With the most successful product to emerge from its research labs to date, Lyxumia, about to be filed with US and European medicine regulators, Zealand Pharma is approaching a pivotal period. The type II diabetes drug is viewed as a promising if slightly late entrant to the GLP-1 agonist class; having Sanofi as a partner means the product will not be wanting for marketing muscle.
Commercial success will mean lucrative royalty and milestone payments for Zealand, which the company intends to re-invest in R&D, to generate further products for partnering. What the Danish firm will not do at the moment, says chief executive David Solomon, is try to take a product to market itself. “We see no value in trying to do more than what we do well,” he tells EP Vantage.
The fruits of Zealand’s R&D efforts were harvested once again earlier this year, in a deal signed with Boehringer Ingelheim over its glucagon/GLP-1 dual agonists. Boehringer bought global rights to the programme, which includes lead candidate ZP2929, which is being readied to move into the clinic. Zealand expects to recognise €20m in milestones this year; in total €376m of milestones are possible, plus royalties on future sales.
Based on the pharmacology of a gut peptide hormone, oxyntomodulin, ZP2929 acts on both glucagon and GLP-1 receptors. By improving glucose tolerance and inducing weight loss, the company believes the compound holds potential for patients with obesity and type II diabetes.
GLP-1 agonists on or near the market are known to induce weight loss. However this tends to tail off after nine months or so. The companies hope these dual agonists will show sustained weight loss although are understandably keen to distance this project from the troubled obesity space.
“We don’t want to compare this drug to the skeletons of obesity drug failures. It is not an obesity drug primarily. In our view it is a drug for use in patients with type II patients who happen to be overweight,” Dr Solomon says.
The Boehringer deal was exactly the sort of transaction Dr Solomon says Zealand wants to strike more of - broad, early stage collaborations with the potential for healthy and ongoing milestones.
“Our aspiration is to develop into a strong R&D agent of peptide drugs. Zealand is a deal making company – we don’t aspire to build sales and marketing,” he says.
“Our guidance is to do phase I and IIa, to maximise return and minimise the risk. But we will start discussions with credible partners as soon as we put a product in the pipeline.”
Currently, that pipeline consists of two unpartnered clinical-stage assets – ZP1848 for inflammatory bowel disease and danegaptide for atrial fibrillation; numerous projects are ongoing in early pre-clinical stages.
Still, further deals are not what Zealand followers are really waiting for. Before the end of the year another five pivotal trials of Lyxumia, generically called lixisenatide, will report, completing the large Sanofi-run GetGoal programme of nine phase III trials, encompassing 4,500 patients.
The candidate is likely to be the second once-daily GLP-1 to reach the market behind Novo Nordisk’s Victoza, which generated an impressive $413m last year, its first full year on the market. Global Victoza sales are expected to reach $2.29bn by 2016, consensus data from EvaluatePharma show. Analysts have pencilled in sales of $361m by 2016 for Lyxumia, but these figures could easily rise once the full suite of phase III data is revealed, and safety and efficacy confirmed.
Other important data on the horizon will come from a phase IIb head-to-head trial of Victoza and Lyxumia, looking specifically at plasma glucose straight after meals. Sanofi is hoping to show its candidate brings blood sugar down to normal levels faster, and the study could provide some important ammunition to differentiate the two agents.
Still, Dr Solomon is sanguine about what is likely to be a hard fought commercial battle.
“Like any extraordinarily large target market with growing prevalence, there’s room for more than one once-daily. Novo and Sanofi have very different commercial strengths, they are both very good GLP-1s, and patients are very heterogeneous. There will be a role for each of these GLP-1s and their different attributes,” he believes.
Should all go to plan, Zealand is in for some healthy payments from Sanofi as Lyxumia nears the market - of milestones still payable $235m are outstanding. Filing in the EU is due later this year and early next year in the US, so if the regulatory path is smooth and launches happen towards the end of 2012, low double digit royalties on sales will also start rolling Zealand’s way.
Holding even greater potential meanwhile is a combination product Sanofi is developing, of Lyxumia plus Lantus, its $5bn fast-acting insulin. With increasing numbers of type II diabetics needing insulin, many of whom are overweight, the weight gain side effect of insulin is a problem.
“If you can use a drug to lose weight and add better glycemic control after meals, you have a double win,” Dr Solomon says.
With Lantus losing patent protection towards the end of 2014, Sanofi wants to get this product on the market as soon as possible, and confirmation that phase III trials have started are another important event on the horizon for Zealand – also likely to trigger a milestone payment.
The appearance of Zealand Pharma on the stock market seven months ago coincided with the emergence of the first data from the GetGoal programme. Despite encouraging progress so far, the share price has not followed suit. After floating at Dkr86, the shares were trading today at Dkr70, valuing the company at Dkr1.60bn ($310m).
Lack of freely trading shares has not helped – 80% of the company’s stock remains locked up in the hands of long term venture capital and other investors. This situation unwinds in November, when they are free to sell.
“The end of the lock up should be more than compensated by the newsflow, which is denser than any other biotech in Europe at the moment,” says Sebastien Malafosse, analyst at Bryan Garnier, who recommends investors buy the shares.
If the sale is properly managed a sudden increase in liquidity should not cause the shares to fall further, he believes.
However it is highly likely that many of the venture capital firms who have been supporting Zealand for many years now will be keen to cash in. A big and sudden increase in liquidity will undoubtedly have an impact on Zealand’s stock price. Whether it will be a positive impact will depend a lot on the news and data emerging over the coming months.