Memorandum

Zealand 4Q13 – Lyxumia withdrawn in Germany – March 20, 2014

Executive Highlights

  • Sanofi will withdraw its GLP-1 agonist Lyxumia (lixisenatide) from the German market effective April 1, following a neutral government comparative efficacy assessment.
  • In response, Sanofi has begun an arbitration process, and is designing additional trials to prove Lyxumia’s benefit.

Earlier today, Zealand Pharma published its 4Q13 and full-year 2013 report. A major diabetes news item was the announcement that Sanofi is withdrawing the GLP-1 agonist Lyxumia (lixisenatide) from the market in Germany, effective April 1. The decision is not an April Fools’ joke; rather, it follows after the completion of price discussion based on a comparative efficacy ruling by the German government that found “no additional benefit” with Lyxumia over current standard of care such as metformin and SFUs (other diabetes drugs, including AZ’s Forxiga, Novartis’ Galvus, and BI/Lilly’s Tradjenta have run into similar problems in Germany). According to Zealand’s report, Sanofi has started an arbitration process, and is working on additional clinical studies to provide German authorities with additional evidence of Lyxumia’s benefit. As the annual report made clear, however, the company and its partners have seen successes in a number of other areas. The company provided an update on the ELIXA CVOT for Lyxumia (results expected in 1H15; a US resubmission should follow), phase 3 testing of the Lixi/Lan fixed-ratio combination of Sanofi’s Lyxumia and Lantus (which is poised to be the first GLP-1/basal insulin on the US market), Zealand and BI’s shared glucagon/GLP-1 program, and Zealand’s novel glucagon analog for liquid formulation.

Our top three highlights from the update are included below.

 

TOP Three HIGHLIGHTS

  1. Sanofi will be withdrawing its GLP-1 agonist Lyxumia (lixisenatide) in Germany as of April 1, 2014. This decision follows the conclusion of pricing negotiations with German authorities. Sanofi has already begun the arbitration process, and is also working on additional clinical studies to provide additional evidence of Lyxumia’s benefit. We also imagine that currently ongoing studies such as GetGoal Duo II could also provide more valuable data. We look forward to learning how long any additional studies might take, which would inform a possible timeline on when Lyxumia could return to the market, should a subsequent German review prove more positive.
    • For background: Sanofi has been in negotiations with German authorities for the past few months following a comparative efficacy analysis conducted by the Germany Institute for Quality and Efficiency in Health Care (IQWiG), and a subsequent ruling from the German Federal Joint Committee (G-BA) that the drug has no additional benefit over the current standard of therapy. We first reported this in our Zealand 2Q13 Report. A “no additional benefit” ruling effectively relegates a drug to generic-level pricing.
    • This announcement is part of a long saga of German reimbursement challenges that diabetes drug manufacturers have faced in recent years. AZ withdrew it’s SGLT-2 inhibitor Forxiga (dapagliflozin) in Germany following a similar G-BA ruling (See our AZ 4Q13 Report), Novartis is considering withdrawing its DPP-4 inhibitor Galvus (vildagliptin), and BI/Lilly did not launch their DPP-4 inhibitor Tradjenta (linagliptin) in Germany. Clearly this process rewards first-to-market compounds far more than in other geographies.
    • The announcement also reviewed the ongoing rollout and continued clinical testing of Lyxumia. Sanofi withdrew its submission for Lyxumia with the FDA in 2013 to avoid interim data disclosure from ELIXA, the drug’s CVOT. ELIXA is expected to deliver results in 1H15 (a slight narrowing of previous guidance for 2015), enabling a resubmission in 2015. Lyxumia has been approved in over 40 countries, with launches ongoing in Europe, Japan, Mexico, and other markets. During the full-year 2013, Zealand received Lyxumia royalties of DKK 6.6 million ($1.2 million). At IDF, Dr. Bo Ahrén presented data demonstrating that Lyxumia’s effect is comparable when administered before breakfast or the main meal of the day, supporting flexible administration.  
  2. We learned today that LixiLan, the fixed-dose combination of Lyxumia and Sanofi’s best-selling basal insulin Lantus (insulin glargine), is poised to potentially be the first GLP-1/insulin combination on the market in the US. Phase 3 testing is expected to end in 2H15, enabling possible regulatory submissions starting at the end of 2015. Zealand and Sanofi had originally pursued a fix/flex device (which would have allowed for variable dosing for Lantus with a fixed dose of Lyxumia), but switched to a fixed-ratio device similar to that pursued by Novo Nordisk for its GLP-1/basal insulin combination IDegLira (liraglutide/insulin degludec). Novo Nordisk’s therapy was initially poised to be first-to-market, but the FDA’s issuance of a CRL for Tresiba (insulin degludec) pushed back the submission for IDegLira until 2016 at the earliest (see our Novo Nordisk 3Q13 Report). Phase 3 testing is currently underway for LixiLan. The phase 3 program currently includes two trials: LixiLan-O (n=1,125 patients with inadequate control on oral agents) and LixiLan-L (n=700 patients not at goal on basal insulin); both are listed as recruiting.
  3. The company’s full 2013 report provided updates on Zealand’s range of partnerships and projects in diabetes, which appear to be progressing well. In addition to the continued clinical testing of Lyxumia and LixiLan, the company has partnerships with BI (to develop GLP-1/glucagon dual agonists, see below) and with Lilly to develop novel agents for diabetes and obesity. 
  • As we reported in January, Zealand Pharma announced a series of changes in its GLP-1/glucagon dual agonist development program with Boehringer Ingelheim (BI). The press release indicates that the companies "differ" in their views towards the current lead candidate ZP2929, which is currently in phase 1. As a result, Zealand has assumed full responsibility for (and control over) the candidate's continued phase 1 testing, while a new lead compound will be selected for the company's collaboration with BI. The companies have not released information about any other GLP-1/glucagon candidates, but to our knowledge they are investigating different GLP-1/glucagon combinations with varying potencies at each receptor, as well as dual agonists formulated for once-weekly dosing.
  • The financial terms of the collaboration (signed in June 2011) remain unchanged: Zealand is entitled to development-based milestone payments, as well as tiered royalties from the sale of products developed through the collaboration. This change of plans will put the costs of ZP2929's phase 1 testing with Zealand (until now, BI has financed all development costs) and will push back the timeline for milestone payments to Zealand, as the companies will need time to select a new candidate. We wonder what the basis is for the differing views between Zealand and BI on ZP2929; we presume that BI was not enamored with early data on the agent if it has decided to keep working on the mechanism but to drop this specific compound from the collaboration but we have no specific information on this. In preclinical studies, GLP-1/glucagon dual agonism has demonstrated similar glycemic control to GLP-1 agonists and even more impressive weight loss. For more information on Zealand/BI's collaboration, read our Zealand 3Q13 Report. 
  • As a reminder, Zealand is also working on a liquid-soluble glucagon receptor agonist (ZP-GA-1), which could be used in a rescue pen for the treatment of hypoglycemia. See page 10 of our ADA 2013 Novel Therapies Report for data on that candidate. 

 

Questions and Answers

Q: Could you add some flavor on Germany and Lyxumia? We heard a couple of days ago that Lyxumia was pulled from the German market. Are there any updates from Sanofi on their plans to meet requirements with the G-BA or start any additional studies here?

A: I would say per your note this is not material to Zealand and it’s really, as many know, a political problem with Germany. It was faced earliest by Tradjenta, our partner BI and faced most recently by Novo Nordisk and by others as well. We know there is a lot of activity in Germany to address this so that German citizens can have access to the most modern medicines. It doesn’t mean that our partner will necessarily will begin further studies; that is more for Sanofi to address so I won’t comment on that at this point.

Q: For Lyxumia, could you update us on how much sales came from the German market? To put things into perspective, there was some enthusiasm last year once Sanofi announced that they reached 8% market share.

A: Although we received early news on volume in Germany from our partners in Germany, we received no specific numbers on revenue so I don’t have anything to share. I can share with you the observation that the GLP-1 market in Germany is a small market. It happens to be a medicine that German practitioners aren’t as keen to prescribe as they are in countries like France where the GLP-1 market is much bigger.

A: The percentage market share numbers we gave were based on volume and again, the GLP-1 market in Germany is small. We haven’t received any updates from Sanofi. I think its fair to assume that following the G-BA proposition, doctors may have become reluctant to put patients on GLP-1’s, as they might have envisaged this as the final outcome of price negotiations, because its certainly not the first time they’ve seen a pharma company take this decision based on the very difficult pricing environment of Germany. For our forecast at least, the fact that it’s been withdrawn from the German market is not a big surprise and it doesn’t change much.

Q: Firstly on ZP2929, I was wondering if you could add some more flavor on the new version that BI is working on. Are we looking at a once-weekly product to better compete against 401? Also, are there any new plans for the old version? Does Zealand have plans to push this one forward into phase 2 on your own? I believe you had other parties interested a few years ago when you partnered with BI. Do you still see this as attractive or if not, what has changed here, considering BI has also changed its mind?

A: BI has placed a lot of importance in its diabetes franchise — it’s the only purpose-built franchise they focus on. I think they’re taking the view that they want to study, in terms of TPP, what profiles of future medicines they need to be a winner for BI going forward in the coming years. So they’re looking at several options: one could be weeklies. Another profile could be glycemic control combined with something else, for example cardiovascular benefit. Lots of people talk in the world of dual therapies that could lower triglycerides or lower cholesterol. There are many different profiles that could be successful for them and we’re paying attention. This is very important program, there were many backups to choose from and there is lots of discussion between the parties.

In terms of ZP2929 itself, obviously its still in phase 1 and we have to interact with the FDA to move in any possible directions. But you are correct to say that we were looking at doing phase 2 at Zealand earlier in our plans, as early even as 2010. At some point though we must partner this out. This is a diabetes asset and the risk of doing phase 3 studies are outsized for Zealand’s capabilities today. Part of the analysis is: what is the partner landscape? We know who the players are and are in constant dialogue with the landscape’s players as well as adding some of these players as new partners, like Lilly. So I can’t give you any further perspective but this is part of the paradigm of completing phase 1 studies and thinking about what next steps could be. Obviously this is an important topic for Zealand since this is a proprietary asset and we fully believe in the properties and qualities of 2929.

Q: With regards to BI collaboration and how we can think about that in terms of a revenue perspective. I think when this deal was originally envisioned at around 42 billion Euros, recognized over some time period. Is this period now lengthened, or is the amount now largely irrelevant given the change in the collaboration?

A: The 42 billion Euros is no longer relevant to consider. The remaining milestone payments relating to the lead compound under the BI collaboration, which was initially 376 million Euros, we have 365 million remaining of these and these are automatically transferred to a new lead candidate under collaboration with BI. In terms of revenues, that is booked as other operational revenue. These are revenues that were related to what we were doing related to the phase 1 development of 2929, so you shouldn’t consider these revenues relevant any longer.

 

-- by Manu Venkat and Kelly Close