treatment arms?
I guess just lastly, if you were to see you know positive outcome on the interim in let's say Q3, what else is required for potential NDA submission from the other EASE-SBS trials 2, 3 and 4? Would you have to wait for additional data from that prior to NDA submission? Thank you.
Yeah. Thanks for the clear question. Why not wait? This was a dialogue we had with the FDA throughout the year to make sure that we would meet our goals, you can say. As I said before, we feel comfortable around the power that goes into this one. The reason that we take the decision now is that we enter now the winter season, and when we do, as you know, everybody starts to see spikes again in COVID. We don't wanna be in a situation where Q1 is going to get again cause delays to this program. I think it's a very reasonable thing for us to make that decision now.
That's at least how we have discussed this internally, and we feel very comfortable with the interim. That is the trigger where we are right now. We are not changing the way we assess the data. We are still allowed to assess each arm individually. That is the power, and we are also looking into both the primary and secondary endpoints. Again, there's no change to those aspects. If we have a decision to stop and it's positive, then we expect and plan to submit the NDA based on those data, meaning that for each SBS two and three, the two extension studies will basically make a data cut there at that time, and then those data will be part of the submission.
For each SBS 4, which is the phase 3b study, we will likely also consider to do an interim cut just to provide those data as well, but they are not in our current planning needed for the submission. If we reach a decision for a positive go, then we expect to pursue the NDA based on the data that we have available at that time.
Thank you, Joseph. Great. Thanks for taking our question.
There are no more questions over the phone lines. I will hand back to Emmanuel Dulac for closing remarks. Thank you.
Thank you. With that, we would like to thank you all for attending and for your questions. End of June, we launched our first commercial product in the U.S., Zegalogue injection for the treatment of severe hypoglycemia in patients aged six and above. Meanwhile, we are four months into the launch. We continue to progress our late-stage clinical program, our type 1 diabetes management, the rare disease programs, as well as advance our early stage pipeline. That's actually the message I want you to take away tonight. As well, we look forward to connecting on future announcements and updates. Thank you very much for your time.
This concludes our conference for today. Thank you for participating. You may now all disconnect.