Zealand Pharma A/S
Company Announcement

Zealand interim report for the first nine months of 2015 (un-audited): Financial results on target with significant pipeline progress

Copenhagen, 2015-11-05 09:28 CET --   

• Lyxumia^® royalties and milestone revenue of DKK 20.6 million / EUR 2.7 million
• Net operating expenses of DKK 176.2 million / EUR 23.6 million for the period  
• Net result of DKK -183.7 million / EUR -24.6 million
• Financial guidance for 2015 unchanged     
• Significant pipeline progress in Q3 2015:
  • Lixisenatide (Type 2 diabetes) application for regulatory approval in the US accepted for review by the FDA
  • LixiLan (Type 2 diabetes) showed positive results in two Phase III trials and Sanofi expects regulatory submission in the US in Q4 2015 and in the EU in Q1 2016 
  • Novel long-acting GLP-2 analogue, ZP1848, advanced into Phase II development for the treatment of Short Bowel Syndrome
  • Stable glucagon analogue, ZP4207, showed positive results in a multiple-dose Phase Ib trial for better control of hypoglycemia                                                                                                                                

Copenhagen, 5 November 2015 – Zealand Pharma A/S (“Zealand”) (CVR no. 20 04 50 78) announces financial results on target for the first nine months of 2015, from 1 January to September 30, and reports that  significant product and pipeline milestones have been met and announced in Q3 2015.

Financial results for the first nine months of 2015  

(Comparative figures for the same period 2014 in brackets)

Lyxumia^® royalty revenue: DKK 20.5 million (14.1) / EUR 2.7 million (1.9), up 46% year-on-year

Total revenue: DKK 20.6 million (147.5) / EUR 2.8 million (20.0)

Net result: DKK -183.7 million (-2.0) / EUR -24.6 million (-0.3)

Cash and cash equivalents (as of 30 September 2015):  DKK 453.9 million (303.8) / EUR 60.8 million (40.8)

Earnings per share: DKK -7.99 (-0.09) / EUR -1.07 (-0.01) 

Significant product and pipeline milestones met in Q3 2015 and the period thereafter

Lixisenatide (Lyxumia^®) –Type 2 diabetes (Sanofi): In late September, the US Food and Drug Administration (FDA) accepted for review Sanofi’s New Drug Application (NDA) for registration of lixisenatide, an important milestone in the US regulatory review process for this product.

LixiLan (fixed-ratio combination product of lixisenatide and insulin glargine (Lantus^®) – Type 2 diabetes (Sanofi):  In September, Sanofi announced positive results from LixiLan-L, the second pivotal Phase III trial with LixiLan to meet the primary endpoint. Positive results from the first pivotal Phase III trial, LixiLan-O, were reported in July. Based on the results from both trials, Sanofi  is proceeding towards planned submission of LixiLan for regulatory approval in Q4 2015 in the US and in Q1 2016 in the European Union.   

Danegaptide – Cardiac reperfusion injuries:  In late August, Zealand completed the enrolment of 591 patients with an acute myocardial infarction (AMI) into the Phase II Proof-of-Concept trial. Zealand expects results to be available in Q1 2016.  

ZP1848 – Short Bowel Syndrome: In mid-September, Zealand announced the advance of its novel,        long-acting and stable GLP-2 analogue into clinical Phase II development. The dosing of the first patients in a Phase II Proof-of-Concept, dose-finding trial is planned for Q1 2016.

ZP4207 – Stable glucagon for multi-dose use to treat and control mild to moderate hypoglycemia:  In September, Zealand announced positive results from the clinical Phase Ib trial, supporting good safety and tolerability for ZP4207 after multiple dosing.

In October, as part of Zealand’s collaboration with Boehringer Ingelheim on an undisclosed target in the cardio-metabolic field, the selection of a lead candidate for preclinical development led to a DKK 22.4 million (EUR 3.0 million) milestone payment to Zealand. As this event was after the reporting period, the payment has no impact on the results for the first nine months of 2015.    

Commenting on the interim report, Britt Meelby Jensen, President and CEO of Zealand, said:

“During the last quarter, we have made further important progress across our portfolio of products, which has provided additional clarity and strength to Zealand’s business.

We are excited about Sanofi’s filing of lixisenatide for registration in the US and the positive outcome of two pivotal Phase III studies with LixiLan, supporting Sanofi’s planned move towards US regulatory filing for this product before end 2015. In alignment with our strategic focus, we have in parallel successfully expanded and advanced our proprietary pipeline. We have taken ZP1848 into Phase II development for SBS, reported positive results from the Phase Ib multiple-dosing trial with our stable glucagon product, ZP4207, and completed the enrolment of close to 600 patients into our Phase II trial with danegaptide. With these significant advances, we continue our progress towards accelerated value creation for patients and shareholders.”

Financial guidance for 2015 unchanged

Zealand’s financial guidance for 2015 is unchanged as announced in the company’s interim report for H1 2015.

This includes growing royalty revenue from Sanofi’s global sales of lixisenatide (Lyxumia^®) plus DKK 155 million / EUR 21 million from event driven milestone payments from partners.

Net operating expenses for the full year are expected to be at the upper end of the announced range of DKK 225-235 million / EUR 30-32 million.

Expected news flow outlook for the rest of 2015 and H1 2016

Q4 2015   LixiLan: Planned regulatory submission in the US (by Sanofi)

H1 2016   Lixisenatide: Royalty reports for Q4 2015 and Q1 2016 and status updates

                 Lixilan: Planned regulatory submission in the European Union (by Sanofi)

                 LixiLan: Presentation of results from LixiLan-O and LixiLan-L at a medical conference

                 Elsiglutide: Completion of Phase II dose-finding trial

                 Danegaptide: Topline results from Phase II Proof-of-Concept trial  

                 ZP1848: Dosing of first patients in Phase II Proof-of-Concept trial

                 ZP4207 (rescue pen): Initiate next stage of clinical development

                 Boehringer Ingelheim collaboration: Start preclinical development of new once-weekly GGDA lead

Financial calendar for 2016

16 March         Full year announcement and Annual Report 2015    

19 April            Annual General Meeting  

18 May            Interim report for first quarter of 2016

25 August        Interim report for first half of 2016

9 November    Interim report for the first nine months of 2016

Q3 2015 conference call details

Zealand’s management will host a conference call today at 14.00 CET/ 08:00 EDT to present the interim report for the first nine months of 2015 with focus on the pipeline progress in Q3 2015. Participating on the call will be Britt Meelby Jensen, President and Chief Executive Officer, Mats Blom, Chief Financial Officer, and Hanne Leth Hillman, Senior Vice President for Investor Relations and Communications. The presentation will be conducted in English and followed by a Q&A session.

The dial-in numbers are:

DK standard access       +45 32 71 16 60

UK and international       +44 (0) 20 3364 5381

US (free dial-in)             +1 718 354 1158

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

●●●●●

For further information, please contact

Britt Meelby Jensen, President and Chief Executive Officer
Tel: +45 51 67 61 28, email: bmj@zealandpharma.com

Hanne Leth Hillman, Senior Vice President for Investor Relations & Communications
Tel: +45 50 60 36 89, email: hlh@zealandpharma.com

About Zealand Pharma

Zealand Pharma A/S (Nasdaq Copenhagen: ZEAL) (“Zealand”) is a biotech company with leading-edge scientific expertise in turning peptides into medicines. Zealand has a growing proprietary pipeline of novel specialty drug candidates and a mature portfolio of products and projects under license collaborations with Sanofi, Helsinn Healthcare and Boehringer Ingelheim.

Zealand’s first invented medicine, lixisenatide, a once-daily prandial GLP-1 analogue for the treatment of Type 2 diabetes, is marketed globally (ex-US) as Lyxumia^® by Sanofi and under regulatory review in the US. The license agreement with Sanofi covers also a single-product combination of lixisenatide and insulin glargine (Lantus^®) which is on track for regulatory submission in the US in Q4 2015 and in the European Union in Q1 2016.

The proprietary pipeline includes; danegaptide for ischemic reperfusion Injuries in Phase II development; ZP1848 for Short Bowel Syndrome in Phase II development; and the stable glucagon analogue, ZP4207, in Phase II preparation both as a single-dose rescue pen for severe hypoglycemia and for multiple-dose use to treat and control mild to moderate hypoglycemia; as well as several preclinical peptide therapeutics.

The company is based in Copenhagen (Glostrup), Denmark. For further information about Zealand’s business and activities, please visit: www,zealandpharma.com or follow us on Twitter @ZealandPharma

Key figures for the group

Management review

Products and pipeline

Zealand has a broad and growing portfolio of novel peptide therapeutics, partly under license collaborations, where all development and commercial costs are covered outside Zealand, partly proprietary.

Zealand has its first invented medicine, lixisenatide for patients with Type 2 diabetes, marketed globally outside the US as Lyxumia^® and filed for registration in the US, both by Sanofi. The pipeline of novel therapeutics has one product in preparation for regulatory submissions, three product candidates in clinical Phase II development, three product candidates in clinical Phase I development, and several preclinical programs.

Out-licensed products and projects under collaboration – Highlights and outlook

Lixisenatide– GLP-1 analogue for Type 2 diabetes: Marketed globally ex-US as Lyxumia^® and under regulatory review in the US (Sanofi)         

• Lixisenatide (Lyxumia^®) is available for patients in more than 40 countries outside the US. Sanofi plans additional launches in the coming quarters.
• In late September, the Food and Drug Administration (FDA) accepted Sanofi’s application (NDA) for regulatory approval of lixisenatide in the US. This milestone initiated the regulatory evaluation process, and a US regulatory decision by the FDA is expected in Q3 2016.

LixiLan - Fixed-ratio combination of lixisenatide and insulin glargine (Lantus^®) for Type 2 diabetes: In preparation for regulatory submissions (Sanofi)

• In September, Sanofi announced positive results from LixiLan-L, the second pivotal Phase III trial with LixiLan to meet the primary endpoint. In this trial, LixiLan showed a statistically superior reduction in HbA1c (average blood glucose over the previous three months) compared with insulin glargine (Lantus^®) in 736 patients with Type 2 diabetes.
• In July, a positive outcome from the LixiLan-O pivotal Phase III trial showed the superiority of LixiLan in the reduction of blood glucose (HbA1c) in 1,170 patients with Type 2 diabetes insufficiently controlled on metformin, both compared to lixisenatide and compared to insulin glargine 100 units/mL.  
• Following the positive results from both LixiLan-O and LixiLan-L, Sanofi is preparing for regulatory submissions of LixiLan, expected in Q4 2015 in the US and in Q1 2016 in the EU.                           

Elsiglutide – GLP-2 analogue for chemotherapy-induced diarrhea: In Phase IIb development (Helsinn Healthcare)                                                                                                              

• The enrolment of patients with colorectal cancer into Helsinn’s ongoing Phase IIb dose-finding trial is progressing as planned. The trial is expected to complete in H1 2016.
• Late June, Helsinn completed the enrolment of 1,700 colorectal and breast cancer patients into an observational study intended to evaluate the incidence rates and severity of chemotherapy induced diarrhea across Europe and the US. Helsinn expects the results from this study to be available in Q1 2016 and to be important to guide the design of a potential pivotal Phase III trial program for elsiglutide.

Collaborations with Boehringer Ingelheim

• Under the license collaboration on novel glucagon/GLP-1 dual agonists for the treatment of Type 2 diabetes and/or obesity, Boehringer Ingelheim has changed focus and decided to investigate the development of a new once-weekly lead peptide candidate. The next development step would be start of preclinical development, rather than start of clinical development as previously guided. Preclinical development of the new lead is expected to start in H1 2016.
• Under the other collaboration covering an un-disclosed Zealand-invented therapeutic peptide approach in the cardio-metabolic field, Boehringer Ingelheim in October selected a lead candidate, which will now be advanced into preclinical development. As announced, this development milestone was associated with a payment of DKK 22.4 million (EUR 3.0 million) to Zealand.

Zealand’s proprietary pipeline – Highlights and outlook

Danegaptide – A gap junction modifier to protect against cardiac reperfusion injuries: In Phase II development

• In late August, Zealand completed the enrolment of 591 patients with an acute myocardial infarction (STEMI) into its Phase II Proof-of-Concept trial. The trial has been running very well and Zealand confirms expectations for trial completion before the end of 2015 and for top-line results in Q1 2016.

ZP1848 – Novel long-acting GLP-2 analogue for Short Bowel Syndrome: In Phase II development

• In late September, Zealand announced the advance of its proprietary, long-acting GLP-2 analogue, ZP1848, into clinical Phase II development for the treatment of Short Bowel Syndrome, a gastro-intestinal specialist care indication of high, unmet medical needs.
• The start of Phase II development of ZP1848 for Short Bowel Syndrome is an important step in line with Zealand’s strategic focus of growing its proprietary pipeline for accelerated value creation.
• Enrolment and dosing of the first patients in a Proof-of-Concept, dose-finding trial is planned for Q1 2016.

ZP4207 - Stable glucagon single-dose, ready-to-use rescue pen for severe hypoglycemia in diabetes: In preparation for next clinical phase after Phase I

• Next step is regulatory interactions with the FDA to get feedback on the planned development path for a single-dose version of ZP4207 for the rescue treatment of severe hypoglycemia.
• Pending regulatory feedback, the plan is to initiate the next clinical study with ZP4207 in H1 2016.

ZP4207 - Stable glucagon for multiple-dose use to control mild/moderate hypoglycemia in diabetes: Completed Phase Ib development

• In September, Zealand announced positive results from a Phase Ib trial, demonstrating that ZP4207 was safe and well tolerated with the ability to provide a clinically relevant blood glucose response after repeat daily dosing in healthy volunteers.
• Based on the Phase Ib results, Zealand is progressing plans for next steps in the development of ZP4207 for multiple-dose use, including potentially as a component in an artificial pancreas device, to correct low blood sugar levels in patients with Type 1 diabetes.

ZP2929 – Glucagon/GLP-1 dual agonist for type 2 diabetes and/or obesity: In Phase I development

• Zealand has completed additional supportive preclinical studies with ZP2929 and expects to engage with the FDA in H1 2016, to agree on the clinical program.

Update on Zealand’s maturing business and strategic outlook: From peptide to patient

Earlier this week, Zealand released an update on the status of its maturing business and the strategic direction for the company towards accelerated value creation for patients and shareholders under the headline “From peptide to patient”.

Zealand is committed to a diligent growth strategy taking point of departure in four focus areas:

1. Advance and build the proprietary pipeline: Focus on select proprietary medicines, which Zealand intends to take through to registration, leveraging expected revenue growth from out-licensed portfolio in the years to come.
2. Focus on specialty diseases: Zealand will pursue therapeutic opportunities in specialty disease areas where peptides have high relevance.
3. Build on both internal and external innovation, maintaining a dynamic and efficacious R&D structure: Pipeline expansion to building on the company’s validated leading-edge scientific expertise in converting peptides into medicines, combined with external innovation.
4. Leverage via partnerships with a decreasing focus on full out-licensing: Out-license selected assets, while expanding strategic partnerships from early research to commercialization.

The update on business and strategy was also presented by president and CEO, Britt Meelby Jensen at a Capital Markets Day, hosted by Zealand on Tuesday 3 November in New York. Slide presentations from the event are available on the company’s website and an audio recording will also be accessible.

On Wednesday 18 November, from 1:30 pm (lunch from 1:00 pm) to 4:30 pm, Zealand will host also a Capital Markets Day for institutional investors and analysts in Denmark at the company’s offices in Glostrup, Copenhagen. This event will have a similar agenda to the meeting in New York.

To sign up for participation in the Capital Markets Day at Zealand, please contact: Executive Assistant Annette Boring Kjær on abk@zealandpharma.com.

Financial review

(Comparative figures for the same period 2014 are shown in brackets)

Income statement
The net result for the first nine months of 2015 was a loss of DKK 183.7 million compared to a loss of DKK 2.0 million for the same period of 2014. The lower net result is a consequence mainly of milestone payments received by Zealand in the first nine months of 2014 under the license agreements with Sanofi, Boehringer Ingelheim and Helsinn while no milestone payments have been received in the same period of 2015. Further, net operating expenses were higher during the first nine months of 2015 compared to the same period of 2014 due mainly to an increased level of development activities and one-off severance costs.

Revenue
Zealand received DKK 20.5 million (14.1) in royalty revenue on Sanofi’s sales of Lyxumia in the first nine months of 2015, representing an increase of 46% versus the same period last year. There has been a minor license payment from Helsinn of DKK 0.1 million in the first nine months of 2015. For the same period in 2014, Zealand received milestone payments of DKK 133.4 million from Sanofi, Boehringer Ingelheim and Helsinn. Total revenue for the first nine months of 2015 amounted to DKK 20.6 million (147.5).

Royalty expenses
Royalty expenses for the first nine months of 2015 were DKK 2.7 million (12.9). Royalty expenses are payments by Zealand to third parties on the bases of license payments received for Lyxumia^®.

Research and development expenses
Research and development expenses for the first nine months of 2015 amounted to DKK 159.0 million (122.0) which was in line with expectations. The increase of DKK 37.0 million compared to 2014 is mainly due to increased development costs of DKK 17.0 million, severance costs of DKK 6.7 million related to management changes and non-cash effect warrant expenses of DKK 12.1 million.

Administrative expenses
Administrative expenses for the first nine months of 2015 amounted to DKK 28.0 million (20.6). The increase is mainly a consequence of severance costs related to management changes and non-cash effect warrant expenses and increase in IT costs.

Other operating income
Other operating income for the first nine months of 2015 amounted to DKK 10.8 million (2.4). Other operating income mainly consists of funding of research costs under the collaboration with Boehringer Ingelheim.

Operating result
The operating result for the first nine months of 2015 was a loss of DKK -158.3 million (-5.6).

Net financial items
Net financial items consist of interest expenses on the royalty bond, amortization of costs relating to the royalty bond, interest income, banking fees and regulations based on changes in exchange rates. Net financial items for the first nine months of 2015 amounted to DKK -28.9 million (2.3).

Result from ordinary activities before tax
Result from ordinary activities before tax for the first nine months of 2015 came to DKK -187.2 million (-3.3).

Tax on ordinary activities
With a negative result from ordinary activities in the first nine months of 2015 and financial guidance pointing towards a negative result also for the full year, Zealand expects to be eligible to receive up to DKK 5.9 million in corporate tax income for 2015 of which DKK 3.6 (1.3) million have been recognized for the period.

No deferred tax asset has been recognized in the statement of financial position due to uncertainty whether tax losses carried forward can be utilized.

Net result and comprehensive income
Net result for the first nine months of 2015 amounted to DKK -183.7 million (-2.0). 

Equity
Equity stood at DKK 159.4 million (316.2) at the end of the period, corresponding to an equity ratio of 30% (88).

Capital expenditure
Investments in new laboratory equipment for the period amounted to DKK 3.3 million (2.9).

Cash flow
Cash flow from operating activities amounted to DKK -179.8 million (-5.5), cash flow from investing activities to DKK -3.3 million (21.4) of which DKK 0.0 million (24.4) relates to sale of securities, and cash flow from financing activities to DKK 72.6 million (0.0) relating to exercise of warrants. The total cash flow for the first nine months of 2015 amounted to DKK -110.4 million (15.9).

Cash and cash equivalents
As of 30 September 2015, Zealand had cash and cash equivalents of DKK 453.9 million (303.8). The increase is mainly explained by the royalty bond issued in December 2014 adding DKK 272.2 million of cash to the company.

Key financial development in Q3 2015

Revenue in the third quarter amounted to DKK 7.2 million (58.2) of which DKK 7.1 (6.0) million relates to royalty income to Zealand from Sanofi’s commercial sales of Lyxumia^®. This represents an increase of 18% versus the same period last year.

Total operating expenses amounted to DKK 53.6 million (45.7). The increase of DKK 7.9 million is mainly explained by increased development costs of DKK 6.2 million.

Net result for the third quarter amounted to DKK –51.3 million (16.9).

Financial guidance for 2015

Zealand’s financial guidance for 2015 is unchanged as announced in the company’s interim report for H1 2015.

This includes growing royalty revenue from Sanofi’s global sales of lixisenatide (Lyxumia^®) plus DKK 155 million / EUR 21 million from event driven milestone payments from partners.

Net operating expenses for the full year are expected to be at the upper end of the announced range of DKK 225-235 million / EUR 30-32 million.

Events after the end of the reporting period

In October 2015, Zealand received a milestone payment of DKK 22.4 million (EUR 3.0 million) relating to the selection of a lead candidate for preclinical development under our collaboration with Boehringer Ingelheim on an undisclosed target in the cardio-metabolic field.

Risk factors

This interim report contains forward-looking statements, including forecasts of future expenses as well as expected business related events. Such statements are subject to risks and uncertainties as various factors, some of which are beyond the control of Zealand, may cause actual results and performance to differ materially from the forecasts made in this interim report. Without being exhaustive, such factors include e.g. general economic and business conditions, including legal issues, scientific and clinical results, fluctuations in currencies etc. A more extensive description of risk factors can be found in the 2014 Annual Report under the section Risk management and internal control.

Management’s statements on the interim report

The Board of Directors and the Executive Management have today considered and adopted the interim report of Zealand Pharma A/S for the period 1 January – 30 September 2015. The interim report has not been audited or reviewed by the company’s auditor.

The report is prepared in accordance with IAS 34 as endorsed by the EU and the additional Danish disclosure requirements for listed companies. The accounting principles are unchanged in the first nine months of 2015 and reference is made to the Annual Report 2014 for a more detailed description of the accounting policies.

In our opinion, the interim report gives a true and fair view of the Group’s assets, equity and liabilities and financial position at 30 September 2015 as well as of the results of the Group’s operations and cash flow for the period 1 January – 30 September 2015.

Moreover, in our opinion, the Management’s Review gives a true and fair view of the development in the company’s operations and financial conditions, of the net result for the period and the financial position while also describing the most significant risks and uncertainty factors that may affect the Group.

Copenhagen, 5 November 2015

Executive Management

Britt Meelby Jensen      Mats Blom                   

President and CEO       Senior Vice President and CFO

Board of Directors

Martin Nicklasson         Rosemary Crane           Catherine Moukheibir
Chairman                      Vice Chairman

Alain Munoz                  Peter Benson                Michael Owen                                      

Christian Thorkildsen    Helle Størum                Jens Peter Stenvang

Interim financial statements