Q1 2022 Zealand Pharma A/S Earnings Call
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Ladies and gentlemen, thank you for standing by and Blizzcon towards you and I've found my results for Q1, 2022 conference calls.
At this time, all participants are released and hold them out.
So to speak of present, they've shown there would be a question and answer session.
I would now like turn the conference over to speak of today My dialogue with.
Boston as Chief Financial Officer. Please go ahead.
Thank you operator, welcome and thank you for joining us today to discuss Zealand's first quarter results for 2022.
I'm, Matt Dallas, Senior Vice President and Chief Financial Officer Zealand with me today is <unk>, President and Chief Executive Officer, Adam Sainsbury, you can find the related company announcement and additional supporting information on our website at Zealand pharma dotcom.
I'd 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 more complete picture of risks and other factors with that I will turn the call over to president and CEO Adam Sainsbury.
Thank you, Matt and thanks to everyone for joining today.
Slide three.
As you all know at the end of the first quarter. Following a thorough review of our business operations, we announced an organizational restructuring and receipt and the strategic refocusing to consistency that into a more cost effective company focused on our core competence is the research and development of innovative peptide therapeutics addressing areas.
High unmet medical need.
We believe.
This decision supports our mission to change the lives of patients with next generation peptide therapeutics.
With a new commercial partnership strategy and a more streamlined organization, we are financially well positioned to achieve our goals in the next few years, which includes the potential for three more commercialized products and are highly valued product pipeline, including programs targeting diabetes obesity chronic inflammation.
Leveraging our strong and innovative peptide platform.
Please turn to slide four.
Yes.
Okay.
One of my top priorities since taking over as the CEO has been to execute on the announced restructuring, including securing a strong financial runway that will take us beyond near term clinical milestones.
The cost savings associated with the restructuring and the amendment to our financing agreement with Oberland capital has delivered financial stability, which enable us to deliver on our R&D focus.
As Matt will discuss later in greater detail.
We expect to have completed the announced downscaling in the U S by the end of the third quarter.
As announced today.
Matt will be leaving <unk> to pursue new opportunities by the end of August and we have initiated a search for a new CFO for the company.
John Stephens in 2019 and paid an important part in building <unk> commercial operations in the U S and it's created a very strong finance organization for the company.
Personally I've really enjoyed working with Matt and I look forward to work with him until the end of his tenure <unk> Zealand.
Securing strong commercial partnerships is a fundamental element to our new strategy. Our business development team has been very busy engaging potential partners for veeco and <unk> and I look forward to delivering on these negotiations in the coming months.
Lastly, we look forward to top line results for our two but two of our phase III programs, which of course, depending on the data could lead to NDA filings.
Please turn to slide five.
We continue to make progress on our clinical pipeline all programs, our pace of innovation coming from our peptide platform, which is the foundation of our refocused strategy.
Our excellence in understanding pit tonnes, an hour both know how and how to create innovative peptide therapeutics will be at the center when considering future strategic partnerships.
Our clinical programs they target type one diabetes rare diseases obesity, and we havent late preclinical assets targeting chronic inflammation.
We have strong momentum across the pipeline and a number of upcoming significant milestones this year.
Importantly, we have three major clinical data readouts approaching with pre pivotal phase III results, both locally packaged side in STS and basically go about in CSI.
Of which I will expand upon in a moment and phase II data for <unk> 45 to 69 or <unk> in type two diabetes.
This candidate is patented ingelheim and is the lead program in our BDC portfolio.
Which also includes an eminent analogue in phase one development and keep analogs in late preclinical development.
Applying our peptide knowhow and cutting edge platform to create a purely to tegra PCT is an important part of our repo with strategy and I look forward to sharing updates from these programs with you later in the year.
Turning to slide six.
As I mentioned earlier in the coming weeks, we expect topline results from our phase <unk> study evaluating <unk> for the treatment of congenital hyperinsulinism.
In neonates and intense.
CSI is an ultra rare pediatric disease characterized by recurring and persistent hyperglycemia.
Our randomized placebo controlled study of 12 children with Chr ranging in age from seven to eight to 12 months.
We will measure a primary endpoint of reduced need for intravenous glucose.
We believe <unk> has the potential to be an important new treatment option for children with THR, where there is a significant unmet medical need and we look forward to sharing the results from this phase III study soon.
With positive data, we plan to pursue an NDA submission, which will also include data from the phase III trial in older children with Chr.
With the FDA.
Please turn to slide seven.
Let me now turn to another product in our pipeline. So that we look forward to share phase III data later this year.
<unk>, our long acting <unk>, two analog being investigated for the potential treatment of short bowel syndrome Sds.
We believe there is significant opportunity to improve the care for these patients and also believe that <unk> holds significant potential as a next generation <unk> and other.
The one.
Speaker profiles.
Delivered ultra injector provides a clear.
And differentiation.
The upcoming phase III data, we'll provide more insights into the clinical profile of the drug.
And with positive data, we will pursue an NDA filing with the FDA.
Please turn to slide eight.
Yes.
Our <unk> data readout for <unk> one.
<unk> remains on track for data in the third quarter.
Also later this year, we expect to see the data from <unk>, two and three as you can see on this picture.
And we look very much forward sharing the data with you later in the year Pizza.
<unk> turn to slide nine.
File additional late stage basically upon programs our partner beta bionics initiated the phase III program for basically organ in the body hormonal artificial pancreas pump for the management of type one diabetes in late 2021, and we expect that the first dosing of patients will be dosed later in this year.
EBIT by Onyx recently presented results from the incident only bionic pancreas pivotal study at the International conference of advanced technologies and treatments for diabetes.
Achieving key primary and secondary endpoints demonstrating improved outcomes over standard of care in people living with type one diabetes.
While this trend did not involve walk on to demonstrate encouraging potential of the bionic pancreas pump for the management of type one diabetes and we look forward to advancing our phase III program.
In summary, we have a strong momentum across our robust preclinical pipeline.
And clinical pipeline and the refocused strategy prioritizing <unk> announced at the end of the first quarter, we feel well positioned to continue this progress.
I'll now turn our.
Our CFO , Matt Dallas to walk through our quarterly financials, and the ways in which our organizational restructuring have improved our operational efficiency. Thanks, Kevin This last quarter, we not only outlines our refocused strategy and initiate our organizational restructuring and took steps to strengthen our financial future ensuring that we can continue to discover and develop innovative.
A new peptide therapeutics in 2022 and beyond slide 10 illustrates the immediate and long term impact of the organizational restructuring.
So meeting in operation operating expense reduction from our 2021 level of $1 25 billion Danish kroner of $200 million. In 2022. This is primary related to a 90% reduction of the workforce of our U S subsidiary.
Anticipate that the long term impact of the restructuring will result in a 400 million Danish kroner annual reduction in operating expenses beginning in 2023.
In addition on May 10th we completed an amendment to our note purchase agreement with Oberland Capital. This amendment was completed as both of our change in strategy and helps position the company financially to execute on this strategy with the Amendment Zealand has paid down $50 million USD of the original $100 million principal balance in there.
We're up to $75 million additional capital available to Zealand. Following the completion of specific events. The amendment removes any restrictions on use of cash and extends the company's cash runway into 2023 on.
On Slide 11, you will see Zealand's income statement for the first quarter of 2022 and how it compares to 2021. The total revenues for the first quarter was $50 1 million Danish kroner or $2 3 million U S dollars.
This was driven by net Ziegler product revenue partnership revenue from our collection of Alexia <unk>.
Collaboration with Alexia.
Net operating results for the quarter was a loss of 300 to 302 million Danish kroner or $45 1 million USD sales and marketing costs, mainly relate to the commercial infrastructure in the U S for Ziegler R&D costs, mainly related to our late stage clinical programs.
And as a result of our announced restructuring all gross gross margin and operating expenses related to the V go wearable insulin delivery device.
For as discontinued operations.
Total discontinued operations for the first quarter of 2022 were loss of $41 8 million Danish kroner were $6 $2 million you must be.
Slide 12 illustrates our financial position and ability to support our growing business through continued investments net operating expenses for the quarter was $314 2 million Danish kroner or $46 9 million USD included in net operating expenses for the first quarter of 2020 to $75 8 million Danish kroner related to our announced restructuring cash.
On hand at the end of Q1, 2022 was $1 1 billion Danish kroner, or 167 6 million USD.
Turning to our financial guidance on slide 13.
On March 30th Zealand updated the guidance for net product revenue from the sales of commercial products to be 115 million Danish kroner, plus or minus 10%. This is a decrease of $120 million of English color from the guidance issued on March 10.
Combined sales of <unk> in Q1 was $39 2 million Danish kroner and were in line with the updated guidance.
Following the company's announced intent to sell Vigo net product, where the device is to be accounted for as discontinued operations as such net product revenue reported in the Q1 earnings release only reflects sales of <unk>, which were $4 1 million Danish kroner with full year net product revenue projected to be 19 million Danish kroner, excluding any potential partnerships realized.
These agreements.
In 2020 to Zealand pharma expects revenue from existing license agreements. However, since such revenue is uncertain in terms of size and timing.
Does not provide does not intend to provide guidance on such revenue net operating expenses for 2022 are expected to be 1 billion Danish kroner, plus or minus 10%. This is unchanged from our guidance issued on March 30th and is a decrease of 200 million Danish kroner from the guidance issued on March 10th.
With that I will now turn it back to Adam.
Thanks, Mike.
Please join me on slide 14.
We expect 2022 to be a catalyst rich year, and we look forward to sharing data from our phase III studies evaluating <unk> in <unk> and get back to the side and Sps and long with updates from our ongoing phase III study of the designate one by homeowner pancreas pump.
And progress on our beauty portfolio.
<unk>, our commercial and late stage assets will provide us with the financial strength to focus on the continuous advancement of our early stage pipeline, while leveraging our competitive platform for the discovery and development of innovative new pets at maturity in 2022 and beyond.
This will allow us to take full advantage of our well documented strength and research and development and enable us to deliver on our mission to ensure our mission.
<unk> leads the people who need them the most.
Thank you all I'll now turn it over to the operator for questions.
Operator.
Ladies and gentlemen, we will now begin the question and answer session to ask a question.
And one on your telephone and wait for your name to be announced.
The first question from Thomas <unk> from Danske Bank. Please go ahead.
Yes. Thank you very much so much power from from density So three questions from my side. So so just king all with the with this financing agreement with <unk>.
So you are paying.
Pardon me of $10 million U S to remove the decree.
Liquidity covenant.
So can you maybe just help me understand why you had this.
Construct in the first place. So is there anything that has changed in regards to your original expectations of when you were supposed to reach this level would that be at Abbotts data states originality, because it just seems a little bit strange when you know that the <unk>.
Data would come out in Q3, and then just to understand.
The updated agreement here, so so the cash runway into 2020 free.
I'm, just wondering is that including the $75 million that you have additionally from oberland.
And also in that 75, you have $50 million.
Sort of a dependency on M&A.
Or how would you actually be able to get access to dose additional $15 billion without any M&A. So just help me understand this item here.
And then.
Second question just on your.
The pipeline and new strategy. So so assuming that you have positive readout here very near term on CSI. So so firstly would you still advanced Sip.
Submit all the regulatory stuff.
And then aimed to out license afterwards, and how to should we think about timing in regards to two of course, the other trials that youre doing with basically will go intermediate dose and also the hormone pump. So so anything here that you you want to wait any catalyst that you want to await aside of course from the very upcoming in the near term.
On the CSI.
And then lastly, just on <unk>.
Well this thing.
I guess you spent some somebody here maybe five to 10 million made in the U S on annual basis on the U S listing and basically that silver volume. So so why why haven't you also could see that to <unk> in connection with the with the whole restructuring to save to.
Okay. Thank you.
Thanks, Thomas maybe I guess start by addressing the pipeline question and then Matt He will address the Oberland Christian and also the dual listing.
You are correct that we expect to see that.
A phase III readout from the <unk> study within the coming weeks and I can also confirm that if its positive then we expect to submit an NDA late in the year.
<unk> the data from the first study that also means of course that we can see our team CSC and are completely engaged in writing that NDA already now in the anticipation of and hope with the hope that we will see positive data.
With the new strategy, we would still anticipate to submit the NDA and then in parallel seek a commercial partner.
Copeland.
Matt.
Yes, Tom I'll Skip some of your financial questions, let's start with the cash runway the cash runway.
Into 2023, that's just what we have in the bank based on our current operating plan and does not account for any additional cash coming into this company. So it doesn't factor in any new business development.
Or any additional funding from overland and that Oberlin additional funding that $75 million, it's 50 million tied to business development.
When a half tied to <unk> positive data and 12 in a habit of mutual option alright.
Alright.
And then the re read the amendment.
On the <unk> agreement that was driven by the fact that when we entered this deal we were a commercially focused company.
As such that deal had components in it that were tied to net sales.
Targets by the company that would release a liquidity covenant once we made the change and announced a restructuring it would have been impossible for us to achieve those targets because we were nowhere and youre going to be the commercial entity for our programs. So with that we did.
The reason why this amendment and it removes that liquidity covenant, we prepaid a portion of it down but it frees up the remaining balance.
Without any commercial ties.
On the dual listing what I'd say there is youre absolutely right in the cost behind it with the restructuring and also kind of as our <unk>.
Normal course of doing business, we're always evaluating.
The cost drivers in this company and with that the dual listing is always something that is under our approach and we will look at as we move forward is to not only that but what everything else and how we operate with the best and most logical way for us to be spending.
Proceeds.
Alright, great. Thank you very much for the color.
Thank you for your question.
Next question from Joseph <unk> from Needham. Please go ahead.
Hi, Thanks for taking our question ours is on the phase III SBS readout for <unk>.
<unk> tide can you comment on.
Potential impact of.
NIST injections due to due to COVID-19.
And have you do you have a stock plan or sort of pre specified rules for handling missed injections and.
Have you.
<unk> discussed just been discussed annual reviewed by regulators and thanks for taking my question.
Thanks.
The question correct.
It was relating to the risks of missed injections of <unk> in this study so compliance to taking the drug.
And if we have statistics to account for that.
It's not something we have observed and to be honest, it's not something you can say, we would expect would increase with the COVID-19 situation. We have had a key focus here throughout COVID-19 to secure drug supply for the patients and.
That's not been situations, where they have not been able to supply that product to the patient so.
We do not see any issues here.
So is that correctly understood your question Matt.
I don't think we have a specific issue.
Okay, great. Thank you for taking our question.
Yes.
Thank you for your question. The next question from Lucy Codrington from Jefferies. Please go ahead.
Hi, there thanks for taking my questions just to see.
With me.
Artificial pancreas, and just wanted to get more color on your.
It's about how the insulin only data stacks up versus your expectations and whether you see any implications from days you'll plan to trials.
And then related to that just seems to be the delay in starting the dosing of that trial, particularly given we are expecting a significant portion of the patients from the incident antitumor days, we're into the trial.
And then just double check.
And revised.
And are there any changes to the royalty obligations at that.
Thank you.
Thank you I'll take the first question and then Matt will address the overland.
So.
Yes.
As many of you probably saw and as he also chassis on the calls and beta bionics a.
A few weeks ago at the phase III data from the pivotal study in the insulin only at ATB and David.
The way we see these days is that they are very confirming the confirming our ambition for this product in the sense that they are very much in line with what we could have expected based on the phase III data.
Basically the only system so of course in our minds. It also speaks well for what we can expect for the final model.
As you May remember, we did a head to head study a small phase II study a few years ago. So it really is for US it's extremely encouraging data when you think about what the dual hormone.
I'll, let Ken how that could perform compared to two existing systems. So we ability reassured about the potential I would say is seeing these data and perhaps even more importantly, also the fact that they've looked at it.
It's now being submitted for regulatory approval with the FDA. So that also confirms you can see.
The technical conquest that beta bionics, I'm, making with the device.
We would have like to see the first ADP dose yet.
It has been slight delays in that as you alluded to we are happy with what we see right now.
Beta bionics wanted to make sure that the device that we assigned in the phase III Dynamo study is complete.
Complete is similar to the commercial device that had been submitted to the FDA.
We agree to that strategy.
But that introduce a little bit of a debate with regard to dosing the first.
Patients who participated in the insulin only study could of course still be eligible to enroll into the final mile and studying so.
We are comfortable that of course would have like to see it.
Having a little bit before.
And Lucy on the royalty obligation because we reduced the principal down from $150 million. We've got prepayment the royalty obligation was subsequently reduced by house.
Great. Thanks very much.
Thank you for your question.
And back to the conference over to.
Mr. <unk>. Please go ahead.
Thank you so with that we would like to thank you all for attending and for your questions. We look forward to connecting with you at future announcements and updates have a great day.
Okay.
That does conclude the conference for today. Thank you for participating you may all disconnect.
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