Company announcement – No. 38 / 2019

Zealand Pharma completes Phase 3 clinical program for HypoPal^® rescue pen, initiates a new Phase 2 clinical proof of concept trial with dasiglucagon, and secures DKK 560 million in additional investment

2019 Q3 Interim Report

Copenhagen, November 14, 2019 – Zealand Pharma A/S (“Zealand”) (Nasdaq: ZEAL) (CVR No. 20 04 50 78), a Copenhagen-based biotechnology company focused on the discovery and development of next generation peptide medicines, today announced financial results through the third quarter of 2019.

Emmanuel Dulac, President and Chief Executive Officer at Zealand Pharma, comments:
“Zealand Pharma has made impressive progress so far this year. We clarified our strategy, advanced our late stage clinical programs and expanded our early pipeline with Zealand’s first ever acquisition. We strengthened existing partnerships and secured new ones. We reinforced our financial strength through a substantial private placement with a long-time investor, and added new talent into our team. I am proud of all our highly committed employees who support the accelerating pace of our company, enabling both recent achievements and long-term value creation. Zealand is on an exciting journey, with vast opportunities to improve patients’ lives by providing innovative peptide therapeutics.”

Financial results for the first nine months of 2019

• Revenue DKK 29.8 million / USD 4.4 million (DKK 24.9 million / USD 3.9 million in the first nine months of 2018).
• Net operating expenses DKK 431.5 million / USD 62.9 million (DKK 330.6 million / USD 51.3 million in the first nine months of 2018).
• Net operating result DKK –402.1 million / USD –58.7 million (DKK 797.5 million / USD 123.8 million in the first nine months of 2018).
• Cash including marketable securities amounted to DKK 1,543.2 million / USD 225.0 million as of September 30, 2019 (September 30, 2018: DKK 1,478.6 million / USD 229.6 million).

Business highlights for the third quarter of 2019 and subsequent events

• Primary and all key secondary endpoints achieved in pediatric Phase 3 study with dasiglucagon HypoPal^® rescue pen, thereby completing the Phase 3 program and keeping on track for submission of U.S. FDA New Drug Application in early 2020.
• Initiated a Phase 2 clinical proof of concept trial with dasiglucagon mini-doses in patients with serious meal-induced hypoglycemia following bariatric surgery.
• Acquired Encycle Therapeutics, Inc., to strategically expand Zealand’s pipeline with a unique, pre-clinical oral peptide technology to target gastrointestinal diseases.
• Boehringer Ingelheim announced decision to advance dual-acting GLP-1/glucagon agonist BI 456906 to Phase 2 clinical testing in obesity/diabetes. Initiation of the Phase 2 trial is expected in 2019 and will trigger EUR 20 million milestone payment to Zealand.
• Secured DKK 559.6 million from private placement and directed share issue to existing shareholder Van Herk Investments B.V.
• Matt Dallas joined as Senior Vice President and Chief Financial Officer in October 2019.

Financial guidance for 2019

In 2019, Zealand expects revenue from existing license agreements. However, since such revenue is uncertain in terms of amount and timing, Zealand does not guide on such revenue.

Net operating expenses in 2019 are expected to be within DKK 580-600 million, which is in line with the financial guidance provided in financial report for 2019 H1 (Q2).

Pipeline

Short bowel syndrome

Glepaglutide 

Zealand is developing treatments for gastrointestinal diseases, with current focus on short bowel syndrome (SBS). One of the leading programs in Zealand’s pipeline is glepaglutide, a long-acting GLP-2 analog being developed in an auto-injector with potential for convenient weekly administration. The Phase 3 pivotal program was initiated in late 2018, with patient enrollment expected to be completed in 2020. Due to delays in U.S. and UK investigational site activations over the summer, we now expect 50 patients randomized in 2019 and results from the trial are expected in the first half of 2021 (previously late 2020). The trial seeks to establish the efficacy and safety of once- and twice-weekly administration of glepaglutide in patients with SBS. The primary endpoint is to evaluate the reduction in weekly parenteral support volume from baseline to week 24. Orphan drug designation is granted in the U.S.

ZP7570
ZP7570 is a potential first-in-class and long-acting GLP-1R/GLP-2R dual agonist. ZP7570 is designed to improve management of SBS beyond what is achievable with mono GLP-2 treatments, and may represent a next level of innovation for helping SBS patients to further realize full potential for intestinal rehabilitation. The clinical program was started in June 2019 and, following good progress in the Phase 1a single-ascending dose, safety and tolerability trial, we now plan to initiate a Phase 1b multiple-ascending dose, safety and tolerability trial in early 2020.

Diabetes / Obesity

Dasiglucagon is Zealand’s lead drug in development to improve the treatment of metabolic diseases.  Dasiglucagon is a stable glucagon analog being developed in four distinct indications:

Dasiglucagon HypoPal^® rescue pen for severe hypoglycemia
The ready-to-use dasiglucagon rescue pen, the HypoPal^®, is designed to offer diabetes patients fast and effective treatment for severe hypoglycemia. In the pivotal and confirmatory Phase 3 trials, the primary and all key secondary endpoints were successfully achieved with a median time to blood glucose recovery of 10 minutes. Results from a pediatric Phase 3 study announced in September 2019 demonstrate that the median time to blood glucose recovery was 10 minutes for dasiglucagon also in children.

The submission of the New Drug Application (NDA) with the U.S. FDA is on track for early 2020. Build-up of U.S. commercial operations has been accelerated in the last quarter with recruitment for key leadership positions ongoing.

Dasiglucagon dual-hormone artificial pancreas for automated diabetes management
Zealand is developing a 1 ml cartridge containing 4 mg/ml dasiglucagon, intended for use in dual-hormone artificial pancreas pumps.

We are collaborating with Beta Bionics, developer of the iLet™, a pocket-sized, dual-chamber, autonomous, glycemic control system. The iLet mimics a biological pancreas by calculating and dosing insulin and/or glucagon (dasiglucagon) as needed, based on data from the diabetic person’s continuous glucose monitor. Zealand has invested USD 5 million in Beta Bionics. Top-line results from a Phase 2 trial in patients with Type 1 diabetes demonstrated that the bihormonal iLet using dasiglucagon provided superior glycemic control over the insulin-only iLet. During the bihormonal period, 90% of participants had a mean CGM glucose level of < 154 mg/dL, whereas only 50% of participants on the insulin-only iLet achieved this. Importantly these glycemic targets were achieved while time spent with blood glucose levels < 54 mg/dL was only 0.3% in the bihormonal and 0.6% in the insulin-only arm.

Zealand and Beta Bionics are in a positive dialogue with the FDA and expect to initiate the pivotal Phase 3 trial in late 2020.    

Dasiglucagon for congenital hyperinsulism (CHI)
The potential of chronic dasiglucagon infusion delivered via a pump to prevent hypoglycemia in children with CHI is being evaluated in a Phase 3 program. The aim is to reduce or eliminate the need for intensive hospital treatment, reduce the frequency of dangerous low blood glucose and need for constant feeding, and to potentially delay or eliminate the need for pancreatectomy. The U.S. FDA and the European Commission both granted orphan drug designation to dasiglucagon for the treatment of CHI.

The first Phase 3 trial with 32 CHI children aged 3 months to 12 years is ongoing and, based on strong progress in patient enrollment over the last quarter, the results are expected in 2020. The second Phase 3 trial with 12 CHI children from 7 days up to one year of age is expected to start by the end of 2019.

Dasiglucagon for post bariatric surgery hypoglycemia (NEW)
A Phase 2 dose-finding clinical proof of concept trial has been initiated in October 2019 to explore potential benefit of mini-doses of dasiglucagon in correcting serious hypoglycemic events following meal ingestions in some patients who have undergone bariatric surgery. View details of the study at https://clinicaltrials.gov/ct2/show/NCT03984370. Results of this trial are expected in 2020.

BI 456906: Long-acting GLP-1/GLU dual agonist for obesity and/or diabetes (with Boehringer Ingelheim)
The GLP-1/glucagon dual agonist activates two key gut hormone receptors simultaneously and may offer better blood sugar and weight-loss control than current single-hormone receptor agonist treatments. The lead molecule BI 456906 is targeting treatment of diabetes and obesity. Boehringer Ingelheim has announced that they will initiate a Phase 2 trial in late 2019, based on the safety, tolerability, and favorable weight loss potential in individuals with a BMI up to 40 kg/m² observed in Phase 1.  

The Phase 2 trial will be a randomized, parallel group, dose-finding study of subcutaneously administered BI 456906, compared with placebo and open-label semaglutide in 410 patients with Type 2 diabetes mellitus. The main objective of the trial is to demonstrate a dose-relationship of BI 456906 on HbA1c from baseline to 16 weeks relative to placebo. Secondary objectives are to assess the effect of BI 456906 on change in body weight. An open-label comparator (semaglutide) will allow for comparison of the effects against a pure GLP-1R agonist. Additional details about the study are available at https://clinicaltrials.gov/ct2/show/NCT04153929.

Boehringer Ingelheim is funding all research, development and commercialization activities related to the treatment. Zealand is eligible to receive up to EUR 386 million in milestone payments (of which EUR 365 million is outstanding) and high-single to low-double digit royalties on global sales. Zealand will receive a milestone payment of EUR 20 million related to the start of Phase 2.

Long-acting amylin analog for obesity and/or diabetes (with Boehringer Ingelheim)
The current once-weekly amylin analog lead molecule for treatment of diabetes/obesity is anticipated to enter Phase 1 clinical testing in 2020. In pre-clinical studies, Zealand and Boehringer Ingelheim observed that the novel, long-acting amylin analog may prevent the development of obesity in pre-clinical models, suggesting its potential use in treating obesity and obesity-related comorbidities.

Boehringer Ingelheim is funding all research, development and commercialization activities related to the treatment. Zealand is eligible to receive up to EUR 295 million in milestone payments (of which EUR 283 million is outstanding) and mid-single to low-double digit royalties on global sales.

Pre-Clinical Programs

Complement inhibitors (with Alexion Pharmaceuticals)
Zealand and Alexion Pharmaceuticals announced in March that they will collaborate on the discovery and development of novel peptide therapies for complement-mediated diseases. Under the terms of the agreement, Alexion and Zealand entered into an exclusive collaboration for the discovery and development of subcutaneously delivered peptide therapies directed to up to four complement pathway targets. The lead program is a long-acting inhibitor of Complement C3 which has the potential to treat a broad range of complement mediated diseases. Zealand will lead the joint discovery and research efforts through the preclinical stage, and Alexion will lead development efforts beginning with IND filing and Phase 1 studies.

For the lead target, Zealand is eligible to receive up to USD 610 million in development and sales milestone payments, plus royalties on global sales in the high single to low double digits.

ZP10000: Integrin alpha-4-beta-7 Inhibitor
In October 2019, Zealand acquired Encycle Therapeutics, Inc., a private Toronto-based biotech company exploiting a unique platform technology that enables the rapid synthesis of macrocyclic peptides exhibiting enhanced drug-like properties. The acquisition is centered on a pre-clinical lead asset ZP10000 (formerly ET3764) that is being developed as an orally-delivered peptide drug to target integrin alpha-4-beta-7, which is involved in the pathogenesis of inflammatory bowel disease (IBD). The target’s mode of action has been clinically validated in IBD by vedolizumab, an approved, infusion-only alpha-4-beta-7 integrin inhibitor. Zealand also gained access to Encycle’s screening library of approximately 5,000 unique peptide-like macrocycles that could provide additional targets for research.

Zealand acquired all outstanding shares in Encycle Therapeutics Inc. and all its intellectual property, including all rights to develop and commercialize the lead asset. Zealand did not acquire any infrastructure or personnel with this transaction. The total future consideration for the acquisition could potentially reach USD 80 million in one-time contingent value rights (“earn-outs”), of which USD 10 million in earn-outs could be payable up to the successful completion of a Phase 2 study. All earn-outs are payable in cash and/or Zealand equity at Zealand’s discretion, are linked to the lead asset only, and contingent on certain future successful development, regulatory, and commercial-related milestones. There is also a potential mid-single digit royalty on global net sales from the lead asset.

Ion Channel Blockers
We have identified novel peptides that are potent and selective blockers of ion channels that may play roles in several inflammatory diseases. Further optimization is required and we expect these programs to contribute to the clinical pipeline in the future.

GIP analogs
Expanding on our GLP-1 experience, we have discovered potent selective analogs of gastric inhibitory peptide (GIP) and extended this to single peptides that have dual activity at both GIP and GLP-1 receptors as well as single peptides with triple activity at GIP, GLP-1 and glucagon receptors. These peptides have therapeutic potential to treat metabolic diseases such as type 2 diabetes and obesity with early clinical validation of GIP/GLP-1 dual agonist provided by a Phase 2 study reported in 2018 (Frias et al, The Lancet 392:2180-2193).

Conference call today at 4:00 pm CET / 10:00 am ET

Zealand’s Management will host a conference call today at 4:00 pm CET to present results through the first nine months of 2019. Participating in the call will be Chief Executive Officer Emmanuel Dulac, Chief Financial Officer Matt Dallas, and Chief Medical and Development Officer Adam Steensberg. The presentation will be followed by a Q&A session.

The conference call will be conducted in English, and the dial-in numbers are:
Denmark:                             +45 32 72 80 42
United Kingdom:                  +44 (0) 844 571 8892
United States:                      +1 631 510 7495
France, Paris                       +33 (0) 176700794
Netherlands, Amsterdam     +31 (0) 207143545

Passcode                             3379579

A live audio webcast of the call, including an accompanying slide presentation, will be available via the following link, https://edge.media-server.com/mmc/p/yhu6rmnz, also accessible from the Investor section of Zealand’s website (www.zealandpharma.com). Participants are advised to register for the webcast approximately 10 minutes before the start.

A recording of the event will be available on the Investor section of Zealand’s website following the call.

Upcoming events

Zealand Pharma plans to publish results for the fourth quarter and full year 2019 on March 12, 2020.

The Annual General Meeting 2020 is planned for April 2, 2020, subject to the appropriate official notification.

For further information, please contact:

Zealand Pharma Investor Relations
+45 50 60 38 00
investors@zealandpharma.com

Matt Dallas, Senior Vice President and Chief Financial Officer
mdl@zealandpharma.com

Lani Pollworth Morvan, Investor Relations and Communication
lpm@zealandpharma.com 

NOTE: DKK/USD Exchange rates used: September 30, 2019 = 6.8566 and September 30, 2018 = 6.4413

About Zealand Pharma A/S
Zealand Pharma A/S (Nasdaq Copenhagen and New York: ZEAL) ("Zealand") is a biotechnology company focused on the discovery and development of innovative peptide-based medicines. More than 10 drug candidates invented by Zealand have advanced into clinical development, of which two have reached the market. Zealand’s current pipeline of internal product candidates focus on specialty gastrointestinal and metabolic diseases. Zealand’s portfolio also includes two clinical license collaborations with Boehringer Ingelheim and pre-clinical license collaboration with Alexion Pharmaceuticals.

Zealand is based in Copenhagen (Søborg), Denmark. For further information about the Company's business and activities, please visit www.zealandpharma.com or follow Zealand on LinkedIn or Twitter @ZealandPharma.

Safe Harbor/Forward-Looking Statements
The above information contains forward-looking statements that provide our expectations or forecasts of future events such as new product introductions, clinical development activities and anticipated results, product approvals and financial performance. Such forward-looking statements are subject to risks, uncertainties and inaccurate assumptions. This may cause actual results to differ materially from expectations and it may cause any or all of our forward-looking statements here or in other publications to be wrong. Factors that may affect future results include interest rate and currency exchange rate fluctuations, delay or failure of clinical trials and other development activities, production problems, unexpected contract breaches or terminations, government-mandated or market-driven price decreases for Zealand's products, introduction of competing products, Zealand's ability to successfully market both new and existing products, exposure to product liability and other lawsuits, changes in reimbursement rules and governmental laws and related interpretation thereof, and unexpected growth in costs and expenses.

Certain assumptions made by Zealand are required by Danish Securities Law for full disclosure of material corporate information. Some assumptions, including assumptions relating to sales associated with a product that is prescribed for unapproved uses, are made taking into account past performances of other similar drugs for similar disease states or past performance of the same drug in other regions where the product is currently marketed. It is important to note that although physicians may, as part of their freedom to practice medicine in the United States, prescribe approved drugs for any use they deem appropriate, including unapproved uses, at Zealand, promotion of unapproved uses is strictly prohibited.