Zealand Pharma announces acceleration of U.S. commercial operations through the completion of the Valeritas acquisition; FDA acceptance of New Drug Application submission for the dasiglucagon HypoPal® rescue pen; pipeline progress including
Interim report for
H1 2020
Zealand Pharma announces acceleration of U.S. commercial operations through the completion of the Valeritas acquisition; FDA acceptance of New Drug Application submission for the dasiglucagon HypoPal® rescue pen; pipeline progress including completion of patient enrollment in first Phase 3 trial of dasiglucagon in CHI; and completion of a direct issue and private placement for DKK 657.7 million.
Interim report for H1 2020
Zealand Pharma A/S (Nasdaq: ZEAL) (CVR No. 20045078), a biotechnology company changing lives with innovative peptide-based medicines, today announced financial results for the first half of 2020.
Financial results for the first half of 2020
- Revenue: DKK 233.4 million / USD 35.3 million (DKK 19.9 million / USD 3.0 million in the first six months of 2019).
- Net operating expenses: DKK -437.2 million / USD -65.7 million (DKK -292.0 million / USD -44.5 million in the first six months of 2019).
- Net operating result: DKK -230.9 million / USD -34.7 million (DKK -272.1 million / USD -41.5 million in the first six months of 2019).
- Cash, cash equivalents, and marketable securities: DKK 1,644.9 million / USD 247.2 million as of June 30, 2020 (June 30, 2019: DKK 1,142.1 million / USD 174.1 million).
Emmanuel Dulac, President and Chief Executive Officer at Zealand Pharma, comments:
In the first half of 2020, Zealand Pharma made significant progress towards its goal of leveraging our innovative peptide platform to address unmet needs in metabolic and gastrointestinal diseases. The New Drug Application for the dasiglucagon HypoPal® rescue pen was accepted in May and is under review by the U.S. FDA, with a target action date of March 27, 2021. As we await an approval decision, we are accelerating the build-out of our commercial team, bolstered by the acquisition of the Valeritas assets and commercial infrastructure, including the already marketed V-Go® wearable insulin delivery device. We are also expanding our commercial operations in the U.S. through the establishment of a new U.S. headquarters in Boston and the appointment of a new President of Zealand Pharma U.S.
We also continue to execute on our clinical development pipeline, remaining on track for the Phase 3 clinical trial readout of dasiglucagon in congenital hyperinsulinism which is expected later this year. Despite previously announced delays in enrollment due to the circumstances created globally by the COVID-19 pandemic, we are enrolling in our Phase 3 trial of glepaglutide in short bowel syndrome, with expected results still slated for 2021. Underscoring our commercial preparations and development efforts is a solid balance sheet, recently strengthened by an additional DKK 657.7 million raised through a direct issue and private placement as well as a EUR 20.0 million milestone payment from our Boehringer Ingelheim GLP-1/glucagon dual agonist partnership program that was triggered in June.
Business highlights for the first half of 2020
- Accelerated U.S. commercial operations through acquisition and integration of business assets of Valeritas Holdings, Inc., opening of new Boston office, and appointing new U.S. leadership. We made strong progress against our objective to establish U.S. commercial operations in order to launch our late stage assets by acquiring substantially all of the business assets of Valeritas Holdings, Inc., including the marketed V-Go® wearable insulin delivery device. We successfully integrated 110 employees, supporting systems, processes and the majority of established contracts in Q2 since we closed with a cash transaction of USD 23.0 million on April 2. In June, Zealand announced the appointment of Frank Sanders as President of Zealand Pharma U.S., and in July announced the opening of a new U.S. headquarters in Boston.
- Announced FDA acceptance of New Drug Application (NDA) for the dasiglucagon HypoPal® rescue pen for treatment of severe hypoglycemia. In March, Zealand announced the submission of the NDA to the U.S. Food and Drug Administration (FDA), and in May, the Company announced the FDA’s acceptance of the filing. Under the Prescription Drug User Fee Act (PDUFA), the FDA has set a target action date of March 27, 2021.
- Completed randomization in the first Phase 3 study of dasiglucagon for the treatment of congenital hyperinsulinism (CHI.) Randomization was completed in the study with 32 children with CHI aged 3 months to 12 years, with results expected late this year. The first neonates have been dosed in the second Phase 3 study with 12 children with CHI from 7 days up to one year of age.
- Initiated a Phase 2 low-dose dasiglucagon trial for prevention of insulin-induced hypoglycemia in people with type 1 Diabetes in June. The 20 patient dose finding study supports our efforts to develop a mini-dose pen for the treatment and prevention of mild to moderate hypoglycemia. (ClinicalTrials.gov Identifier: NCT04449692).
- Presented positive clinical data and health economic outcome data with use of regular human insulin delivered by the V-Go® in adults with type 2 diabetes and presented clinical and non-clinical evidence for dasiglucagon rescue therapy at the 80th Scientific Sessions of the American Diabetes Association. In June, Zealand presented data showing that in older adults with type 2 diabetes, use of human regular insulin delivered by V-Go® demonstrated similar glycemic control with no increased hypoglycemia risk compared to use of rapid acting insulin analogs. Zealand also presented additional results from two Phase 3 clinical studies with dasiglucagon for the treatment for severe hypoglycemia as well as one preclinical pharmacokinetics/pharmacodynamics (PK/PD) study investigating aqueous versus dimethyl sulfoxide (DMSO) formulations of glucagon and the pharmacodynamics of dasiglucagon in aqueous solution.
- Announced a two-year research agreement with Intomics A/S. In June, Zealand entered into a research agreement with Intomics, broadening Zealand’s access to ‘Big Data’, artificial intelligence and machine learning in the discovery and development of next generation peptide therapeutics. From its competences with AI, machine learning, and network biology, Intomics has developed the inBio DiscoverTM platform, which has been used for accelerating R&D, including identification of novel targets, discovery of biomarkers, patient stratification, and precision medicine.
- Phase 2 trial initiated in late April with BI 456906, a long-acting GLP-1/glucagon dual agonist, for the treatment of type 2 diabetes and obesity, by partner Boehringer Ingelheim and first patient dosed in June. Dosing of the first patient in the Phase 2 trial triggered a EUR 20 million milestone payment due to Zealand in Q3 of 2020. Boehringer Ingelheim has also informed Zealand that they intend to expand development of BI 456906 to also include treatment of non-alcoholic steatohepatitis (NASH).
- Secured a total of DKK gross 657.7 million through a direct issue and private placement of new shares. The financing, completed in June, provides Zealand with additional funding to continue supporting the Company’s development pipeline and prepare the Company for the potential commercial launch of dasiglucagon in the U.S. in 2021, pending regulatory approval.
Financial guidance for 2020
Net product revenue from the sales of the V-Go wearable insulin delivery device is expected to be within the range of DKK 150 - 175 million for the period beginning on April 2, 2020 and ending on December 31, 2020.
In 2020, Zealand expects revenue from existing license agreements. However, since such revenue is uncertain in terms of size and timing, Zealand does not intend to provide guidance on such revenue.
Net operating expenses in 2020 are expected to be within the range of DKK 950-1,000 million and remains unchanged to the operating expense guidance announced on May 14, 2020, which reflected an increase in guidance for 2020 net operating expenses from DKK 790-810 million due to the acquisition of the business activities from Valeritas effective since April 2, 2020. The acquisition increased Zealand Pharma’s personnel by 110 employees in the U.S. and added the V-Go program to the Zealand commercial portfolio.
Update regarding COVID-19
Zealand continues to monitor the COVID-19 pandemic and take precautions to keep our employees, patients, business and clinical partners safe. This is an ongoing exercise in monitoring the effects of the pandemic on all of our key stakeholders and responding appropriately, we maintain compliance with guidance from applicable government and health authorities. We have adapted the way we work to support our community’s efforts to reduce the transmission of COVID-19 and protect our employees, while continuing to provide patient care and maintain business continuity.
Zealand has taken measures to secure its discovery activities, which remain ongoing, while work in laboratories and facilities has been organized to reduce the risk of COVID-19 transmission. The impact of COVID-19 on our research activities has thus far been minimal. Employees who can work from home have been doing so, while those needing to work in laboratory facilities are divided into shifts to reduce the number of people gathered together at one time. Business travel has been minimized and online and teleconference technology is used to meet virtually rather than in person.
Consistent with our announcement on April 2, 2020, we have continued our clinical trials while working with authorities, investigators, trial sites and CROs to minimize site visits and ensure optimal trial follow-up.
While we have continued our clinical trials, several clinical sites paused enrollment of new patients to accommodate the pressure on hospital systems caused by the COVID-19 outbreak. Several of these sites have re-opened for new patient enrollment and we expect this development to continue over the coming months assuming that the pressure on hospital systems remains reduced and any further COVID-19 outbreaks do not cause lockdowns that affect our clinical trial sites.
Direct engagement with health care providers and patients has been reduced and has been transformed by leveraging virtual meetings, training, and support. Commercial activities in the U.S. are focused on continuing to support the business for the V-Go® wearable insulin delivery device (acquired on April 2, 2020), while ensuring a continued high level of service and support for patients who have already been prescribed the device. We anticipate a reduced ability to meet with V-Go® stakeholders will impact V-Go® sales.
Pipeline as of June 30, 2020
1 Partnered with Boehringer Ingelheim. Zealand eligible for EUR 345m in outstanding milestones; 2 Partnered with Alexion Pharmaceuticals: Zealand eligible for USD 610m in outstanding milestones. 3 Acquired Encycle Therapeutics, Inc.: future potential earn-outs of up to USD 80m contingent on successful achievement of development, regulatory and commercial milestones; payable in cash and/or ZEAL equity at Zealand’s discretion.
Metabolic diseases
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 New Drug Application (NDA) with the U.S. FDA was filed in Q1 2020, and the NDA was accepted for review by the FDA in May 2020. Under the Prescription Drug User Fee Act (PDUFA), the FDA has set a target action date of March 27, 2021. In addition to the hiring of the President of Zealand Pharma U.S., key leaders across sales, marketing, market access and medical affairs have been on boarded to prepare for the potential launch in the U.S. market in 2021.
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 demonstrated that the median time to blood glucose recovery was 10 minutes for dasiglucagon in children.
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. 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.
Beta Bionics has finalized screening of patients into the 440 patient insulin-only bionic pancreas pivotal trial with dosing of the first subjects expected in Q3 (ClinicalTrials.gov Identifier: NCT04200313). Measures to accommodate COVID19 precautions have caused a slight delay in initiation of the Insulin-Only Phase 3 trial which will push initiation of the bi-hormonal bionic pancreas Phase 3 trial with dasiglucagon into 2021.
Dasiglucagon for congenital hyperinsulinism (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.
Two Phase 3 studies are ongoing with results expected in 2020. The first Phase 3 study is with 32 children with CHI age 3 months to 12 years and enrollment was completed in August. The second Phase 3 study is with 12 children with CHI age 7 days to one year of age.
Dasiglucagon adjustable mini-dose
Post bariatric hypoglycemia Phase 2 dose-finding clinical proof of concept trial reported results in March 2020 that demonstrate mini doses of dasiglucagon significantly reduced meal-induced hypoglycemia compared to placebo in individuals who have undergone gastric bypass bariatric surgery.
A Phase 2 low-dose dasiglucagon trial for prevention of insulin-induced hypoglycemia in people with type 1 diabetes is ongoing.
Gastrointestinal diseases
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 pivotal Phase 3 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. Trial results are expected in H2 2021. 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. Results from the Phase 1a single-ascending dose, safety and tolerability trial are expected in 2020, and we plan to initiate the Phase 1b multiple-ascending dose, safety and tolerability trial in 2021.
Pre-Clinical Programs
Zealand is pursuing multiple pre-clinical programs in inflammatory gastrointestinal and metabolic therapeutic areas.
Zealand regained the worldwide rights to a long-acting Amylin analog program from Boehringer Ingelheim, including the lead molecule that had been in development as a potential once-weekly treatment of obesity and Type 2 diabetes.
Partner programs
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, obesity and non-alcoholic steatohepatitis (NASH). Boehringer Ingelheim initiated a Phase 2 trial on April 30, 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 is 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.
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 345 million is outstanding) and high-single to low-double digit royalties on global sales.
Complement inhibitors (with Alexion Pharmaceuticals)
Zealand and Alexion Pharmaceuticals announced in March 2019 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. In addition, Alexion has the option to select up to three additional targets with Zealand eligible for $15 million upfront per target plus development/regulatory milestones for each target selected similar to the lead target with slightly reduced commercial milestones and royalties.
Protagonist Therapeutics License Agreement
In 2012, we entered into a research collaboration agreement with Protagonist Therapeutics, Inc., or Protagonist Therapeutics, and one of its affiliates, which agreement was terminated in 2014. At that time, Protagonist Therapeutics elected to assume the responsibility for the development and commercialization of compounds previously developed, and we assigned to Protagonist Therapeutics certain intellectual property arising from the collaboration. We also granted Protagonist Therapeutics an exclusive license to certain background intellectual property rights of Zealand that relate to the products they assumed.
Under the terms of the terminated agreement and related agreements, we are entitled to receive payments in respect of certain development, regulatory and commercial milestone events, as well as a low single-digit royalty on worldwide net sales of products developed under the agreement, if further developed and commercialized by Protagonist Therapeutics. Through June 30, 2020, we had received USD 1 million of such milestone payments and we may be entitled to receive up to USD 128 million of additional milestone payments under the agreement if certain development, regulatory and commercial milestone events occur.
On 23 January 2020 Protagonist Therapeutics filed a demand for arbitration with the International Court of Arbitration of the International Chamber of Commerce (ICC) seeking a declaration that it has no past, present or future milestone or royalty payment obligations with respect to the compound it is advancing, PTG-300, alleging that the compound is not within the set of compounds to which such payment obligations apply. Protagonist Therapeutics is also seeking costs, fees, and expenses of the proceeding, including attorneys’ fees, repayment of the USD 1 million of payments previously paid and pre-judgment interest. We are defending against this demand on the basis that payments are required for PTG-300 under our agreements and, as to the demand for repayment that the payments made were voluntary and are non-reimbursable. We have also filed counterclaims demanding payment of an additional milestone now due in the amount of USD 1 million, USD 2 million or USD 3 million, depending on the number of patients to be enrolled in the Phase III clinical trials for PTG-300, and seeking a declaration confirming our right to the payments due under our agreements, as well as the costs, fees and expenses of the proceeding, including attorneys’ fees, and pre-judgment interest. The arbitration remains pending as of the date of this report.
Conference call today at 4:00 pm CEST / 10:00 am EDT
Zealand’s management will host a conference call today at 4:00 pm CEST to present results through the first half of 2020. 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 +33 (0) 176700794
Netherlands +31 (0) 207143545
Passcode 1775754
A live audio webcast of the call, including an accompanying slide presentation, will be accessible from the Investor section of Zealand’s website. 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 third quarter 2020 on November 12, 2020.
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About Zealand Pharma A/S
Zealand Pharma A/S (Nasdaq: ZEAL) a biopharmaceutical company, is developing next generation peptide-based medicines to change the lives of people living with metabolic and gastrointestinal diseases. The Company has one FDA-approved product, V-Go®, an all-in-one basal-bolus insulin delivery option for people with diabetes and is using its peptide platform to develop a diverse pipeline of drug candidates. Its lead candidate in the metabolic franchise, the dasiglucagon HypoPal Rescue Pen, is under review by the U.S. FDA, with potential commercialization in 2021 pending regulatory approval. Dasiglucagon is also in development for three additional metabolic indications, with one late stage program for congenital hyperinsulinism. Zealand also has a late stage product in its gastrointestinal franchise, glepaglutide, which is being evaluated in a Phase 3 study for patients with short bowel syndrome. Zealand is headquartered in Copenhagen, Denmark, with offices in the U.S. including locations in New York, Boston, and Marlborough (MA).
Safe Harbor / Forward-Looking Statement
The above information contains forward-looking statements that provide our expectations or forecasts of future events such as the impact of the global COVID-19 pandemic on our business, new product introductions, clinical development activities and anticipated results, product approvals, financial performance and integration of a recently acquired business. Zealand may, in some cases, use terms such as “predicts,” “believes,” “potential,” “proposed,” “continue,” “designed,” “estimates,” “anticipates,” “expects,” “plans,” “intends,” “may,” “could,” “might,” “will,” “should” or other words or expressions referencing future events, conditions or circumstances that convey uncertainty of future events or outcomes to identify these forward-looking statements. 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 the impact of the global COVID-19 pandemic, 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, unexpected growth in costs and expenses, and Zealand’s ability to integrate businesses in varying geographies with different commercial and operating characteristics. You will find a more detailed assessment of these risks, uncertainties and other risks that could cause actual events or results to materially differ from our current expectations in the Company’s U.S. Securities and Exchange Commission filings and reports, including in the Company’s Annual Report on Form 20-F for the year ended December 31, 2019, as supplemented by risks described herein.
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.
NOTE: DKK/USD Exchange rates used: June 30, 2020 = 6.6553 and June 30, 2019 = 6.5585
For further information, please contact:
Investor Relations
Mads Kronborg
Head of Investor Relations & Communication
Phone: +45 5060 3707
Email: mkronborg@zealandpharma.com
For U.S. Media
David Rosen
Argot Partners
Phone: 212-600-1902
Email: media@zealandpharma.com
Key figures *
DKK thousand
Reviewed | Audited | ||||||
INCOME STATEMENT AND COMPREHENSIVE INCOME | Note | Q2 2020 | Q2 2019 | H1 2020 | H1 2019 | FY 2019 | |
Revenue | 221,016 | 19,918 | 233,432 | 19,918 | 41,333 | ||
Gross margin | 192,990 | 19,734 | 205,406 | 19,734 | 40,918 | ||
Research and development expenses | -127,006 | -135,423 | -291,658 | -256,910 | -561,423 | ||
Sales and Marketing expenses | -74,853 | 0 | -74,853 | 0 | 0 | ||
Administrative expenses | -45,592 | -20,736 | -70,665 | -35,191 | -67,881 | ||
Net operating expenses | -247,451 | -156,206 | -437,176 | -292,101 | -628,860 | ||
Operating result | -53,710 | -136,288 | -230,912 | -272,072 | -576,942 | ||
Net financial items | -5,846 | -2,171 | -9,003 | 4,794 | 11,265 | ||
Result before tax | -59,556 | -138,459 | -239,915 | -267,278 | -576,677 | ||
Income tax | (1) | 1,375 | 1,333 | 2,306 | 2,641 | 5,136 | |
Net result for the period | -58,181 | -137,126 | -237,609 | -264,637 | -571,541 | ||
Comprehensive result for the period | -58,481 | -137,126 | -237,937 | -264,637 | -571,541 | ||
Earnings/loss per share – basic/diluted (DKK) | -1.57 | -4.33 | -6.49 | -8.47 | -16.91 | ||
STATEMENT OF FINANCIAL POSITION | June 30, 2020 | June 30, 2019 | December 31, 2019 | ||||
Cash and cash equivalents | 1,350,986 | 840,802 | 1,081,060 | ||||
Marketable securities | 293,982 | 301,292 | 299,448 | ||||
Cash, cash equivalents and Marketable securities | 1,644,968 | 1,142,094 | 1,380,508 | ||||
Other assets | 626,806 | 87,305 | 219,006 | ||||
Total assets | 2,271,774 | 1,229,399 | 1,599,514 | ||||
Share capital ('000 shares) | 39,734 | 31,815 | 36,055 | ||||
Equity | 1,799,922 | 966,778 | 1,242,673 | ||||
Total liabilities | 471,852 | 262,621 | 356,841 | ||||
Equity ratio | (2) | 0.79 | 0.79 | 0.78 | |||
CASH FLOW | H1 2020 | H1 2019 | FY 2019 | ||||
Cash outflow/inflow from operating activities | -313,518 | -90,687 | -409,455 | ||||
Cash outflow/inflow from investing activities | -186,428 | -29,852 | -51,666 | ||||
Cash outflow/inflow from financing activities | 770,249 | 102,517 | 674,480 | ||||
Purchase of property, plant and equipment | -14,392 | -419 | -21,036 | ||||
Free cash flow | (3) | -327,910 | -91,127 | -430,491 | |||
OTHER | June 30, 2020 | June 30, 2019 | December 31, 2019 | ||||
Share price (DKK) | 227.40 | 142.70 | 235.40 | ||||
Market capitalization (MDKK) | (4) | 8,449 | 4,540 | 8,487 | |||
Equity per share (DKK) | (5) | 48.44 | 30.45 | 34.52 | |||
Average number of employees | 320 | 163 | 173 | ||||
Number of full time employees at the end of the period | 313 | 172 | 179 | ||||
Notes: | |||||||
* The acquisition of the business from Valeritas is only reflected in key figures covering the period since April 2, 2020 being the acquisition date. (1) Zealand expects to be eligible to receive up to DKK 5.5 million in Danish corporate tax benefit related to R&D expenses incurred for 2020, of which DKK 2.8 million has been recognized for the period ended June 30, 2020. | |||||||
(2) Equity ratio is calculated as equity at the balance sheet date divided by total assets at the balance sheet date. | |||||||
(3) Free cash flow is calculated as the sum of cash flows from operating activities and purchase of property, plant and equipment. | |||||||
(4) Market capitalization is calculated as outstanding shares at the balance sheet date times the share price at the balance sheet date. | |||||||
(5) Equity per share is calculated as shareholders' equity divided by total number of shares less treasury shares. |
Financial review
Comparative figures for the corresponding period in 2019 are shown in brackets except for the financial position, which expresses the comparative figures as of December 31, 2019.
The reviewed condensed consolidated interim financial statements of the Company have been prepared in accordance with IAS 34, Interim Financial Reporting, as issued by the International Accounting Standards Board, or the IASB. The reviewed condensed consolidated interim financial statements are presented in DKK, which is also the functional currency of the Company.
Financial results
Revenue, cost of goods sold, and gross margin reported for V-Go are as of the closing of the Valeritas Asset Purchase on April 2, 2020 and do not include figures from the first quarter of 2020.
Revenue and gross margin
Revenue for the six months ended June 30, 2020 was DKK 233.4 million of which DKK 149.1 million was a result of the milestone payment triggered in June from our partnership agreement with Boehringer Ingelheim. Revenue from our partnership with Alexion during the period was DKK 26.2 million versus DKK 18.3 million for the same period in 2019. Revenue from sales of the V-Go wearable insulin device was DKK 58.1 million. Cost of goods sold for the period beginning April 2 and ending June 30, 2020 was DKK 28.0 million relating to V-Go sales.
Research and development expenses
Research and development expenses for the six months ended June 30, 2020 amounted to DKK 291.7 million, an increase of 14% versus the same period in 2019, in which research and development expenses were DKK 256.9 million. The costs mainly relate to the regulatory efforts to support the NDA filing for the dasiglucagon HypoPal rescue pen, clinical development of dasiglucagon and glepaglutide programs, as well as pre-clinical research activities.
Sales and marketing expenses
Sales and marketing expenses consist of expenses for selling, product demonstration samples, trade shows, and similar items. Sales and marketing expenses for the six months ended June 30, 2020 amounted to DKK 74.9 million versus DKK 0.0 million in 2019. The increase originates from Zealand’s commercial activities that commenced in connection with the acquisition of the Valeritas business and appointment of a new commercial U.S. leadership.
Administrative expenses
Administrative expenses consist of administrative personnel, company premises, investor relations and similar items. Administrative expenses for the six months ended June 30, 2020 amounted to DKK 70.7 million, an increase of 101% versus the six months ended June 30, 2019, which amounted to DKK 35.2 million. The increase is due to higher consultancy and legal costs of which DKK 7.1 million relates to the acquisition of the Valeritas business, but also expenses for integration of acquired activities, new company headquarter and increased compensation expenses.
Operating result
Operating result reflects gross margin, research and development expenses, sales and marketing and administrative expenses, as discussed above. The operating result for the six months ended June 30, 2020 was DKK -230.9 million compared to DKK -272.1 million for the same period in 2019.
Financial income and financial expenses
Financial income and financial expenses, which we refer to collectively as net financial items, consist of interest income and expense, dividend, banking fees and impact from adjustments from changes in currencies. Net financial items for the six months ended June 30, 2020 amounted to DKK -9.0 million (expense) as compared to DKK 4.8 million (income) for the same period in 2019. The decrease is primarily driven by the unfavorable impact from fair value adjustment by DKK 6.3 million, increase in interest expense and banking fees by DKK 2.7 million and by unfavorable changes in currencies by DKK 5.5 million.
Result before tax
Result before tax reflects operating result and net financial items, as discussed above. Result before tax for the six months ended June 30, 2020 was DKK -239.9 million, compared to DKK -267.3 million for the same period in 2019.
Income tax
During the six months ended June 30, 2020, we recognized DKK 2.3 million in net income tax benefit. The net income tax benefit is mainly impacted by DKK 2.8 million related to the Danish tax credit scheme (Skattekreditordningen) under which companies may annually obtain payment of the tax base of losses originating from R&D expenses of up to DKK 25.0 million (tax value of DKK 5.5 million).
No deferred tax asset regarding the Danish parent company has been recognized in the statement of financial position due to uncertainty as to whether tax losses carried forward can be utilized within the near term.
Net result and comprehensive result
Net result for the period consists of result before tax and income tax, and comprehensive result for the period consists of net result for the period and other comprehensive income. Net result and comprehensive result for the six months ended June 30, 2020 amounted to DKK -237.6 million compared to DKK -264.6 million for the same period in 2019. The increase is primarily a result of the Boehringer Ingelheim milestone payment of DKK 149.1 million offset by an increase in Research and development and sales and marketing expenses.
Liquidity and capital resources
Equity
Equity as of June 30, 2020 was DKK 1,799.9 million corresponding to an equity ratio of 79%. The equity as of December 31, 2019 was DKK 1,242.7 million corresponding to an equity ratio of 78%. Equity ratio is calculated as equity at the balance sheet date divided by total assets at the balance sheet date. The increase in equity mainly stems driven by from the direct issue and private placement in June of DKK 657.7 million, the private placement in March of DKK 137.2 million, and issue of shares related to exercise of warrants of DKK 32.6 million offset by the loss for the period and costs incurred in connection with the capital increases.
Marketable securities, cash and cash equivalents
As of June 30, 2020, marketable securities, cash and cash equivalents amounted to DKK 1,644.9 million as compared to DKK 1,380.5 million as of December 31, 2019. The increase in cash and cash equivalents is a consequence of capital increase from private placements and warrants exercised during the period offset by the cash used for operations and the Valeritas acquisition.
Cash flow
Cash used in operating activities for the six months ended June 30, 2020 was DKK -313.5 million, as compared to cash outflow generated by operations of DKK -90.7 million for the same period in 2019. The increase from the same period in 2019 is mainly related to our research and development and sales and marketing expenses increasing as a result of the regulatory and pre-commercial activities for the Hyp
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