Zealand Pharma: QuickView

The recent CHMP positive opinion for Lyxumia (lixisenatide), its expected US NDA filing next month and the potential EU approval in Q113, create a likely hat trick of positive catalysts. However, a focus on monotherapy overlooks the fact that Zealand’s prospects rely more heavily on the “Fixflex” Lyxumia/Lantus combination. This is falling behind Novo Nordisk’s competing pairing of Tresiba (insulin degludec) – itself newly launched as monontherapy – with Victoza. This, combined with the relative advantages of Tresiba over Lantus, may constrain its commercial potential.

GetGoal Data Now In The Net…
Sanofi’s huge GetGoal programme of 11 Phase III studies of Lyxumia met primary efficacy endpoints of HbA1c reduction and showed non-inferiority to twice-daily Byetta (exenatide). A beneficial effect on weight-gain and hypoglycaemia risk offers a useful competitive advantage. Furthermore, the data were sufficiently robust to support a recommendation for approval as an add-on to basal insulin, something the market leader, Victoza (liraglutide), was unable to attain.

...But There Is Risk Of Relegation For Lyxumia Monotherapy
However, although Phase II data imply Lyxumia is more efficacious than Victoza, this has not been replicated in our meta-analysis of GetGoal data at Phase III. On a placebo-adjusted basis, Victoza reduced HbA1c levels by 1.1% from baseline, vs 0.74% with Lyxumia. Additionally, concerns about whether Lyxumia is truly once-daily exist. With two once-weekly Phase III GLP-1 agonists hot on Lyxumia’s heels (Lilly’s dulaglutide and GSK’s Syncria/albiglutide), Lyxumia’s commercial prospects could be marginalised.

Too Late, Too Little
The aforementioned places increased emphasis on the Lyxumia/Lantus combination, which following delay, will at best hit the market in 2015-16 on or possibly after Lantus’s patent expiry, limiting the opportunity for patient switching. Moreover, the delay has allowed Novo Nordisk’s Tresiba/Victoza pairing to move ahead, the components of which individually outstrip Sanofi’s. Tresiba can also be taken at any time of day. This more flexible dosing and low incidence of night time hypoglycaemic events may drive a preference over Sanofi’s combination offering.

Valuation: Hinged On Lyxi/Lanti Fixflex
Zealand should start to earn revenues on Lyxumia in 2013 and management believes it could become durably profitable on royalties derived from sales of only $250m/year, possible in 2014. But the real potential will come in from the combination in 2015-16. Thus in the short term there is likely upside, but longer term there is possibly more commercial uncertainty than is widely recognised.

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