Delivering on
our commitment
to patients
Zealand Pharma
Annual Report 2019
Company reg. no. 20045078
2
2
On the cover
Crosby was born with congenital
hyperinsulinism.
Read more page 18
In consideration of our impact
on the environment, the Zealand
Pharma Annual Report will transition
to electronic copy only. A limited
number of printed copies will be
made of the Annual Report 2019,
and it will be the last publication
produced in print.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 Contents
Contents
Management review
Changing lives
About Zealand Pharma
Shareholder Letter
2019 Achievements
and financial highlights
Consolidated Key Figures
2020 Outlook and objectives
Transforming peptides
Pipeline overview
Dasiglucagon: Severe hypoglycemia
Dasiglucagon: Congenital hyperinsulinism
Dasiglucagon: Automated diabetes management
4
5
6
8
10
11
12
14
16
18
20
Approaching commercialization
Engaging partnerships
Corporate matters
Corporate Governance
Corporate Responsibility
Our People
Risk Management and Internal Control
Financial Review
Shareholder Information
Board of Directors
Corporate Management
26
28
31
32
35
36
38
40
43
45
47
Dasiglucagon: Hypoglycemia following bariatric surgery 21
Glepaglutide and ZP7570: Short bowel syndrome
Pre-clinical projects
22
25
33
50
50
51
52
52
53
54
88
88
89
90
90
91
100
101
102
107
107
Financial statements
Consolidated financial statements
Income statement
Statement of comprehensive income
Statement of financial position
Statement of cash flows
Statement of changes in equity
Business overview
Notes
Financial statements of
the parent company
Income statement
Statement of comprehensive income
Statement of financial position
Statement of cash flows
Statement of changes in equity
Notes
Alternative performance measures
for the group (non-audited)
Statement of the Board of Directors and
Executive Management
Independent auditor’s report
Other information
Sources
Addresses (company information)
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
4
4
CL - COVER
Changing lives
We work every day with patient communities
and thought leaders to change the lives of
people with severe medical conditions
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 CL - About Zealand Pharma
55
About
Zealand Pharma
We are passionate about changing
the lives of people with severe
medical conditions through
targeted development of next
generation peptide therapeutics.
Our ambition is to be a world leader in treating specialty gastrointestinal and metabolic diseases.
We intend to deliver best-in-class treatment options that meet patient medical needs and ease
the burden on the health care system.
We utilize a business model with two approaches. First, we aim to retain full ownership and
control of product candidates all the way to market in selected geographies. Second, we also
engage in licensing partnerships that expand the opportunity and probability of success for
selected products and/or indications. Our agile organization engages with partners across the
value chain, such as leading Clinical Research Organizations (CROs) and Contract Manufacturing
Organizations (CMOs).
Fully integrated
biotech company
Founded 1998 in Copenhagen,
locations in Boston and New York
Leading peptide
platform
A world leading peptide platform, with two
medicines on the market
Find out more about Zealand on
zealandpharma.com/about-us
Four potential launches
in four years
Accelerating late stage programs to launch new
products into major markets beginning in 2021
Experienced
team
179 employees of which
85% are in R&D
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 6
6
CL - Shareholder letter
Shareholder Letter
Poised to deliver on
our commitment
to patients
Over the past year, Zealand Pharma
successfully operated an acceleration
in strategy to become a fully integrated
biotech company, maintaining highly
productive research and development,
while building our own commercial and
medical operations. By maintaining control
over our proprietary products, we will
maximize value for our shareholders while
simultaneously supporting access to our
innovative treatments for patients in need.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 77
Execution on our first new drug application
In 2019, the clinical program for the dasiglucagon
HypoPal® rescue pen was completed. The program
includes four Phase 3 clinical studies that demonstrat-
ed a consistent median time of 10 minutes to recovery
from severe hypoglycemia for both adults and children
when treated with dasiglucagon. These clinical results
provide a solid foundation for our new drug application
to the U.S. FDA, which we remain on-track to submit in
the first quarter of 2020.
Progression of all pre-clinical and clinical programs
Driven by an ambition to transform management of
type 1 diabetes, we created dasiglucagon: a fast-acting
glucagon analog that is stable in solution. This mole-
cule allows us to envision multiple novel drug-device
combinations: a rescue treatment for severe hypogly-
cemia in a ready-to-use auto-injector or a prefilled sy-
ringe, a multi-dose pen for mini dosing hypoglycemia,
a chronic treatment with a continuous delivery pump
for patients suffering from the rare disease congenital
hyperinsulinism, and in an artificial pancreas in com-
bination with insulin for type 1 diabetic patients (which
received Breakthrough Device designation from the
U.S. Food and Drug Administration in 2019).
We also progressed glepaglutide, a long-acting GLP-2
analog delivered in a ready-to-use auto-injector to
help short bowel syndrome (SBS) patients improve
absorption of nutrients and electrolytes.
In our early pipeline, we advanced innovative dual pep-
tides to improve patient outcomes, including a GLP-1/
GLP-2 agonist to also treat SBS, and a GLP-1/GLU
agonist for type 2 diabetes/obesity.
Building independent U.S. operations
Establishing commercial and medical operations is
the final step of our transformation. In the second half
of 2019, we successfully onboarded key personnel,
selected a site in the Boston-area to complement our
New York office, and commenced the early build of
our infrastructure. The momentum of these activities
has carried into 2020, where we continue to execute a
fast-paced plan to ensure our U.S. organization is fully
operational by year end and ready to launch Zealand’s
dasiglucagon HypoPal® rescue pen in 2021.
An acquisition to grow our strategic assets
For the first time, Zealand brought an external asset
into our peptide platform by acquiring Encycle Thera-
peutics. The acquisition further strengthens our lead-
ership in peptide therapeutics and novel treatments for
gastrointestinal diseases, and reinforces our commit-
ment to investing in both internal and external innova-
tion to address significant unmet medical needs.
Validation from partnering industry leaders
We formed a new partnership with Alexion Pharma-
ceuticals to collaborate in the discovery and devel-
opment of peptide therapeutics for complement
mediated diseases. This new partnership was followed
by Boehringer Ingelheim’s decision to advance the
GLP-1/glucagon dual agonist licensed from Zealand,
BI 456906, into Phase 2 development for treatment
of obesity and type 2 diabetes. We are thrilled these
collaborations are expanding opportunities for our next
generation peptide therapeutics to reach even more
patients.
been among the top three shareholders of Zealand
Pharma since early 2018. The placement raised Van
Herk’s percent of share capital to 19% and added DKK
559.6 million to Zealand’s existing cash resources. It is
an honor to be recognized by an investor with a track
record of success in biotech, and to receive substantial
support from all shareholders who are keeping per-
spective on our long term value creation.
Transforming to deliver on our commitment
The combination of dense news flow, clarification of
our strategic intent, and acceleration on our road to
commercialization have been positively recognized by
the market and have supported an historical increase
in valuation to our long time shareholders. In addition
to the mentioned achievements, Zealand experienced
other transformational changes during 2019. Transition
of executives introduced Chief Financial Officer Matt
Dallas and myself to the company. Also, we initiated a
relocation in Denmark from the offices in which Zea-
land has thrived for twenty years, to a new facility that
can accommodate our success-driven growth. Our
team continues to work hard, with the Zealand spirit
that is distinct, collaborative, and determined.
On behalf of the Board of Directors, the Manage-
ment team, and all Zealand colleagues: thanks to our
shareholders, partners and patients for placing trust
in our company. We are focused on achieving our
ambitions, and delivering on the commitment that we
make to patients: we will change lives by addressing
severe medical needs with our next generation peptide
therapeutics.
Additional support from institutional shareholders
A private placement of shares was made with Van Herk
Investments, a long-term investor in biotech who has
Emmanuel Dulac
President and Chief Executive Officer
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 8
8
CL - 2019 Achievements
2019
Achievements
In addition to advancing nearly every
pipeline program, we realized two
other significant accomplishments
in 2019: a new license partnership
with an industry leader, and
Zealand's first acquisition.
Accelerated our late-stage
pipeline
• Dasiglucagon HypoPal® rescue pen:
Clinical program completed and NDA submission early 2020
• Dasiglucagon for dual-hormone pump:
Phase 2 completed and Phase 3 planned for late 2020
• Dasiglucagon for congenital hyperinsulinism:
Two pivotal Phase 3 trials initiated
• Glepaglutide for short bowel syndrome:
continued progress in Phase 3
Advanced our early pipeline
• Once-weekly GLP-1/GLU for obesity/type 2 diabetes¹:
Phase 1 completed and Phase 2 to be initiated early 2020
• Long-acting GLP-1/GLP-2 dual agonist (ZP7570) for SBS:
Phase 1 initiated
Expanded our strong financial
and organizational position
• Entered agreement with Alexion Pharmaceuticals to develop
complement C3 inhibitor
• Completed the company's first acquisition: Encycle Therapeutics,
securing pre-clinical α4β7 integrin inhibitor and access to screening
library of approximately 5,000 peptide-like macrocycles
• Accelerated build-up of U.S. operations to prepare for first product
launch anticipated in 2021
• Secured DKK 560 million in private placement with existing investor Van
Herk Group
¹ BI456906, partnered with Boehringer Ingelheim
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 CL - Financial highlights
99
Financial
highlights
R&D investment, DKK
561.4 m
+28%
(v. 2018)
Employees (FTE)
179
85% in R&D
Administrative expenses, DKK
67.9 m
(+56% v. 2018)
Revenue, DKK
ZEAL share price, DKK at Dec. 31, 2019
Cash position, DKKm
299
41.3 m
(+9% v. 2018)
235.40
(+186% since Dec. 31, 2018)
Find out more about Zealand at
zealandpharma.com/investor
Net operating expenses, DKK
628.9m
(+31% v. 2018)
300
250
200
150
100
K
K
D
,
e
c
i
r
p
e
r
a
h
S
299
1081
861
319
21
538
419
323
75
6
589
Dec 2018
Jul 2019
Dec 2019
2014
2015
2016
2017
2018
2019
Securities
Restricted cash
Cash and equivalents
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
10
10
CL - Consolidated key figures
Consolidated key figures
DKK ’000
2019
Restated6 Restated6 Restated6 Restated6
2015
2017
2016
2018
Income statement and
comprehensive income
Revenue
Royalty expenses
Research and
development expenses
Administrative expenses
Other operating income
Operating result
Net financial items
Result before tax
Corporate tax
Net result for the year
Comprehensive income/loss
Earnings/loss per share
– basic (DKK)
Earnings/loss per share
– diluted (DKK)
Statement of financial position
41,333
-415
37,977
-3,356
136,322
-14,163
230,864
-30,931
182,573
-21,578
-561,423
-67,881
-438,219
-43,543
444 1,099,526
652,385
-27,334
625,051
-43,773
581,278
581,278
-587,942
11,265
-576,677
5,136
-571,541
-571,541
-323,949
-47,343
607
-248,526
-31,387
-279,913
5,500
-274,413
-274,413
-261,387
-50,514
1,697
-110,271
-43,764
-154,035
5,500
-148,535
-148,535
-214,711
-38,793
12,828
-79,681
-38,505
-118,186
5,875
-112,311
-112,311
-16.91
18.94
-9.85
-6.11
-4.87
-16.91
18.94
-9.85
-6.11
-4.87
Cash and cash equivalents
Restricted cash¹
Marketable securities
Total assets
Share capital (‘000 shares)
Equity
Equity ratio²
Royalty bond
1,081,060
0
299,448
860,635
0
298,611
1,599,514 1,229,797
30,787
1,242,673 1,116,281
0.91
0
0.78
0
36,055
588,718
5,892
75,111
721,285
30,751
514,669
0.71
135,734
323,330
318,737
0
683,116
26,142
267,381
0.39
332,243
418,796
21,403
0
627,621
24,353
244,803
0.39
312,951
DKK ’000
2019
2018
2017
2016
2015
Cash flow
Cash outflow/inflow from
operating activities
Cash outflow/inflow from
investing activities
Cash outflow/inflow from
financing activities
Purchase of property, plant
and equipment
Free cash flow³
Other
Share price (DKK)
Market capitalization (DKKm)⁴
Equity per share (DKK)⁵
Average number of employees
Number of full time employees
at the end of the year
-409,455
-461,420
-278,746
40,904
-224,767
-51,666
882,925
221,351
-299,958
-1,594
674,480
-155,449
337,930
157,146
96,413
-21,036
-430,491
-4,038
-463,418
-7,226
-285,972
-2,600
38,304
-4,040
-228,807
235.40
8,487
34.52
173
82.40
2,537
36.33
146
85.00
2,614
16.77
128
106.50
2,784
11.24
124
151.50
3,689
10.29
110
179
149
133
108
106
¹
²
³
⁴
⁵
⁶
Restricted cash serves as collateral for the royalty bond issued in 2014. No cash has been restricted since Zealand has
redeemed the outstanding royalty bond in 2018.
Equity ratio is calculated as equity at the balance sheet date divided by total assets at the balance sheet date.
See page 100 regarding alternative performance measures.
Market capitalization is calculated as outstanding shares at the balance sheet date times the share price
at the balance sheet date.
Equity per share is calculated as shareholders’ equity divided by total number of shares less treasury shares.
Warrant expenses have been restated for the period 2015-2018. See note 1 to the consolidated financial statements.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
CL - 2020 Outlook and objectives
2020 Outlook
and Objectives
Financial guidance
In 2020, Zealand expects revenue from existing
license agreements. However, since such revenue
is uncertain in terms of amount and timing, Zealand
does not guide on such revenue.
We expect to achieve several
significant milestones in our
dasiglucagon and glepaglutide
programs in 2020, all advancing
toward becoming a fully integrated
biotech, so we can deliver on our
commitment to changing patient
lives and create additional value for
shareholders.
Net operating expenses in 2020 are expected to be
within the DKK 790-810 million range. The increase
compared to 2019 is due to a rise in administrative
expenses as the Company prepares for the product
launch and subsequent commercialization for the dasi-
glucagon HypoPal Rescue Pen as well as the clinical
development costs associated with glepaglutide and
the dasiglucagon CHI and DHAP programs in Phase 3.
1111
DKKm
2020
guidance
2019
2019
realized guidance¹
Net operating expenses2
1 As revised on August 15, 2019.
790-810
629
580-600
2
For definition of net operating expenses, refer to page 100.
Estimate guidance for 2019 was exceeded due to
increased levels of support needed in internal staffing
as well as from professional advisors and external
service providers as the Company prepares for a
product launch and subsequent commercialization.
2020 Objectives
Advance our early pipeline and
strategic alliances
• Complement C3 inhibitor¹: pre-clinical development towards Phase 1 initiation
• ZP 10000 α4β7 integrin inhibitor: pre-clinical development towards Phase 1 initiation
Execute on the clinical pipeline
• Dasiglucagon HypoPal® rescue pen: submit new drug application to U.S. FDA
• Dasiglucagon for congenital hyperinsulinism: Phase 3 clinical results expected in
2020, on track for 2021 new drug application
• Dasiglucagon for dual-hormone artificial pancreas pump: Phase 3 study initiation
• Glepaglutide for short bowel syndrome: complete patient enrollment in Phase 3 study
in 2020, with results and new drug application in 2021
• ZP 7570 for short bowel syndrome: Phase 1 program advancement
• BI 456906 for obesity/type 2 diabetes²: Phase 2 initiation
• Amylin analog for obesity/type 2 diabetes2: Phase 1 initiation
• Establish Boston-area office for Zealand Pharma U.S. operations
• Execute launch readiness program for dasiglucagon HypoPal rescue pen
• Disciplined financial management with tight cost control
Build Zealand Pharma U.S. and
advance launch readiness
Maintain a strong financial and
organizational position
¹ Partnered with Alexion Pharmaceuticals.
² Partnered with Boehringer Ingelheim.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
12
12
TP - COVER
Zealand's pipeline has never been
more robust than it is today, and
we have an amazing team capable
of expanding our leadership in the
discovery and development of next
generation peptide therapeutics.”
Adam Steensberg
Executive Vice President, Research & Development
and Chief Medical Officer
Transforming
peptides
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 TP - Transforming peptides
Transforming
Peptides
Discovering and optimizing peptides to create
new medicines
Peptides represent a therapeutic modality with over
60 approved and marketed peptide drugs and many
more in clinical development.¹
We leverage more than 20 years
of experience discovering and
developing peptide drugs to
transform peptide projects into
next generation therapeutics.
Find out more about Zealand on
zealandpharma.com/strategy
For more than twenty years, Zealand has been
successfully optimizing native peptide hormones
to confer the necessary properties to be a safe and
effective drug.
Native peptides are composed of amino acids (fifty
or less) in a linear or cyclic form, have powerful
biological functions but are inherently unstable and
short-lived. To convert these native peptides into an
effective peptide therapeutic requires the instability
and thus duration of action to be corrected while
maintaining or enhancing the biological activity. This
requires modifications to the amino acid sequence of
the peptide, generally using substitution with another
amino acid.
Zealand uses its unique in depth understanding of
peptide chemistry and biology to focus the substitu-
tion process on key amino acids to remove the weak
points that result in poor solubility, stability or activity,
and thus create new drug candidates.
We have successfully applied this approach to
glucagon, amylin, GLP-1, and GLP-2. Enhancing their
natural properties or combining their activities in
single peptides has presented multiple therapeutic
opportunities and led to lixizenatide, the first mar-
keted peptide drug discovered by Zealand’s peptide
platform.
1313
Strategic expansion
In 2019, Zealand Pharma completed its first acquisi-
tion with the purchase of Encycle Therapeutics, Inc.
The acquisition centered on a pre-clinical lead asset
that is being developed to target integrin α4β7, which
is involved in the pathogenesis of inflammatory bow-
el disease (IBD). Notably, this macrocycle technology,
derived from peptides, has enhanced potential for
penetration of membranes, thus creating poten-
tial for orally-delivered peptide drugs. Zealand also
gained access to a screening library of approximately
5,000 unique macrocycles that could provide addi-
tional targets for research using Zealand’s expertise in
peptide development.
Working with external innovation
In line with Zealand’s strategy to access cutting-edge
technology, we have a range of research collabora-
tions providing us with access to novel peptide librar-
ies (e.g. Orbit Discovery UK, the Torrey Pines Institute
for Molecular Studies U.S.A) or new technologies
for peptide stabilization and delivery. All are focused
on identifying peptides that act on disease-relevant
targets.
20 years
of experience
¹
J. Lau and M. Dunn, Therapeutic peptides: Historical perspectives, current development trends, and future directions.
Bioorganic & Medicinal Chemistry, version 26, issue 10, 1 June 2018, p. 2700-2707.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 14
14
TP - Pipeline overview
Pipeline
Overview
Zealand has a robust pipeline,
including one registration-ready
program, two Phase 3 programs
with one more entering Phase 3
this year, and several promising
early development projects.
Find out more about Zealand’s pipeline at
zealandpharma.com/product-pipeline
Product Candidate
Indication
Pre-
clinical
Phase 1
Phase 2
Phase 3
Regi-
stration
Development Programs
Dasiglucagon HypoPal® Rescue Pen
Severe hypoglycomia
Read more page 16
Dasiglucagon S.C. Continuous infusion
Congenital hyperinsulinism
Read more page 18
Dasiglucagon Dual-hormone Pump
Diabetes management
Read more page 20
Glepaglutide GLP-2 Analog
Read more page 23
Short bowel syndrome
ZP7570 GLP-1/GLP-2 Dual Agonist
Short bowel syndrome
Read more page 23
BI 456909 GLP-1/GLU Dual Agonist
Obesity/Type 2 diabetes1
Read more page 24
Amylin Analog
Read more page 24
Obesity/Type 2 diabetes2
Pre-Clinical Programs
Complement C3 Inhibitors
Read more page 25
Undisclosed³
ZP10000 α4β7 integrin inhibitor
Read more page 25
Inflammatory bowel disease⁴
Ion Channel Blockers
Read more page 25
Undisclosed
GIP/GLP-1/Glucagon Mono/Dual/Triple
Undisclosed
Read more page 25
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 Three patient
stories
We are honored to present three
profiles of people living with severe
unmet medical needs. Each story
provides a backdrop for how a
disease can affect every day life
for a patient, their family and
caregivers, and illustrates why we
are committed to delivering next
generation therapeutics to help
change their lives.
TP - Three patient stories
1515
Severe hypoglycemia
Anders lives with Type 1 diabetes. When his
blood glucose levels crashed unexpectedly,
he experienced severe hypoglycemia. Onset
of severe hypoglycemia was unpredictable
despite diligent management of Anders'
blood glucose levels.
Read more page 16
Congenital Hyperinsulinism
Crosby was born with congenital hyper-
insulinism. His parents were warned that
having a CHI baby was "going to be a really
tough journey." They tell about the chal-
lenges they have faced: from receiving a
rare prenatal diagnosis of the condition, to
trying to manage his volatile blood gluclose
levels.
Read more page 18
Short bowel syndrome
Will was diagnosed with short bowel syn-
drome at age 13. He began receiving total
parenteral support, a lifesaving therapy for
patients with intestinal failure that provides
all the elements of nutrition and hydration
needed to live via intravenous infusion.
Read more page 22
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 16
16
TP - Severe hypoglycemia
Severe
hypoglycemia
Severe hypoglycemia is an acute,
life-threatening condition resulting
from a critical drop in blood
glucose levels. Among the most
feared complications of diabetes
treatment1, severe hypoglycemia
requires another person for rescue.²
Read more of Anders’ story at
zealandpharma.com/anders-story
6 million people
With diabetes are on insulin therapy in the U.S.3
~300,000 hospitalizations
Occur annually in the U.S. due to severe
hypoglycemia4
Dasiglucagon HypoPal® Rescue Pen
The Dasiglucagon HypoPal® Rescue Pen is a ready-
to-use auto-injector containing 0.6 mg dasiglucagon,
and is designed to offer diabetes patients fast and
effective treatment for severe hypoglycemia.
2019 Achievements
The clinical program was concluded in 2019. 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 demonstrate that the
median time to blood glucose recovery was 10
minutes for dasiglucagon also in children.
Next steps
The submission of the New Drug Application with
the U.S. FDA is on track for early 2020. Build-up of
U.S. commercial operations is on track to support
the anticipated launch in 2021.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 1717
“Diabetes affects me all the
time, and I have to think about
it no matter what I do.”
Anders
Anders lives with type 1 diabetes. He constantly mon-
itors his blood glucose levels to maintain glycemic
control and good health. Despite wearing an insulin
pump to improve management of insulin injections,
he has experienced severe hypoglycemia multiple
times and it remains on the most feared challenges
of living with his type 1 diabetes.
Dasiglucagon HypoPal® rescue pen for potential fast treatment of severe
hypoglycemia; on track for early 2020 NDA submission.
Pivotal Phase 35
Confirmatory Phase 36
Pediatric Phase 37
40 min
35 min
30 min
For illustration only
10 min
12 min
10 min
10 min
12 min
Dasiglucagon
0.6 mg
Placebo
GlucaGen®
1.0 mg
Dasiglucagon
0.6 mg
Placebo
Dasiglucagon
0.6 mg
Placebo
GlucaGen®
1.0 mg
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Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
18
18
TP - Congenital hyperinsulinism
Congenital
Hyperinsulinism
300 newborns
Are diagnosed every year with genetically
determined CHI in the U.S. and EU1,2
Congenital hyperinsulinism (CHI)
is an ultra-rare and devastating
congenital disorder in newborns. It
is caused by a defect in pancreatic
beta cells, resulting in insulin
overproduction. This leads to
persistently and dangerously low
blood sugar levels (hypoglycemia).
Substantial burden
of disease
High resistance to existing medical treatment3
High risk of seizures and permanent brain injury4
Most severe cases require pancreatic surgery5
Prolonged hospitalization and intolerable
burden to patients, families, caregivers,
and healthcare systems2,6
Dasiglucagon Subcutaneous Continuous
Infusion
Dasiglucagon is a potential first-in-class glucagon
analog for the treatment of children with congenital
hyperinsulinism.
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 frequen-
cy of dangerous low blood glucose and need for
constant feeding, and to potentially delay or elimi-
nate the need for pancreatectomy. The U.S. FDA and
the European Commission both granted orphan drug
designation to dasiglucagon for the treatment of CHI.
Read more of Crosby’s story at
zealandpharma.com/crosbys-story
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 1919
2019 Achievements
The first Phase 3 trial with 32 CHI children aged
3 months to 12 years is ongoing and, the second
Phase 3 trial with 12 CHI children from 7 days up
to one year of age was initiated in December 2019.
Next Steps
Based on strong progress in patient enrollment,
results from the Phase 3 studies are expected
in 2020.
“Even though he appears to be such a
normal kid, any moment his blood sugar
can drop to a really dangerous level.
Crosby needs to have a nurse with him
at school because his blood sugar, even
on medication, is extremely volatile.”
Julie, Crosby’s mother
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 20
20
TP - Automated diabetes managment
Automated
diabetes
management
Currently, maintaining blood glucose levels requires
continuous intervention with insulin. The amount of
insulin administered is subject to continuous adapta-
tion dictated by the individual’s blood glucose levels,
food intake, activities such as exercise, sickness, prior
insulin injections, etc.
A person with type 1 diabetes
depends on multiple daily insulin
injections to maintain plasma
glucose in the normal ranges.1,2
When too much insulin is injected, dangerously low
blood glucose levels can develop and rapid intake of
sugar-rich food is needed to prevent development of
severe hypoglycemia. Conversely, injecting too little
insulin will lead to dangerously high blood glucose,
which is also associated with significant acute and
chronic complications.
Despite progress with faster acting modern insu-
lins and novel insulin pumps connected to glucose
sensors, current therapies require considerable effort
by the people with diabetes and their caregivers. As
such, type 1 diabetes remains one of the most bur-
densome diseases to manage.
When a person with type 1 diabetes experiences
dangerously low blood glucose, they produce an
insufficient amount of the counteracting hormone
glucagon, and depend on frequent ingestion of
excessive food to re-establish normal glucose levels.
Moreover, most people with type 1 diabetes keep
blood glucose levels in the higher ranges; only 17% of
children and 21% of adults diagnosed with diabetes in
the U.S. achieved the glycemic targets recommended
by American Diabetes Association.3
Dasiglucagon for dual hormone
artificial pancreas pump systems
Zealand is developing a 1 ml cartridge contain-
ing 4 mg/ml dasiglucagon, intended for use in
dual-hormone artificial pancreas pumps.
We are collaborating with Beta Bionics, develop-
er 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. Zealand has invest-
ed USD 5 million in Beta Bionics.
2019 Achievements
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 low blood
glucose levels < 54 mg/dL was only 0.3% in the
bihormonal and 0.6% in the insulin-only arm.
Next Steps
Zealand and Beta Bionics are in dialogue with
the FDA and expect to initiate the pivotal Phase
3 trial in late 2020.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 TP - Hypoglycemia following bariatric surgery
2121
Hypoglycemia
following
bariatric surgery
Dasiglucagon mini dose
Dasiglucagon mini dose may provide an attractive
treatment solution for people with type 1 diabe-
tes who experience hypoglycemic events, and for
whom eating or drinking carbohydrates is not an
option, similar to the post-bariatric patients.
A number of patients who have
undergone bariatric surgery as a
treatment for obesity, experience
reactive hypoglycemia after eating
a meal. Thus, ingesting additional
food or drink to increase plasma
glucose is not an option. There is
no approved treatment option for
the estimated 6,000 patients in the
U.S. who suffer from this serious
condition.
2019 Achievements
In October, a new clinical program was
initiated for dasiglucagon to evaluate its
potential as a novel treatment for patients with
post bariatric surgery hypoglycemia.
Next Steps
Results from the Phase 2 clinical proof of
concept dose-finding trial expected in 2020.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 22
22
TP - Short bowel syndrome
Short bowel
syndrome
Underlying causes for SBS include inflammatory bow-
el syndrome, intestinal infarction, radiation damage or
trauma, and recurrent intestinal obstruction or con-
genital disorders.1,2,3 SBS affects an estimated 20,000-
40,000 people in the U.S. and Europe.4
Patients with SBS have
undergone massive intestinal
surgery resulting in significantly
reduced or complete loss of
intestinal function.
Read more of Will’s story at
zealandpharma.com/wills-story
SBS patients cannot absorb adequate fluids and nu-
trition taken orally, and those most severely affected
become dependent on home parenteral support to sur-
vive. Home parenteral support is delivered through daily
infusion of intravenous fluids and nutrition via a central
venous catheter.1,2 Long-term use of parenteral support
carries a risk of catheter-related blood stream infec-
tions, blood clots, and organ impairment including liver
and kidney damage.2 Patients are required to connect
to the infusion lines and pumps for up to 16 hours every
day, which can pose significant restrictions on ability to
engage in normal daily activities.5
Limitations of current treatments
Management of SBS is a complex multidisciplinary
task with a focus on optimizing the patient’s hydra-
tion and nutritional status. It includes striking the right
balance between parenteral support and oral intake
of fluids and nutrition. Treatment with GLP-2 analogs
has been demonstrated to increase the absorptive
capacity of the remaining intestines, and thus enables
the patient to realize their full potential for intestinal
rehabilitation following surgery.
Despite the clear benefits of reducing the dependency
on parenteral support, people treated with the only
currently available short-acting GLP-2 therapy have
shown high levels of treatment discontinuation,1,2
which Zealand views as an opportunity for more ef-
fective, less complex and better tolerated treatments
tailored to the needs of SBS patients.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 2323
“As a thirteen year old, the
hardest part for me was that
I wasn’t able to participate in
sports. At the time, that was my
biggest concern. I realized later…
it was a lot bigger than just that.”
Will
Will has had short bowel syndrome since he was 13
years old. When first diagnosed, he was receiving
infusions of total parenteral nutrition (TPN) for 12
hours, every night of the week.
Being connected to the TPN infusion limited his
ability to leave the house and attend school. He has
worked hard to regain his freedom and quality of life
by optimizing his TPN and being connected fewer
hours and days per week. His goal is to be completely
free from receiving TPN.
Glepaglutide
Glepaglutide is a long-acting GLP-2 analog being
developed in an auto-injector with potential for
convenient weekly administration. GLP-2 molecules
stimulate the growth of intestinal tissue, increase nu-
trient and fluid absorption, increase intestinal blood
flow, and reduce gastric secretion and emptying.
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.
2019 Achievements
Phase 3 pivotal trial progress and ramp up in
patient enrollment.
2019 Achievements
The clinical program was started in June 2019
with a Phase 1a single-ascending dose, safety and
tolerability trial.
Next steps
Patient enrollment is expected to
be completed in 2020, and results are expected
in the first half of 2021.
Next Steps
Following good progress in the Phase 1a trial, we
expect to initiate a Phase 1b multiple-ascending
dose, safety and tolerability trial in 2020.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
24
24
TP - Obesity Type 2 diabetes
Obesity /
There are insufficient therapeutic options available, resulting in a high unmet medical need for
safe and effective treatments that achieve significant weight loss.
Type 2 Diabetes
Excessive weight and obesity are
amongst the leading risk factors for
heart disease, ischemic stroke, liver
diseases and type 2 diabetes as well
as for a number of cancers.
Find out more about our research at
zealandpharma.com/our-approach
Long-acting amylin analog
with Boehringer Ingelheim
Amylin is a pancreatic peptide hormone that plays an
important role in decreasing food intake and in the
regulation of postprandial plasma glucose levels.
The compound is a long-acting analog
of amylin and has demonstrated
significant weight loss in pre-clinical
models of obesity.²
In pre-clinical studies, Zealand and Boehringer In-
gelheim observed that the novel, long-acting amylin
analog may prevent the development of obesity in
pre-clinical models, suggesting its potential use in
treating obesity and obesity-related comorbidities.
Long-acting GLP-1/GLU dual agonist
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 and obesity.
A Phase 2 trial will be initiated in early
2020, based on the safety, tolerability,
and favorable weight loss potential in
individuals with a BMI up to 40 kg/m²
observed in Phase 1.¹
The Phase 2 trial is a randomized, parallel group,
dose-finding study of subcutaneously administered
BI 456906, compared with placebo and open-la-
bel semaglutide in 410 patients with Type 2 dia-
betes 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.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 Pre-Clinical
Projects
We continually look for opportunities
to enhance native peptides,
expand current Zealand drugs
into new indications, or discover
novel peptide therapeutics to
address unmet needs in specialty
gastrointestinal and metabolic
diseases.
Find out more about our research at
zealandpharma.com/our-approach
TP - Pre-clinical projects
2525
We have in-depth knowledge of the role of GLP-2 in
physiology and disease through our work on glep-
aglutide, and we see exciting opportunities beyond
short bowel syndrome. We have recently optimized
a single peptide, ZP7570, which has activity at both
the GLP-1 and GLP-2 receptors, with the potential to
treat specialty gastrointestinal and liver diseases. This
program will enter clinical development in the first
half of 2019.
We further utilize our understanding to discover
peptides that act as agonists and antagonists of other
endogenous hormones and their receptors. Our
pre-clinical pipeline includes programs focused on
analogs of endogenous peptide hormones, as well
as exploration of peptides as therapeutics acting on
components of the complement cascade, ion chan-
nels and other target classes.
Integrin α4β7
Inhibitor
ZP10000 (formerly ET3764)
is being developed as an
orally-delivered peptide drug
to target integrin α4β7, which
is involved in the pathogenesis
of inflammatory bowel disease
(IBD). The target’s mode of
action has been clinically
validated in IBD by vedolizum-
ab, an approved, infusion-only
α4β7 integrin inhibitor.
Ion Channel
Blockers
Ion channels are transmem-
brane proteins that control ion
flow across cell membranes
in almost all living cells. Their
dysregulation is implicated
in many diseases includ-
ing inflammatory diseases,
metabolic disorders and rare
channelopathies, and modify-
ing their function is likely to be
therapeutically relevant.
We have identified novel
peptides that are potent and
selective blockers of ion chan-
nels that may play roles in in-
flammation. Further optimiza-
tion is required and we expect
these programs to contribute
to the clinical pipeline in the
future.
GIP
analogs
Expanding on our GLP-1 ex-
perience, we have discovered
potent selective analogs of
gastric inhibitory peptide (GIP)
and extended this to single
peptides that have dual activity
at both GIP and GLP-1 as well
as single peptides with triple
activity (GIP/GLP-1/glucagon).
These peptides have therapeu-
tic potential to treat meta-
bolic diseases such as type
2 diabetes and obesity with
early clinical validation of GIP/
GLP-1 dual agonist provided
by a Phase 2 study reported in
2018 (Frias et al, The Lancet
392:2180-2193).
Complement C3
inhibitors
Altered activation of the com-
plement cascade is implicated
in many immune mediated
diseases and in particular rare
diseases such as paroxysmal
nocturnal hemoglobinuria,
cold agglutinin disease, myas-
thenia gravis and C3 glomeru-
lopathy. There is currently only
one approved drug to treat
complement mediated diseas-
es: an antibody that blocks the
complement cascade at C5,
the final step in complement
activation.
We have identified novel pep-
tides that are potent, selective,
long-acting inhibitors of the
complement cascade acting
at factor C3, upstream of C5
and thus offering potential
differentiation and broader
utility than current therapy. A
candidate will be selected for
pre-clinical toxicology in 2020
and progression to clinical de-
velopment is expected in 2021.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 26
26
AC - COVER
Through new partnerships
with industry leaders and
strategic investments in
innovation, we are creating
opportunities to help
more patients with our
novel therapeutics while
maximizing shareholder
value."
Marino Garcia,
Senior Vice President,
Business Development,
International Commercial &
New Product Planning
Approaching
commercialization
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 AC - Approaching commercialization
Approaching
commercialization
Establishing our presence in the U.S.
Zealand is on a journey to transform into a fully
integrated biotech company including commercial
operations.
We are building a fully integrated
commercial biotech company with
U.S. operations to market our own
therapies for rare diseases.
From our humble beginning in 1998, we have worked
to establish and strengthen our peptide platform. Our
skilled experience in transforming peptides into novel
therapeutics is proven by two products that have
been brought to market, and the licensed partner-
ships in which we have engaged during the past 20
years.
A strategic shift in 2015 was made to enable Zealand
to retain a greater portion of the value creation, by
commercializing fully-owned products. The period
immediately following saw our emphasis on late
stage clinical development, while maintaining our
strength in discovery and research. This incredibly
2727
productive period built the robust pipeline that we
have today, with four late-stage programs followed
by high potential early- and pre-clinical candidates.
As we are approaching commercialization, Zealand
entered into the final stage of transformation in 2019.
We are on the verge of four potential exciting prod-
uct launches in four years. With the decision made
last year to independently launch the dasiglucagon
HypoPal® rescue pen in the United States in 2021,
we quickly took action to begin building U.S. opera-
tions and infrastructure which will be launch-ready in
2021.
Delivering to patients globally
Our team is further dedicated to making Zealand
products available in markets outside the U.S., and
currently assessing the optimal way to best deliver
these much-needed therapeutics to patients.
Our strategy has consistently been to transform into a fully integrated biotech company
with commercial operations in the U.S.
Accelerating late stage
development
Robust pipeline including
three late stage programs
Establishing our Peptide Platform
Founded 1998
World-leading peptide platform with
two medicines brought to market
Licensed partnerships
Approaching commercialization
Establishing operations in the U.S.
NDA submission for
dasiglucagon HypoPal®
rescue pen planned
U.S. leadership,
commercial, medical and
corporate infrastructure
Boston facility to open
Glepaglutide
for short bowel
syndrome
Dasiglucagon
for congenital
hyperinsulinism
Dasiglucagon
dual hormone
artificial pancreas
Dasiglucagon
HypoPal® Rescue
Pen for severe
hypoglycemia
4 potential product launches in 4 years
1998
2019
2020
2021
2022
2023+
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 28
28
EP - COVER
"We leverage agility,
collaboration and boldness
to create and foster strong
partnerships across our value
chain."
Ivan Møller
Senior Vice President,
Technical Development and Operations
Engaging
Partnerships
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 EP - Engaging partnerships
2929
Boehringer Ingelheim
Zealand has a long-term and productive
partnership with Boehringer Ingelheim, to
develop an amylin analog and GLP-1/GLU
product candidates for obesity and/or
type 2 diabetes.
Alexion Pharmaceuticals
In March 2019, Zealand entered into a license,
research and development agreement with
Alexion Pharmaceuticals to develop novel
therapies to treat complement
mediated diseases.
Zealand has licensed two product candidates to
Boehringer Ingelheim, both with potential for
once-weekly administration. Under the terms of
the two agreements, Boehringer Ingelheim funds all
research, development and commercialization activ-
ities. For the GLP-1/glucagon dual agonist, Zealand is
entitled to receive up to EUR 365 million in outstand-
ing milestone payments. The agreement also carries
high-single digit to low-double digit percentage royal-
ties on global sales. The other collaboration compound
is a long-acting amylin analog for which Zealand is
entitled to receive up to EUR 283 million in outstanding
milestone payments, and mid-single digit to low-dou-
ble digit percentage royalties on global sales.
Boehringer Ingelheim’s track record of excellence in
research and development in cardiometabolic diseas-
es is evidence of its innovation which has resulted in
important breakthroughs in recent years, especially in
thromboembolic diseases and type 2 diabetes.
Peptides offer a number of advantages, including be-
ing highly selective and potent, allowing low dosage
volumes for ease of administration, and having the
potential to treat a broad range of complement-me-
diated diseases.
Under the Alexion license, research and develop-
ment agreement, we received an immediate upfront
non-refundable payment of USD 25 million for the
C3 program and a concurrent USD 15 million equity
investment in Zealand at a premium to the market
price. The agreement also provides the potential for
development-related milestones of up to USD 115
million, as well as up to USD 495 million in sales-re-
lated milestones and high single- to low double-digit
royalty payments. Additional programs will provide
further non-refundable upfront payments, develop-
ment and sales milestone and royalties.
Engaging
Partnerships
We engage with development
and commercial partners to
enhance innovation and expand
opportunities across markets and
therapeutics areas.
Find out more about our research at
zealandpharma.com/our-approach
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 30
30
Beta Bionics
Beta Bionics and Zealand have a non-exclusive
development partnership with the primary
goal of obtaining regulatory approval to use
dasiglucagon in the bihormonal configuration
of the iLet1.
The iLet, developed by Beta Bionics, is the world’s
first autonomous bionic pancreas device. This bihor-
monal system leverages lifelong machine learning
and artificial intelligence to deliver insulin and gluca-
gon analogs for automated management of Type 1
diabetes. In addition to dosing insulin, the iLet doses
dasiglucagon — Zealand's glucagon analog with a
unique stability profile in a ready-to-use aqueous
solution.
1 Caution: the iLet is an investigational device, limited by federal law to investigational use.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 CM - COVER
3131
"Conscientious cost management and
operational efficiency will enable us to
deliver on our current programs, and
complete our transformation in a revenue-
generating provider of treatments."
Matt Dallas
Senior Vice President and Chief Financial Officer
Corporate
matters
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 32
32
CM - Corporate Governance
Corporate
Governance
Zealand’s approach to corporate
governance is founded on ethics and
integrity, and forms the basis of our
efforts to ensure strong confidence
from our shareholders, partners,
employees and other stakeholders.
Read the full report on corporate governance at
zealandpharma.com/corporate-governance
As a company incorporated under the laws of Den-
mark, and with its shares admitted to trading and offi-
cial listing on Nasdaq Copenhagen, as well as having
American Depositary Shares representing Zealand
shares trading on Nasdaq Global Select Market in New
York, Zealand is subject to various applicable legis-
lations, standards and other regulations for publicly
traded companies. These include Danish and U.S.
securities law and the recommendations on corpo-
rate governance issued by the Danish Committee on
Corporate Governance (in the below ‘‘the Recom-
mendations’’).
Management structure
Zealand has a two-tier management structure com-
posed of the Board of Directors (“the Board”) and the
Corporate Management. The Board is responsible
for the overall visions, strategies and objectives, the
financial and managerial supervision of Zealand as well
as for regular evaluation of the work of the Corporate
Management. In addition, the Board provides general
oversight of Zealand's activities and ensures that it is
managed in a manner and in accordance with applica-
ble law and Zealand's articles of association.
The Board approves the policies and procedures, and
Corporate Management is responsible for the day-to-
day management of Zealand in compliance with the
guidelines and directions set by the Board of Directors.
The allocation of responsibilities between the Board
and the Corporate Management is stipulated in the
Rules of Procedure.
Board of Directors
The Board of Directors plays an active role in setting
Zealand's strategies and goals and in monitoring the
operations and results. The Board of Directors func-
Corporate governance structure
Annual General Meeting
Board of Directors
Nomination
Committee¹
Audit
Committee
Remuneration and
Compensation
Committee
Corporate Management
Organization
¹ Shareholder elected board members act as Nomination committee.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 3333
Evaluation of the Board of Directors
In the first two months of 2020 the annual
evaluation of the Board of Directors was car-
ried out by an independent vendor, PwC. The
process included electronic questionnaires
and one on one interviews with members
of the Board and members of the Corporate
Management. There were also one on one
meetings between the chairman and each
board member.
In general there was a good level of satis-
faction reported with the operation of the
Board and its interaction with members of the
Corporate Management.
tions according to its rules of procedure. Board duties
include establishing Zealand’s strategy, policies and
activities to achieve Zealand's objectives in accordance
with the Articles of Association.
In line with the Recommendations, the Board of
Directors annually reviews and determines the qual-
ifications and experience needed on the Board. The
chairman supervises the Board of Director's annual
self-evaluation of its performance.
The Board of Directors met thirteen times in 2019, of
which seven meetings were physical meetings.
Board Committees
The Board has established committees to support
the Board in its duties: Audit Committee, Remunera-
tion and Compensation Committee, and Nomination
Committee. The full board acts as its own Nomination
Committee.
Audit Committee
The Audit Committee assists the Board of Directors
with oversight of financial reporting, internal control
and risk management related to finance, and other
activities delegated by the Board of Directors.
Specific topics discussed in 2019 included accounting
treatment of agreement with Alexion Pharmaceuticals
and acquisition of Encycle Therapeutics, auditor’s re-
ports, accounting policies, internal controls, including
SOX (Sarbanes-Oxley Act) compliance, risk manage-
ment, insurance policy, year-end topics and external
financing.
The Audit Committee met nine times in 2019, of which
four meetings were physical meetings.
Overview of meetings in 2019
Attended
Absent
Martin Nicklasson
Kirsten A. Drejer
Jeffrey Berkowitz1
Bernadette Connaughton1
Alain Munoz
Leonard Kruimer
Michael J Owen
Hanne Heidenheim Bak
Jens Peter Stenvang
Rosemary Crane2
Catherine Moukheibir2
1 Elected at the Annual General Meeting on April 4, 2019
2 Stepped down at the Annual General Meeting held on April 4, 2019
Board
Audit
Committee
Remuneration and
Compensation
Committee
Nomination
Committee
-
-
-
-
-
-
-
-
-
-
-
-
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
34
34
Remuneration and Compensation Committee
The Remuneration and Compensation Committee
proposes the remuneration policy and general guide-
lines for incentive pay for the Board of Directors and
the CEO of Zealand as well as targets for compa-
ny-operated performance-related incentive programs.
These policies and guidelines set out the various com-
ponents of the remuneration, including fixed and vari-
able remuneration such as pension schemes, benefits,
retention bonuses, severance and incentive schemes
as well as the related bonus and evaluation criteria.
Specific topics discussed in 2019 included warrant
programs, long-term incentive programs in general,
company goals, employee salary levels, employee
pensions, and CEO and Board compensation.
The Remuneration and Compensation Committee
met physically three times in 2019.
Nomination committee
The Nomination Committee consists of all of the sev-
en shareholder-elected board members.
The Nomination Committee make recommendations
for decisions to the Board of Directors regarding board
and CEO positions and identifies and recommend
candidates for the Board of Directors.
Specific topics discussed in 2019 included the re-
placement of CEO, as Britt Meelby Jensen resigned
in November 2018, and candidates for the Board of
Directors.
The Nomination Committee met physically two times
in 2019.
Compliance with the Corporate
Governance Recommendations
Zealand complies with the Recommenda-
tions on Corporate Governance issued by the
Danish Committee on Corporate Governance,
November 23, 2017, with one exception:
3.4 Board committees (Recommendation,
section 3.4.8): The Remuneration and Com-
pensation Committee will be using the same
external advisers as the Executive Manage-
ment. The Board considers that the external
advisers will provide professional and unbiased
advice in both capacities: as advisers to the
Executive Management and to the Remunera-
tion and Compensation Committee.
The charter of the Audit Committee is
available at:
www.zealandpharma.com/audit-committee
The charter of the Remuneration and
Compensation Committee, the remuneration
report, the remuneration policy and the
guidelines for incentive pay are available at:
www.zealandpharma.com/remuneration-
and- compensation-committee
The rules of procedure of the Nomination
Committee are available at:
www.zealandpharma.com/nomination-
committee
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 CM - Corporate responsibility
Zealand’s guiding principles for operating responsibly
include:
• Enabling health, well-being, and competency de-
velopment of our employees, while ensuring a safe
workplace,
• Focusing collaboration with advocacy groups to
consolidate relations and obtain better treatment
options for patients,
• Conducting business according to the highest
ethical standards,
• Working actively and systematically to minimize our
impact on the environment and climate, and
• Communicating our corporate responsibility ac-
tions openly and honestly to external collaboration
partners, including our suppliers.
Commitment to Sustainable Development Goals
Zealand is committed to addressing global challeng-
es through support of the Sustainable Development
Goals established by the United Nations. Six goals
that are relevant to our business were placed into fo-
cus last year, and we continue to identify and imple-
ment initiatives and metrics to evaluate our progress
in these areas. Additional goals may be considered as
our company continues to grow and evolve.
Reporting framework
Our corporate responsibility efforts are based on the
requirements of the Danish Financial Statements Act,
and we comply with relevant laws, standards and
guidelines for reporting on corporate social responsi-
bility (CSR) activities. We have incorporated selected
UN Sustainable Development Goals that are aligned
to our business to further connect Zealand’s efforts
with those of other companies to address global
challenges.
Corporate
responsibility
As we work toward improving
care for patients and delivering
value for our shareholders, we
further recognize the importance
of protecting the world around
us. We believe in operating as a
responsible company that serves
broader economic, societal, and
environmental interests.
Read the full report at
zealandpharma.com/csr
3535
Addressing global challenges
Zealand is focused on supporting six of the
UN Sustainable Development Goals that are
relevant to our business.
SDG 3: Ensure healthy lives
and promote well-being for
all at all ages
SDG 5: Achieve gender
equality and empower all
women and girls
SDG 10: Reduce inequality
within and among countries
SDG 12: Ensure sustainable
consumption and production
patterns
SDG 16: Promote peaceful
and inclusive societies for
sustainable development,
provide access to justice
for all and build effective,
accountable and inclusive
institutions at all levels
SDG 17: Strengthen the
means of implementation
and revitalize the global
partnership for sustainable
development
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 36
36
CM - Our people
Our People
Highly qualified and motivated
employees are a prerequisite for
achieving the ambitious Zealand
business goals. We aspire to
attract, develop and retain the best
people and to be a company where
employees thrive, regardless of their
background or nationality.
Read about Zealand as a workplace at
zealandpharma.com/zealand-as-a-work-place
Engagement
Highly qualified and motivated employees are a pre-
requisite for achieving the ambitious Zealand busi-
ness goals. Zealand’s annual employee engagement
survey helps leaders and employees to continuously
improve the working environment, and results from
the 2019 survey show that Zealand employees are
both dedicated and motivated.
Competency development
Ensuring every employee has opportunity to both
improve upon their existing strengths while develop-
ing skills is critical to attracting and retaining qualified
and engaged employees. An analysis of all compe-
tency development plans made in 2019 showed that
the quantity and quality of competency development
plans has increased compared to previous years.
Health and well-being
We work to ensure our employees’ well-being and
have a number of policies in place to promote phys-
ical and psychosocial health as well as the safety of
Zealand’s working environment. Zealand has tak-
en Danish Labor Law as a starting point for related
policies and, in many cases, has gone beyond what
is required of public companies in order to be more
considerate of and responsive to the needs of its
workforce.
Safe work environment
Zealand works systematically to maintain a safe and
healthy work environment. We maintain numerous
procedures to support our work environment, and
train all Zealand employees in standard safety proto-
cols to enable self-management of their own occu-
pational safety.
Diversity
Zealand total
%
42
2019
Men
Women
58
Zealand Board of Directors
%
33
2019
Men
Women
67
Other key employee numbers
46.1
Average age of work force
17%
Non-Danish employees
3
Ph.D. students
1
Other trainees
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 "Everyday, our team approaches discovery
and research projects with a unique
combination of curiosity, determination
and enthusiasm. This is the core of
Zealand's success."
Rie Schultz Hansen
Vice President, Discovery and Innovation
3737
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 38
38
CM - Risk management
Risk management
and internal
control
This section contains a summary of Zealand’s key risk
areas and how we attempt to address and mitigate
such risks. Environmental and ethical risks are cov-
ered in our corporate social responsibility reporting,
and risks related to financial reporting are covered in
our corporate governance reporting.
We constantly monitor and assess
the overall risk of doing business in
the pharmaceutical/biotech industry
and the particular risks associated
with our current activities and
corporate profile.
Doing business in the pharmaceutical/biotech indus-
try involves major financial risks. The development of
novel medicines takes several years, costs are high,
and the probability of reaching the market is relatively
low due to developmental and regulatory hurdles.
Zealand’s Management is responsible for imple-
menting adequate systems and policies in relation
to risk management and internal control, and for
assessing the overall and specific risks associated
with Zealand’s business and operations. Furthermore,
Zealand’s Management seeks to ensure that such
risks are managed optimally and in a responsible and
efficient manner.
Risks of particular importance to Zealand are scientif-
ic and development risks, commercial risks, intellec-
tual property risks, clinical trial risks, regulatory risks,
partner interest risks, and financial risks. Risk and
mitigation plans are monitored by Management, and
the continuous risk assessment is an integral part of
the yearly reporting to the Board of Directors.
Zealand risk and mitigation
Commercial activities
– products in research
and development
Research and
development
Risks relating to mar-
ket size, competition,
development time and
costs, partner interest
and pricing of products in
development.
k
s
i
R
From early in the research
phase and throughout
development, commer-
cial potential and risks are
assessed to ensure that
final products have the
potential to be commer-
cially viable. Any major
changes in the commer-
cial potential of a drug
candidate can lead to
reduced value prospects
and, ultimately, discontin-
ued development.
n
o
i
t
a
g
i
t
i
M
Research and develop-
ment of new pharma-
ceutical medicines is
inherently a high-risk
activity. The probabil-
ity of discovering and
developing an efficient
and safe new medicine
with strong IP protection
is very low.
Throughout the research
and development pro-
cess, Zealand regularly
assesses these risks by
means of a quarterly risk
assessment of all the
Company’s research and
development projects,
conducted by Manage-
ment together with the
department heads and
project managers. This
assessment, which is
presented to the Board of
Directors, describes each
project and measures its
progress based on mile-
stones. It analyzes the
individual risks of each
project and prioritizes the
project portfolio.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 Zealand risk and mitigation – continued
3939
Clinical trials
Intellectual property
Regulatory
Future partnerships
Financial
k
s
i
R
Our product candidates will need
to undergo time-consuming and
expensive trials to document
efficacy and safety, the outcome
of which is unpredictable, and for
which there is a high risk of failure.
If clinical trials of our product
candidates fail to satisfactorily
demonstrate safety and efficacy
to the FDA, the EMA and other
comparable regulatory authorities,
Zealand may incur additional costs
or experience delays in complet-
ing, or ultimately not be able to
complete, the development of
these product candidates.
If Zealand or its partners were to
face infringement claims or chal-
lenges by third parties, an adverse
outcome could subject Zealand or
its partners to significant liabilities
to such third parties. This could
lead Zealand or its partners to
curtail or cease the development
of some or all of their candidate
drugs, or cause Zealand’s partners
to seek legal or contractual rem-
edies against Zealand, potentially
involving a reduction in the royal-
ties due to Zealand.
The regulatory approval processes
of the FDA, the EMA and other
comparable regulatory authori-
ties are lengthy, time consuming
and inherently unpredictable,
and if Zealand or its collaboration
partners are ultimately unable to
obtain regulatory approval for their
internal or outlicensed product
candidates, Zealand’s business
could be substantially harmed.
Entering into collaborations with
partners can bring significant
benefits as well as involve risks. In
addition, full control of the prod-
uct is often given to the partner.
Financial risks relate to cash and
treasury management, liquidity
forecasts and financing opportu-
nities.
Zealand’s clinical project teams
work closely with external expert
clinicians and product develop-
ment experts within the industry
to design, set up and conduct
the clinical programs. Zealand’s
employees have been selected due
to their extensive experience within
their field of expertise, receive
training and are continuously de-
veloped to fulfill requirements.
n
o
i
t
a
g
i
t
i
M
Zealand’s patent department
works closely with external patent
counsels and partners’ patent
counsels to minimize the risk of
patent infringement claims as well
as to prepare any patent defense
should this be necessary.
Zealand’s employees receive
training and updates on policies
regarding the correct and lawful
management of external intellec-
tual property.
Zealand’s regulatory department
works closely with external con-
sultants and regulatory agents to
develop regulatory strategies and
frequently interacts with regulato-
ry agencies.
Zealand has taken a decision to
increase its focus on proprietary
programs in order to decrease its
dependence on partners in the
development process and capture
more of the value of its projects.
However, partnerships may still be
relevant in the future and, in order
to maximize the value of such
partnerships, Zealand strives to
foster a close and open dialogue
with its partners, thereby building
strong partnerships that work
effectively.
Financial risks are managed in ac-
cordance with the Finance Policy,
regularly assessed by the Com-
pany’s Management and reported
to the Audit Committee and the
Board of Directors. Zealand is
continuously working to design
and implement an Internal Control
Framework responding to current
business risks and the require-
ments of the Sarbanes-Oxley Act.
See also p. 84, note 26 - Financial
risks.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
40
40
CM - Financial review
Financial review
Financial review for the period
January 1 – December 31, 2019
Since there is no significant difference in the devel-
opment of the Group and the Parent Company, the
financial review is based on the Group’s consolidated
financial information for the year ended December
31, 2019, with comparative figures for 2018 in brack-
ets.
Income statement
The net result for the financial year 2019 was DKK
-571.5 million (581.3). Further developing the late
stage clinical programs and expansion of the early
pipeline together with the commercialization efforts
are driving the cost base of Zealand. These factors
have increased R&D by DKK 123.2 million and in-
creased administrative expenses by DKK 24.3 million
in G&A compared to the year before.
The 2018 result was mainly a consequence of an
increase in Other operating income from the sale of
future milestones and royalties relating to the Sanofi
license having a net gain of DKK 1,098.9 million.
Revenue
Revenue in 2019 amounted to DKK 41.3 million
(38.0).
Revenue from research and development activities
amounted to DKK 41.3 million (0.0) that comprised
DKK 38.0 million Alexion Pharmaceuticals and DKK
3.3 million from an undisclosed counterpart in con-
nection with a Material Transfer Agreement. Revenue
related to the Alexion agreement is recognized over
the duration of the project based on the percentage
of completion.
No milestone payments were received in 2019
(13.1). The milestone payments in 2018 comprised
a payment of DKK 9.8 million from an undisclosed
counterpart in connection with a Material Transfer
Agreement and a payment of DKK 3.3 million from a
license agreement with Protagonist Therapeutics Inc.
No royalty revenue were received in 2019 (24.9). The
royalty revenues in 2018 were earned before the sale
of future Sanofi royalties and milestones from sales of
Lyxumia®/Adlyxin® and Soliqua® 100/33 that con-
tributed with DKK 1,098.9 million in Other Operating
Income in 2018.
Royalty Expenses
Royalty expenses for the year amounted to DKK 0.4
million (3.4) paid to third parties relating to the license
agreement with Sanofi.
Research and development expenses
Research and development (R&D) expenses amount-
ed to DKK 561.4 million (438.2). The increase in R&D
expenses for the year ended December 31, 2019, was
primarily related to external costs of DKK 71.6 million
from the planned development activities across the
Zealand programs. The amount comprises costs for
the three dasiglucagon programs, with main part on
the Phase 3 trials and launch preparations relating
to the rescue pen for severe hypoglycemia. It also
includes costs for the Phase 3 trial with glepaglutide
and clinical cost for the GLP-1/GLP-2 Dual agonist as
well as costs relating to pre-clinical activities.
The R&D share of the personnel expenses for the
year ended December 31, 2019, was DKK 178.1
million (153.6). The increase is mainly related to an
increase in the number of employees in the clinical
development organization.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 During Q1 2019, it was determined that warrants
comprised by the 2010 and 2015 employee incentive
programs granted in the period 2014 until Q4 2018
should be recognized over the vesting period (typ-
ically 3 years) and not when granted, and therefore
expenses have been overstated in this period. Such
misstatements have been corrected with retrospec-
tive impact and thus comparable periods as of and
for the years ended December 31, 2018 and 2017
have been restated as presented in note 1 to the con-
solidated financial statements.
Administrative expenses
Administrative expenses amounted to DKK 67.9
million (43.5). As the company becomes a fully inte-
grated biotech with commercial and medial opera-
tions, there are increased levels of support needed in
internal staffing as well as from professional advisors
and external service providers. There is an increase in
administrative expenses as a result and as the Com-
pany prepares for a product launch and subsequent
commercialization.
Other operating income
Other operating income amounted to DKK 0.4 million
(1,099.5) and mainly consists of government grants.
2018 was heavily impacted by the net gain from the
agreement to sell future royalty streams and USD
85 million of potential commercial milestones for
Soliqua® 100/33/ Suliqua® and Lyxumia®/Adlyxin®
to Royalty Pharma.
Operating result
The operating result for the year was DKK -587.9
million (652.4).
Net financial items
Net financial items amounted to DKK 11.3 million
(-27.3). The increase in financial income is mainly due
to the fair value adjustment of the investment in Beta
Bionics as well as an increase in interest and favora-
ble currency exchange rates. The majority of the de-
crease in financial expense is due to the redemption
of the royalty bond in 2018, which also saw interest
expense and amortized costs related to that bond in
the period totaling DKK 33.4 million. In 2019, inter-
est expenses were mainly comprised of the negative
return on cash balances in DKK and EUR.
Result before tax
Result before tax was DKK -576.7 million (625.1).
Corporate tax
With a net loss, no tax expense has been recorded
for the period. However, under Danish tax legisla-
tion, Zealand is eligible to receive DKK 5.5 million in
cash relating to the tax loss that originates from R&D
expenses for 2019. Corporate tax benefit amount to
DKK 5.1 million (-43.8) including a minor tax expense
in Zealand US.
No deferred tax asset has similar to prior years been
recognized in the statement of financial position due
4141
R&D and administrative expenses
DKKm
700
600
500
400
300
200
100
0
2013
2014
2015
2016
2017
2018
2019
R&D expenses
Administrative expenses
to uncertainty as to when and whether tax losses
carried forward will be utilized.
Net result and comprehensive result
The net result and comprehensive result both
amounted to DKK -571.5 million (581.3), in both cases
due to the factors described above.
Allocation of result
No dividend has been proposed, and the net result
for the year of DKK -571.5 million (581.3) has been
transferred to retained losses.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 42
42
Cash and cash equivalents, restricted
cash and securities
DKKm
1,500
1,200
900
600
300
0
2013
2014
2015
2016
2017
2018
2019
Securities
Restricted cash
Cash and equivalents
Statement of financial position
Marketable securities, cash and cash equivalents
At December 31, 2019, marketable securities, cash
and cash equivalents amounted to DKK 1,380.5 mil-
lion (1,159.2). The increase in cash and cash equiv-
alents is mainly due to the net proceeds from the
issue of shares in the year of DKK 683.2 million, and
the upfront cash and equity investment the company
received, USD 40 million, from the initiation of the
partnership program with Alexion Pharmaceuticals.
Equity
Equity amounted to DKK 1,242.7 million (1,116.3) at
December 31, 2019, corresponding to an equity ratio
of 78% (91%). The increase in equity is a result of the
capital increase including share premium of DKK
683.2 million in total (2.8) partly set off by the net re-
sult for the year of DKK -571.5 million (581.3) and the
recognition of warrants of DKK 14.8 million (17.5).
Cash flow
Cash outflow/inflow from operating activities
Cash flow from operating activities amounted to DKK
-409.5 million (-461.4), mainly due to the loss for the
year adjusted for the upfront cash and equity invest-
ment from the Alexion agreement.
The cash outflow from operating activities for 2018
was adjusted by the cash net gain from the agree-
ment to sell future royalty streams and USD 85 mil-
lion of potential commercial milestones for Soliqua®
100/33/ Suliqua® and Lyxumia®/Adlyxin® and for
other non-cash items.
Cash outflow/inflow from investing activities
Cash flow from investing activities amounted to DKK
-51.7 million (882.9), mainly comprising purchase
of other investment and property, plant and equip-
ment. 2018 was driven by the cash net gain from the
agreement to sell future royalty streams and USD
85 million of potential commercial milestones for
Soliqua® 100/33/ Suliqua® and Lyxumia®/Adlyxin of
DKK 1,105.5 million.
Cash flows related to other investments for the peri-
od amounted to DKK 22.8 million (0.0). Investment is
related to Beta Bionics, Inc. committed in 2018, but
not paid until early 2019.
Investments in plant and equipment for the period
amounted to DKK -21.0 million (-4.0), mainly related
to improvement of the new leased headquarter in
Denmark paid in cash.
No additional investments in marketable securities
has been made in 2019 (225.6). Zealand’s marketable
securities portfolio comprises listed short term bonds
in Danish Kroner to reduce interest expenses, while
still having the cash readily available for R&D activities
and other business opportunities.
Cash outflow/inflow from financing activities
Cash flow from financing activities amounted to DKK
674.5 million (-155.4), mainly related to capital contri-
bution from Van Herk Investments, Alexion Pharma-
ceuticals and proceeds from employees exercising
warrants. 2018 mainly related to the repayment of
the royalty bond.
The total cash flow for full-year 2019 amounted to
DKK 213.4 million (266.1).
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 CM - Shareholder information
4343
Shareholder
information
At December 31, 2019, the nominal value of Zea-
land’s share capital was DKK 36,054,661, divided into
36,054,661 shares with a nominal value of DKK 1
each. The share capital has remained unchanged as
of March 12, 2020.
Zealand is dual listed on Nasdaq
Copenhagen and Nasdaq Global
Select Market, New York, under
the ticker symbol ZEAL.
Find out more about our investor relations at
zealandpharma.com/investor
The share capital has increased by a nominal value
of DKK 5.3 million in 2019 mainly as a result of the
subscription of shares by Van Herk Investments and
Alexion Pharmaceuticals (DKK 4.8 million in total) and
exercise of employee warrants (DKK 0.5 million). All
Zealand shares are ordinary shares and belong to one
class. Each share listed by name in Zealand’s share-
holder register represents one vote at the annual
general meeting and other shareholders’ meetings.
Change in number of shareholders during 2019
The number of registered Zealand shareholders
decreased from 16,227 registered shareholders at
December 31, 2018, the number decreased to 14,567
at December 31, 2019. In addition, 2,726,647 shares
were represented by ADSs traded on Nasdaq Global
Select Market, New York.
At March 6, 2020, Zealand had 15,179 registered
shareholders, representing a total of 34,754,967
shares.
Ownership
The following shareholders are registered in Zea-
land’s register of shareholders as being the owners of
a minimum of 5% of the voting rights or a minimum
of 5% of the share capital (one share equals one vote)
at March 9, 2020:
• Van Herk Investments, Netherlands (19.3% of
votes/19.3% of capital).
Total shareholder composition
%
18
<1
5
15
43
2019
19
Institutional
Strategic Investor
Domestic retail
Non-Institutional
Company related
Miscellaneous
Institutional shares by investment style
%
27
5
8
31
2019
9
20
Value
Growth
GARP
Hedge fund
Index
Other
Institutional shares by geography
6
%
7
11
2
9
43
2019
22
United States
Denmark
United Kingdom
Sweden
France
Rest of Europe
Rest of World
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 44
44
• Wellington Management Group LLP, U.S. (9.8% of
votes/9.8% of capital).
Analyst coverage
Zealand is followed by the financial institutions and
analysts listed below:
• Sunstone LSV Management A/S, Denmark (6.0% of
votes/6.0% of capital).
Share price performance
The price of Zealand’s shares increased by 186%
during the year, which was above relevant indices,
such as the OMX Copenhagen Mid Cap index and
the NASDAQ Biotechnology index. The share price
at year-end 2019 was DKK 235.40, compared to DKK
82.40 at year-end 2018.
Annual General Meeting
The annual general meeting is scheduled to be held
on Thursday, April 2, 2020 at 3:00 PM CET, at Zealand
Pharma, Sydmarken 11, DK-2860 Søborg. Additional
information will become available at www.zealand-
pharma.com/annual-general-meeting no later than 3
weeks before the annual general meeting.
Nasdaq charting 2019 of Zealand's share price
Institution
Analyst’s name
U.S.
Guggenheim
Morgan Stanley
Needham
Etzer Darout
David N. Lebowitz
Alan Carr
United Kingdom
Goldman, Sachs & Co. Graig C. Suvannavejh
Jefferies
Peter Welford
France
Bryan, Garnier & Co
Oddo Securities
Eric Le Berrigaud
Oussama Denguir
Netherlands
Kempen
Denmark
Carnegie
Danske Bank
Handelsbanken
Nordea
Suzanne van Voorthuizen
Jesper Ilsøe
Thomas Bowers
Peter Sehested
Michael Novod
Core share data
Number of shares
and ADSs at
Dec. 31, 2019
Listing
Denmark
U.S.
36,054,661
2,726,647
Nasdaq
Copenhagen
Nasdaq Global Select
Market, New York
Ticker symbol
ZEAL
ZEAL
Index membership
OMXC
Copenhagen
Midcap
STOXX Europe
TMI Pharm
Financial calendar 2020
Event
Date
April 2
May 14
August 13
November 12
Annual General Meeting
Interim report for Q1 2020
Interim report for H1 2020
Interim report for Q3 2020
All dates are subject to NASDAQ deadlines and reporting re-
quirements and are subject to change.
Index
300
275
250
225
200
175
150
125
100
January
February
March
April
May
June
July
August
September October
November December
Zealand Pharma
OMX Copenhagen Mid Cap
NASDAQ Biotech
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
Board of
Directors and
Corporate
Management
CM - BoDo and CM
Zealand Board of Directors at March 12, 2020
4545
Martin Nicklasson
Kirsten A. Drejer
Jeffrey Berkowitz
Position
Chairman
Vice Chairman
Board member
Year of birth
1955
Nationality
Swedish
Gender
First elected
Committee
Male
2015
AuC, RemCo chair and
NomCo chair
Independent
Yes
1956
Danish
Female
2018
Yes
1966
American
Male
2019
AuC
Yes
Special
competencies
Extensive general management
and research and development
experience from AstraZeneca Plc
and Swedish Orphan Biovitrum AB
More than 30 years of interna-
tional experience in the phar-
maceutical and biotech industry.
Before co-founding Symphogen
A/S in 2000, held several scientific
and managerial positions at Novo
Nordisk A/S.
Global executive with extensive
branded and generic pharmaceu-
tical, retail pharmacy, wholesale
drug distribution, specialty, payor
and healthcare services leadership
experience in P&L accountable
roles.
Current positions
Chairman of the board of Orexo
AB and Kymab Ltd. Board mem-
ber of Basilea Pharmaceutica Ltd.
Find out more about the Board of Directors at
zealandpharma.com/
board-of-directors-and-nomination-committee
Zealand shares at
December 31, 2019
1,000
Zealand warrants at
December 31, 2019
Change in owner-
ship in 2019
0
0
Member of the Board of Directors
of H. Lundbeck A/S, Esperion
Theraptics, Inc. and Infinity Phar-
maceuticals, Inc.
Chairman of the board of Bioneer
A/S, Antag Therapeutics ApS, and
ResoTher Pharma ApS. Board
member of Bioporto A/S, Lyhne
& Co, and Alligator Bioscience.
Advisory board member of The
Faculty of Pharmaceutical Scienc-
es, Univ. of Copenhagen, and
DTU Bioengineering. Expert panel
member for InnoBooster grants.
500
0
0
0
0
0
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
46
46
Zealand Board of Directors at March 12, 2020, continued
Bernadette
Connaughton
Leonard Kruimer
Alain Munoz
Michael John Owen
Position
Board member
Board member
Board member
Board member
Year of birth
Nationality
Gender
First elected
Committee
Independent
Special
competencies
Current positions
1958
American
Female
2019
Yes
More than 30 years of
global strategic, com-
mercial and leadership
expertise, and a broad per-
spective on the strategy,
capabilities and govern-
ance required for success-
ful execution in U.S. and
international markets.
1958
Dutch
Male
2019
AuC Chair
Yes
More than 30 years of
experience in corporate
finance, planning and
strategy, including 15
years in senior executive
positions in private and
publicly listed biotechnol-
ogy companies.
Board member of
Halozyme Therapeutics,
Inc. and Syneos Health,
Inc. Board member of Boys
and Girls Club of Mercer
County.
Chairman of the Board of
BioInvent International AB
and independent board
member of Oncolytics.
Member of the investment
advisory council of Karmijn
Kapitaal.
1949
French
Male
2005²
RemCo
No
Physician qualified cardi-
ology and intensive care.
Experience in the phar-
maceutical industry at
senior management level.
Served as SVP for interna-
tional development in the
Sanofi Group and in the
pharmaceutical division of
Fournier Laboratories.
Independent board
member of Amryt Pharma,
Auris Medical and Oxthera
Member of the Scientific
advisory board of Valneva
SE.
Zealand shares at
December 31, 2019
Zealand warrants at
December 31, 2019
Change in owner-
ship in 2019
500
0
+500
4,000
0
+1,500
5,250
0
0
Hanne
Heidenheim Bak
Employee-elected
board member¹
1953
Danish
Female
2012³
Jens Peter Stenvang
Employee-elected
board member¹
1954
Danish
Male
2014⁴
No
No
Project management ex-
perience in drug develop-
ment from lead to launch,
focusing on CNS disease
and orphan drugs. Experi-
ence in disease awareness
and customer relationship
management.
Senior Director, Medical
Affairs Operations.
Laboratory Technician
(Biology).
9,684
14,000
-15,000
2,800
4,000
-700
1951
British
Male
2012
RemCo
Yes
Research experience
focusing on the immune
system and more than
150 publications. Has held
several leading positions
at GlaxoSmithKline, most
recently as SVP and head
of biopharmaceuticals
research.
Chairman of the board
of Ossianix Inc., and is
a member of the board
of Avacta Group plc,
ReNeuron Group plc,
Sareum Holdings plc,
Iksuda Therapeutics and
GammaDelta Therapeutics.
Adviser to the CRT Pioneer
Fund.
300
0
+300
¹ Employee-elected board members are elected for a period of four years. ² Resigned in 2006 and re-elected in 2007. ³ Elected term ended in 2014; re-elected in 2016 for a period of four years. ⁴ Elected term ended in 2018; re-elected in
2018 for a period of two years.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 CM - Management
4747
Zealand Corporate Management at March 12, 2020
Emmanuel Dulac
Matthew Dallas
Adam Steensberg
Ivan Møller
Marino Garcia
Position
Year of birth
Nationality
Gender
Joined Zealand
Experience
Executive Management
President and
Chief Executive Officer
(from April 22, 2019)
1969
French
Male
2019
Prior to joining Zealand, Em-
manuel was Chief Commercial
Officer for Alnylam Pharmaceu-
ticals, a biopharmaceutical com-
pany based in Boston, where he
was responsible for establishing
country operations and building
commercial capabilities to
successfully launch their first
commercial drug.
Emmanuel is a board member of
Proteostasis Therapeutics, Inc.
Executive Management
Senior Vice President and
Chief Financial Officer
(from October 7, 2019)
1975
American
Male
2019
Prior to joining Zealand, Matt
served as chief financial officer
at Aveo Pharmaceuticals, leading
finance for the publicly traded
biotechnology company and
was additionally responsible for
investor relations, facilities and
information technology. He was
previously CFO at CoLucid Phar-
maceuticals, which was acquired
by Eli Lilly. His earlier career
included positions at Genzyme,
NEN Life Science Products, and
Kimberly Clark.
Zealand shares at
December 31, 2019
Zealand warrants at
December 31, 2019
Zealand PSUs at
December 31, 2019
Change in ownership
in 2019
0
74,933
8,835
0
0
27,277
0
0
Executive Management
Executive Vice President,
Research and Development, and
Chief Medical Officer
1974
Danish
Male
2010
Prior to joining Zealand, Adam
led clinical research teams as
medical director at Novo Nor-
disk and worked as a clinician
at Rigshospitalet, University
of Copenhagen. Adam was a
medical and scientific advisor
in the areas of endocrinology,
cardiology, gastroenterology
and rheumatology, and has
significant experience of leading
regulatory strategies.
Senior Vice President,
Technical Development and
Operations
1972
American/Danish
Male
2018
Prior to joining Zealand, Ivan
worked for Novartis in both
generics and pharmaceutical
manufacturing, as well as in
strategy, quality assurance, con-
tract manufacturing and supply
chain leadership in Germany, the
U.S. and Switzerland.
Ivan was project leader at The
Boston Consulting Group in the
pharmaceutical R&D and manu-
facturing areas.
Senior Vice President,
Business Development,
International Commercial and
New Product Planning
1966
Canadian/Spanish
Male
2018
Marino has almost 25 years of
global pharma and biotech ex-
perience in senior commercial,
corporate strategy, and business
development roles. He has held
various U.S. and international
leadership positions of increas-
ing responsibility at pharma-
ceutical companies, including
Synergy Pharma, Aptalis Pharma,
Vifor Pharma, Aspreva Pharma-
ceuticals, Pfizer and Eli Lilly &
Co.
Adam is a board member of Beta
Bionics, Inc.
17,011
0
269,961
5,065
-5,789
63,778
2,803
0
0
65,976
3,062
0
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
48
48
Financial statements
Financial
statements
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 Con Fin – Content
Contents –
consolidated
financial
statements
Consolidated financial statements
Income statement
Statement of comprehensive income
Statement of financial position
Statement of cash flows
Statement of changes in equity
Business overview
Notes
1 Significant accounting policies, and significant
accounting estimates and assessments
2 Revenue
3 Royalty expenses
50
50
51
52
52
53
54
61
64
4 Research, development and administrative expenses 64
5 Fees to auditors appointed at the Annual
General Meeting
6 Information on staff and remuneration
7 Other operating income
8 Financial income
9 Financial expenses
10 Income tax benefit
11 Basic and diluted earnings per share
12 Licenses, rights and patents
13 Property, plant and equipment
14 Right-of-use assets
15 Other investments
65
65
73
74
74
75
76
77
78
79
80
4949
80
80
80
80
81
81
82
83
83
83
84
86
86
86
86
86
16 Trade receivables
17 Prepaid expenses
18 Other receivables
19 Marketable securities
20 Cash and cash equivalents
21 Share capital
22 Royalty bond
23 Deferred revenue
24 Other liabilities
25
Contingent assets, liabilities and
other contractual obligations
26 Financial risks
27 Related parties
28 Adjustments for non-cash items
29 Change in working capital
30 Significant events after the balance sheet date
31 Approval of the annual report
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 50
50
Con Fin – Income Statement
Consolidated financial statements
Consolidated income statement for the years ended
December 31, 2019, 2018 and 2017
Consolidated statements of comprehensive income for the years ended
December 31, 2019, 2018 and 2017
DKK thousand
Revenue
Royalty expenses
Research and development expenses
Administrative expenses
Other operating income
Operating result
Note
2
3
4,6
4,5,6
7
Restated1 Restated1
2017
2018
2019
DKK thousand
Note
Restated1 Restated1
2017
2018
2019
41,333
-415
-561,423
-67,881
37,977
-3,356
-438,219
-43,543
444 1,099,526
652,385
-587,942
136,322
-14,163
-323,949
-47,343
607
-248,526
Net result for the year
Other comprehensive income (loss)
Comprehensive result for the year
1 See note 1 to the consolidated financial statements.
-571,541
0
-571,541
581,278
0
581,278
-274,413
0
-274,413
The Business overview on page 53 and the accompanying notes on pages 54 to 86 form an
integral part of these financial statements.
Financial income
Financial expenses
Result before tax
Income tax
Net result for the year
Earnings/loss per share – DKK
Basic earnings/loss per share
Diluted earnings/loss per share
1 See note 1 to the consolidated financial statements.
8
9
14,655
-3,390
-576,677
9,988
-37,322
625,051
2,122
-33,509
-279,913
10
5,136
-571,541
-43,773
581,278
5,500
-274,413
11
11
-16.91
-16.91
18.94
18.94
-9.85
-9.85
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
Con Fin – Financial position
5151
Consolidated financial statements
Consolidated statements of financial position
as of December 31, 2019, 2018 and 2017
DKK thousand
Note
Restated1 Restated1
2017
2018
2019
DKK thousand
Note
Restated1 Restated1
2017
2018
2019
Assets
Non-current assets
Licenses, rights and patents
Plant and machinery
Other fixtures and fittings, tools and equipment
Leasehold improvements
Fixed assets under construction
Right-of-use assets
Deposits
Restricted cash
Other investments
Total non-current assets
Current assets
Trade receivables
Prepaid expenses
Corporate tax receivable
Other receivables
Marketable securities
Cash and cash equivalents
Total current assets
Total assets
1 See note 1 to the consolidated financial statements
12
13
13
13
13
14
15
16
17
18
19
20
2,480
13,457
8,337
3,913
14,001
85,632
9,012
0
35,632
172,464
0
13,650
1,794
186
0
0
2,762
0
32,582
50,974
0
14,855
953
304
0
0
2,729
5,892
9,312
34,045
751
3,274
30,755
11,740
7,101
1,195
7,935
3,368
299,448
298,611
860,635
1,081,060
1,427,050 1,178,823
5,679
7,253
5,500
4,979
75,111
588,718
687,240
1,599,514 1,229,797
721,285
Liabilities and equity
Share capital
Share premium
Retained losses
Equity
Royalty bond
Deferred revenue
Lease liabilities
Non-current liabilities
Trade payables
Corporate tax payables
Royalty bond
Lease liabilities
Deferred revenue
Other liabilities
Current liabilities
21
30,787
36,055
30,751
2,650,142 1,957,477 1,937,179
-871,983 -1,453,261
-1,443,524
514,669
1,242,673 1,116,281
22
23,26
26
0
83,639
78,068
161,707
0
0
0
0
132,986
0
0
132,986
57,533
614
0
7,692
56,251
73,044
195,134
32,652
0
0
0
0
80,864
113,516
29,428
0
2,748
0
0
41,454
73,630
22
26
23
24
Total liabilities
356,841
113,516
206,616
Total equity and liabilities
1 See note 1 to the consolidated financial statements
1,599,514 1,229,797
721,285
Significant accounting policies, and significant
accounting estimates and assessments
Fees to auditors appointed at the Annual
General Meeting
Information on staff and remuneration
Contingent assets, liabilities and other
contractual commitments
Financial risks
Related parties
Significant events after the balance sheet date
1
5
6
25
26
27
30
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
52
Total
Con Fin – Equity
Con Fin – Cash Flow
52
Consolidated financial statements
Consolidated statements of cash flows for the years
ended December 31, 2019, 2018 and 2017
Consolidated statements of changes in equity
at December 31, 2019, 2018 and 2017
DKK thousand
Net result for the year
Adjustments for non-cash items
Change in working capital
Deferred revenue
Financial income received
Financial expenses paid
Sale of future royalties and milestones
Income tax receipt
Income tax paid
Cash (outflow)/inflow from operating activities
Note
28
29
23
8
9
7
Transfer to restricted cash related to royalty bond
Transfer from restricted cash related to royalty bond
Transfer from restricted cash for royalty bond, interest
Sale of future royalties and milestones
Royalty expenses related to sale of
future royalties and milestones
Change in deposit
Purchase of other investments
Purchase of marketable securities
Sale of securities
Purchase of property, plant and equipment
Purchase of intangible assets
Sale of fixed assets
Dividends on securities
Cash (outflow)/inflow from investing activities
7
7
24
13
12
8
Proceeds from issuance of shares related
to exercise of warrants
Proceeds from issuance of shares (2017: IPO)
Costs related to issuance of shares (2017: IPO)
Leasing installments
Repayment of royalty bond
Cash (outflow)/inflow from financing activities
22
Restated1 Restated1
2017
2018
2019
-571,541
9,207
10,873
139,890
5,413
-3,390
93
0
-409,455
581,278
101,930
12,785
0
4,263
-16,705
0 -1,105,471
5,500
-45,000
-461,420
-274,413
24,534
-11,304
0
2,048
-25,111
0
5,500
0
-278,746
0
0
6,124
0
0
0
0 1,275,802
-60,675
365,795
7,725
0
0
-6,250
-22,803
0
0
-21,036
-2,480
25
878
-51,666
52,468
645,145
-14,444
-8,689
0
674,480
-170,331
-33
0
-299,849
74,230
-4,038
0
0
1,020
882,925
2,884
0
-22
0
-158,311
-155,449
266,056
588,718
5,861
860,635
0
-39
-9,312
-75,037
0
-7,226
0
120
0
221,351
6,790
567,076
-59,576
0
-176,360
337,930
280,535
323,330
-15,147
588,718
Increase/(Decrease) in cash and cash equivalents
Cash and cash equivalents at January 1
Exchange rate adjustments
Cash and cash equivalents at December 31
1 See note 1 to the consolidated financial statements
213,359
860,635
7,066
1,081,060
DKK thousand
Equity at January 1, 2019
as originally presented
Correction of error (net of tax)1
Restated equity at January 1, 2019
Comprehensive result for the year
Net result for the year
Warrant compensation expenses
Capital increases
Cost related to capital increases
Equity at December 31, 2019
Equity at January 1, 2018
as originally presented
Correction of error (net of tax)1
Restated equity at January 1, 2018
Comprehensive result for the year
Net profit for the year (restated)¹
Warrant compensation expenses
Capital increases
Restated equity at December 31, 2018
Equity at January 1, 2017
as originally presented
Correction of error (net of tax)1
Restated equity at January 1, 2017
Comprehensive loss for the year
Net loss for the year
Warrant compensation expenses
Capital increases
Cost related to capital increases
Equity at December 31, 2017
1 See note 1 to the consolidated financial statements.
Share
capital premium
Share Retained
losses
30,787 1,979,493
-22,016
30,787 1,957,477
0
-893,999 1,116,281
0
-871,983 1,116,281
22,016
0
0
5,268
0
-571,541
14,764
697,613
-14,444
36,055 2,650,142 -1,443,524 1,242,673
-571,541
0
0
0
0
14,764
692,345
-14,444
30,751 1,959,199 -1,475,281
22,020
-22,020
30,751 1,937,179 -1,453,261
0
514,669
0
514,669
0
0
36
0
17,472
2,826
30,787 1,957,477
581,278
0
0
581,278
17,472
2,862
-871,983 1,116,281
26,142 1,441,263 -1,200,023
21,175
-21,175
26,142 1,420,088 -1,178,848
0
267,382
0
267,382
0
0
4,609
0
-274,413
0
0
19,311
0
569,041
0
-71,261
30,751 1,937,179 -1,453,261
-274,413
19,311
573,650
-71,261
514,669
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
Con Fin – Business overview
5353
Consolidated financial statements
Business overview
Zealand (the “Company”, the “Group”, “Zealand” and “we”) was founded in 1998 and is a bio-
technology company focused on the discovery and development of innovative peptide-based
medicines. More than 10 drug candidates invented by Zealand have advanced into clinical de-
velopment, of which two have reached the market. Zealand’s current pipeline of internal prod-
uct candidates focus on specialty gastrointestinal and metabolic diseases. Zealand’s portfolio
also includes two clinical license collaborations with Boehringer Ingelheim and one discover
and develop collaboration with Alexion Pharmaceuticals.
In September 2018 we entered into an agreement with Royalty Pharma to transfer all the royal-
ties that we were due to earn from our 2003 agreement with Sanofi in exchange for an upfront
one-time payment of USD 205 million. Excluded from this agreement was a potential milestone
payment from Sanofi of up to USD 15 million. Please refer to note 7.
We have four fully owned programs in late clinical development:
4 Dasiglucagon for Congenital hyperinsulinism
Congenital hyperinsulinism, or CHI, is an ultra-rare but devastating disease caused by inap-
propriately elevated insulin secretion irrespective of glucose levels. This leads to frequent and
often severe hypoglycemia and long-term irreversible damage to health. In January 2018, the
FDA issued a safe-to-proceed letter. Two pivotal Phase 3 trials were initiated in 2019.
In addition to the late stage clinical programs we also have a pipeline of pre-clinical programs
with the potential to enter into the clinic in 2020 and the years to come.
Other significant events during 2019 are the agreement with Alexion Pharmaceuticals to collab-
orate on developing a complement C3 Inhibitor and the acquisition of Encycle Therapeutics
securing pre-clinical 4 7 integrin inhibitor and access to screening library of approximately
5,000 peptide-like macrocycles. Both being part of the pre-clinical expansion of the pipeline.
1 Glepaglutide, a long-acting GLP-2 analog in development for the treatment of short bowel
Company summary
syndrome (SBS).
The pivotal Phase 3 trial in 129 patients has continued in 2019 with expected full enrolment
in 2020. On track for 2021 results and new drug application.
Dasiglucagon, a Zealand-invented proprietary glucagon analog currently in development for
three different indications:
2 Dasiglucagon HypoPal® Rescue Pen for severe hypoglycemia
Ready-to-use dasiglucagon may offer diabetes patients and their families a fast treatment
solution for severe hypoglycemia that is easier to use than currently marketed glucagon kits.
The pivotal Phase 3 clinical program with dasiglucagon for the treatment of severe hypogly-
cemia was completed and New Drug Application submission is planned for first part of 2020.
3 Dasiglucagon in Dual-hormone pump therapy for diabetes treatment
Zealand has already reported positive results from two Phase 2a trials in 2017. In 2019 Phase
2 trial was completed and Phase 3 is planned for late 2020.
Zealand Pharma A/S subsidiaries
ZP Holding SPV K/S
ZP General Partner 1 ApS
Zealand Pharma US Inc.
Encycle Therapeutics Inc.
ZP SPV 3 K/S
ZP General Partner 3 ApS
ZP Holding SPV K/S subsidiaries
ZP SPV 1 K/S
ZP General Partner 2 ApS
Domicile
Owner-
ship
Voting
rights
Denmark
Denmark
United States
Canada
Denmark
Denmark
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Denmark
Denmark
100%
100%
100%
100%
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
54
Notes
Con Fin – Note 1
54
Note 1 – Significant accounting policies, and significant accounting estimates and assessments
Significant accounting policies
Basis of preparation
The consolidated financial statements of Zealand have been prepared in accordance with
International Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board (IASB) and as adopted by the EU and additional requirements under the Danish
Financial Statements Act.
The Board of Directors considered and approved the 2019 Annual Report of Zealand on
March 12, 2020. The Annual Report will be submitted to the shareholders of Zealand for
approval at the Annual General Meeting on April 2, 2020.
The consolidated financial statements are presented on a historical cost basis, except for cer-
tain financial assets and liabilities measured at fair value.
Historical cost is generally based on the fair value of the consideration given in exchange for
goods and services.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date, regardless of
whether that price is directly observable or estimated using another valuation technique.
For financial reporting purposes, fair value measurements are categorized into Level 1, 2 or 3
based on the degree to which the inputs to the fair value measurements are observable and
on the significance of the inputs to the fair value measurement as a whole. The inputs are
described as follows:
Implementation of new and revised standards and interpretations
The Group has adopted the following new and amended standards as described below. Other
amendments effective for 2019 have no impact on the financial statements for Zealand.
IFRS 16 Leases
IFRS 16 replaces IAS 17 and requires all leases to be recognized as a right-of-use asset and
lease liability, measured at the present value of future lease payments. The right-of-use asset is
subsequently depreciated in a similar way to other depreciable assets over the lease term and
interest calculated on the lease liability in a similar way to how it is calculated on finance leases
under IAS 17. Consequently, the change impacts the presentation in the income statement and
the statement of cash flows.
The Group leases properties, equipment and cars. The Group recognizes leases as a right-of-
use asset and a corresponding liability at the date at which the leased asset is available for use.
We refer to note 14 regarding the right-of-use assets and liabilities.
On adoption of IFRS 16, the Group recognized lease liabilities in relation to leases, which had
previously been classified as “operating leases” under the principles of IAS 17, Leases. These li-
abilities were measured at the present value of the remaining lease payments, discounted using
the Lessee’s incremental borrowing rate as of January 1, 2019.
The associated right-of-use assets were at the transition date measured at the amount equal to
the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to
the leases recognized in the statement of financial position as at December 31, 2018.
In the income statement, application of IFRS 16 results in recognition of a depreciation of the
right-of-use asset and an interest expense rather than an operating lease expense.
• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities
that the entity can access at the measurement date
• Implementation method
• Level 2 inputs are inputs, other than quoted prices included within Level 1 that are observable
spective approach whereby comparative figures are not restated.
for the asset or liability, either directly or indirectly
• The Group has adopted IFRS 16, Leases from January 1, 2019, using the modified retro-
• Level 3 inputs are fair value measures derived from valuation techniques that include inputs
for the asset or liability that are not based on observable market data (unobservable inputs).
The consolidated financial statements are presented in Danish kroner (DKK), which is the func-
tional currency of the Parent Company.
In the narrative sections of the financial statements, comparative figures for 2018 and 2017 are
shown in brackets.
IFRIC 23, Uncertainty over income tax treatments
IFRIC 23 provides guidance in respect of recognition and measurement of income tax balanc-
es if uncertainty over the tax treatment exist. Implementation of the interpretation has had no
impact on the income tax balances recognized in the financial statements.
Annual improvements 2015-2017
Comprises minor changes to IFRS 3, IFRS 11, IAS 12 and IAS 23. The amendments have no
impact on the accounting policies applied.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 5555
Notes
Note 1 – Significant accounting policies, and significant accounting estimates and assessments (continued)
Standards and interpretations not yet applied
IASB has issued a number of new and amended standards which are not yet effective. None of
these new standards or amendments are expected to impact the Group’s accounting policies.
Accounting policies
The accounting policies are apart from the application of IFRS 16, Leases, unchanged from last
year. The accounting policies for specific line items and transactions are included in the respec-
tive notes to the financial statements except for basis and principles of consolidation, foreign
currency translation, classification of income statement, segment reporting, classification of
financial assets and the cash flow statement, which are included below.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company
and entities (including structured entities) controlled by the Company and its subsidiaries. Con-
trol is achieved when the Company:
• has power over the investee;
the statement of financial position date and the rate at the date on which the receivable or pay-
able arose are recognized in the income statement as financial income and financial expenses.
Non-monetary assets purchased in foreign currencies are measured at the exchange rate on
the transaction date.
Consolidated financial statements
Income statement
The expenses recognized in the income statement is presented as an analysis using a classifica-
tion based on their function.
Segment reporting
The Group is managed by a Corporate Management team reporting to the Chief Executive
Officer. The Corporate Management team, including the Chief Executive Officer, represents the
chief operating decision maker (CODM). No separate business areas or separate business units
have been identified in connection with product candidates or geographical markets. Conse-
quently, there is no segment reporting concerning business areas or geographical areas.
• is exposed, or has rights, to variable returns from its involvement with the investee; and
• has the ability to use its power to affect its returns.
Statement of financial position
The Company reassesses whether it controls an investee if facts and circumstances indicate
that there are changes to one or more of the three elements of control listed above.
Principles of consolidation
The consolidated financial statements are prepared on the basis of the financial statements of
the parent company and the individual subsidiaries, which are based on uniform accounting
policies and accounting periods in all Group entities. Consolidation of Group entities is per-
formed after elimination of all intra-Group transactions, balances, income and expenses.
Foreign currency translation
Transactions denominated in foreign currencies are translated at the exchange rates on the
transaction dates.
Exchange differences arising between the rate on the transaction date and the rate on the pay-
ment day are recognized in the income statement as financial income or financial expenses.
Receivables, payables and other monetary items denominated in foreign currencies that have
not been settled at the statement of financial position date are translated by applying the ex-
change rates at the statement of financial position date. Differences arising between the rate at
Financial assets
Financial assets include receivables, marketable securities and cash. Financial assets are divided
into categories of which the following are relevant for the Group:
1. Financial assets at amortized cost comprising of receivables with contractual cash flows
solely comprising of payment of principal and interest and which are held for the purpose of
collecting the contractual cash flow.
2. Financial assets at fair value through the income statement, which are marketable securities
held in a business model whose purpose is to regularly sell marketable securities within the
portfolio.
3. Equity investments. These investments are measured at fair value through the income state-
ment.
Financial assets are assigned to the different categories by Management on initial recognition,
depending on the cash flow characteristics and purpose for which the assets were acquired.
All financial assets are recognized on their settlement date. All financial assets other than those
classified at fair value through the income statement are initially recognized at fair value, plus
transaction costs.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 56
Notes
56
Note 1 – Significant accounting policies, and significant accounting estimates and assessments (continued)
Statement of cash flows
The cash flow statement is prepared in accordance with the indirect method on the basis of the
net loss for the year. The statement shows the cash flows broken down into operating, invest-
ing and financing activities, cash and cash equivalents at the beginning and end of the year, and
the impact of the calculated cash flows on cash and cash equivalents.
Cash flows in foreign currencies are translated into Danish kroner at the exchange rate on the
transaction date.
affects only that period, or in the period of the revision and future periods if the revision affects
both current and future periods.
The estimates used are based on assumptions assessed to be reasonable by Management.
However, estimates are inherently uncertain and unpredictable. The assumptions may be
incomplete or inaccurate, and unexpected events or circumstances may occur. Furthermore,
we are subject to risks and uncertainties that may result in deviations in actual results compared
with estimates.
Cash flow from operating activities
Cash flow from operating activities is presented indirectly and is calculated as the net result ad-
justed for sale of royalties, non-cash operating items, changes in net working capital, financial
items paid, and income tax benefits received and paid.
No significant changes have been made to accounting estimates and assessments in 2019.
The following are the most significant accounting judgements and estimates applied by Man-
agement in these financial statements:
Cash flow from investing activities
Cash flow from investing activities includes cash flows from the sale of future royalties and
milestone relating to the Sanofi license, purchase and sale of property, plant and equipment,
investments and deposits, as well as transfers to and from restricted cash related to the royalty
bond.
Cash flow from financing activities
Cash flow from financing activities includes proceeds from issuance of new shares and related
costs, finance lease installments and loan financing.
Cash and cash equivalents
Cash and cash equivalents comprise cash and bank balances.
Significant accounting estimates and judgments
In applying our accounting policies, Management is required to make judgments based on the
specific facts and circumstances relevant to the assessment.
In preparing the financial statements, Management makes a number of accounting estimates
that form the basis for the recognition and measurement of our assets and liabilities.
In applying our accounting policies, Management is required to make judgements and esti-
mates about the carrying amounts of assets and liabilities that are not readily apparent from
other sources. The estimates including assumptions are based on historical experience and
other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to ac-
counting estimates are recognized in the period in which the estimate is revised if the revision
Revenue recognition (management judgement)
Revenue comprises license payments, milestone payments and royalty income. License
payments which provide the buyer with the right to use the license as it exists at the date of
transfer are recognized upon transfer of the associated licensing rights at the point at which
the buyer obtains the right to use the license. Upon entering into agreements with multiple
components, Management determines whether individual components are distinct, which is
the case if the buyer can obtain benefits from the goods or service and the promise is distinct
within the context of the contract. If no individual components are distinct, the contract is
treated as a single performance obligation. When entering into licensing and development
agreements, a critical judgment relates to whether the customer could continue development
of the IP to the stage promised by Zealand under the promise to provide R&D services. If this is
not the case, the IP and the R&D services are considered a single performance obligation.
Milestone payments are related to the collaborative research agreements with commercial
partners and are recognized when it is highly probable that Zealand Pharma will become enti-
tled to the milestone which is generally when the milestone is achieved. Royalty income from
licenses is based on third-party sales of licensed products and is recognized in accordance with
contract terms in the period in which the sales occur.
Revenue from transactions involving the rendering of services which are consumed by the cus-
tomer simultaneously with delivery is recognized along with delivery of the services.
Employee incentive programs (management estimates)
In accordance with IFRS 2, Share-based Payment, the fair value of the warrants classified
as equity settled is measured at the grant date and recognized as an expense in the income
statement over the vesting period. The fair value of each warrant granted during the year is
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 5757
Notes
Note 1 – Significant accounting policies, and significant accounting estimates and assessments (continued)
estimated using the Black– Scholes option pricing model. This requires the input of subjective
assumptions such as:
(cliff vesting). The vesting period is typically 3 years resulting in straight-line recognition of the
cost over 3 years rather than up front.
• The expected stock price volatility, which is based on the historical volatility of Zealand’s
share price
• The selection of the risk-free interest rate, which is determined as the interest rate on Danish
government bonds with a maturity equal to the expected term
• The duration of the warrants, which is assumed to be until the middle of the exercise period
The total fair value of the warrants is recognized in the income statement over the vesting
period. An adjustment is made to reflect an expected attrition rate during the vesting period.
The attrition rate is re-estimated at year-end based on the historical attrition rate resulting
in recognition of an expense equal to grant date fair value of the number of warrants which
actually vest.
Encycle Therapeutics, Inc. acquisition (management judgement)
As of October 2019, Zealand acquired all outstanding shares in Encycle Therapeutics, Inc. and
all its intellectual property, including all rights to develop and commercialize the lead asset.
Zealand will not be acquiring any infrastructure or personnel costs with this transaction. The
total future consideration for the acquisition could potentially reach USD 80 million in one-time
contingent value rights (“earn-outs”), of which USD 10 million in earn-outs could be payable up
to the successful completion of a Phase 2 study. All earn-outs are payable in cash and/or Zea-
land equity at Zealand’s discretion, are linked to the lead asset only, and contingent on certain
future successful development, regulatory, and commercial-related milestones. There is also
a potential mid-single digit royalty on global net sales from the lead asset. Management has
assessed that this acquisition is an asset acquisition, and thus will be accounted for in accord-
ance with IAS 38, Intangible Assets and is not considered a business combination under IFRS 3,
Business Combinations.
Restatement (management judgement)
During Q1 2019 a restatement related to warrants was identified by Management. The Com-
pany grants, on a regular basis, equity settled warrants to Corporate Management and other
employees. Historically, the warrants were deemed vested at grant date. Consequently, the full
fair value at grant date has been recognized as an expense as of this date. Management has
reconsidered the allocation of expenses of warrants. Management has concluded, the warrants
vest at a future date as they become exercisable only upon continued employment during the
time period from grant date up until the specified future date (i.e. the date upon which the
warrants become exercisable). All warrants granted at one point in time vest on the same date
The restatement affects reported profit/loss for the year ended December 31, 2018 and prior
years. While the impact on interim periods is significant, the full year impact is insignificant as
the impact between the quarterly interim periods primarily nets out the full year impact.
Due to the fact that the warrants are equity settled, the counter-entry to the restated expense
is equity. Consequently, the restatement has no impact on reported total equity in any periods.
The value of warrants recognized in equity is presented as part of share premium. Consequent-
ly, the restatement results in a reduction of the share premium and a corresponding decrease
in accumulated loss equal to the cumulative effect on reported profit/loss in prior years for
warrants not fully vested as at January 1, 2018.
The impact of the restatements of warrants on the statement of cash flow is solely a reclassi-
fication between “Net profit/loss for the period” and “Change in working capital”. Hence, there
is no impact on the cash flow from operating activities. Therefore, the Company deemed it
irrelevant to present restated statements of cash flow.
The nature and impact of each restatement in 2017 and 2018 per line item in the consolidated
income statement and consolidated statement of financial position for Zealand is presented on
page 58 and 59.
Income statement:
Research and development expenses and Administrative expenses
Warrant expenses recognized in staff expenses classified as Research and development expens-
es and Administrative expenses, respectively, have been restated as described above.
The restatement has an opposing tax impact of 22% in 2018 because of the positive taxable
income, whereas there is no recognized tax impact in 2017 due to the negative taxable income.
Statement of financial position:
Share premium/Retained Losses (Equity)
The counter-entry to the warrant expenses recognized in the income statement (debit) is Share
Premium (credit) in Equity. The impact on the income statement is recognized in Retained
losses (debit) in Equity, thus results in no net impact on Equity.
The restatement of Share premium and Retained losses impact shows the cumulative impact.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 58
Notes
58
Note 1 – Significant accounting policies, and significant accounting estimates and assessments (continued)
Consolidated income statement for the twelve month period
ended December 31, 2018
Consolidated income statement for the twelve month period
ended December 31, 2017
As most recently
reported,
December 31,
2018
Restate-
ment
Amount as
adjusted,
December 31,
2018
As most recently
reported,
December 31,
2017
Restate-
ment
Amount as
adjusted,
December 31,
2017
DKK thousand
Revenue
Royalty expenses
Research and
development expenses
Administrative expenses
Other operating income
Operating result
Financial income
Financial expenses
Result before tax
Income tax
Net result for the year
37,977
-3,356
-438,215
-43,542
1,099,526
652,390
9,988
-37,322
625,056
-43,774
581,282
0
0
-4
-1
0
-5
0
0
-5
1
-4
DKK thousand
Revenue
Royalty expenses
Research and
development expenses
Administrative expenses
Other operating income
Operating result
Financial income
Financial expenses
Result before tax
Income tax
Net result for the year
136,322
-14,163
-324,667
-47,470
607
-249,371
2,122
-33,509
-280,758
5,500
-275,258
0
0
718
127
0
845
0
0
845
0
845
37,977
-3,356
-438,219
-43,543
1,099,526
652,385
9,988
-37,322
625,051
-43,773
581,278
18.94
18.94
136,322
-14,163
-323,949
-47,343
607
-248,526
2,122
-33,509
-279,913
5,500
-274,413
-9.85
-9.85
Earnings per share - basic (DKK)
Earnings per share - diluted (DKK)
18.94
18.94
0.00
0.00
Loss per share - basic (DKK)
Loss per share - diluted (DKK)
-9.88
-9.88
-0.03
-0.03
Consolidated statements of comprehensive income for the year ended
December 31, 2018
Consolidated statements of comprehensive income for the year ended
December 31, 2017
DKK thousand
Net result for the year
Other comprehensive
income (loss)
Net result for the year
As most recently
reported,
December 31,
2018
581,282
0
581,282
Restate-
ment
-4
0
-4
Amount as
adjusted,
December 31,
2018
581,278
0
581,278
DKK thousand
Net result for the year
Other comprehensive
income (loss)
Net result for the year
As most recently
reported,
December 31,
2017
-275,258
0
-275,258
Restate-
ment
845
0
845
Amount as
adjusted,
December 31,
2017
-274,413
0
-274,413
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
Notes
Note 1 – Significant accounting policies, and significant accounting estimates and assessments (continued)
Consolidated statement of financial position
as of December 31, 2018
Consolidated statement of financial position
as of December 31, 2017
5959
As most recently
reported,
December 31,
2018
Restate-
ment
Amount as
adjusted,
December 31,
2018
As most recently
reported,
December 31,
2017
Restate-
ment
Amount as
adjusted,
December 31,
2017
DKK thousand
Equity and liabilities
Share capital
Share premium
Retained losses
Equity
Royalty bond
Deferred revenue
Lease liabilities
Non-current liabilities
Trade payables
Corporate tax payables
Royalty bond
Lease liabilities
Deferred revenue
Other liabilities
Current liabilities
Total liabilities
30,787
1,979,493
-893,999
1,116,281
0
-22,016
22,016
0
0
0
0
0
32,652
0
0
0
0
80,864
113,516
113,516
0
0
0
0
0
0
0
0
0
0
0
0
0
DKK thousand
Equity and liabilities
Share capital
Share premium
Retained losses
Equity
Royalty bond
Deferred revenue
Lease liabilities
Non-current liabilities
Trade payables
Corporate tax payables
Royalty bond
Lease liabilities
Deferred revenue
Other liabilities
Current liabilities
30,787
1,957,477
-871,983
1,116,281
0
0
0
0
32,652
0
0
0
0
80,864
113,516
30,751
1,959,199
-1,475,281
514,669
0
-22,020
22,020
0
132,986
0
0
132,986
29,428
0
2,748
0
0
41,454
73,630
0
0
0
0
0
0
0
0
0
0
0
0
0
30,751
1,937,179
-1,453,261
514,669
132,986
0
0
132,986
29,428
0
2,748
0
0
41,454
73,630
206,616
721,285
Total equity and liabilities
1,229,797
113,516
Total liabilities
206,616
1,229,797
Total equity and liabilities
721,285
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
60
Notes
60
Note 1 – Change in accounting policies (continued)
Change in accounting policies
Below is explained the impact of the adoption of IFRS 16, Leases on the Group’s financial state-
ments.
As indicated above, the Group has adopted IFRS 16, Leases retrospectively from January 1,
2019, but has not changed comparatives for the 2018 reporting period, as permitted under the
specific transition provisions in the standard. The changes arise from the new leasing standard
are therefore recognized in the opening statement of financial position on January 1, 2019. The
new accounting policies are disclosed in note 14.
On adoption of IFRS 16, the Group recognized lease liabilities in relation to leases which had
previously been classified as ‘operating leases’ under the principles of IAS 17, Leases. These lia-
bilities were measured at the present value of the remaining lease payments, discounted using
the lessee’s incremental borrowing rate as of January 1, 2019. The weighted average lessee’s
incremental borrowing rate applied to the lease liabilities was 2.1%.
No leases were previously classified as finance leases under the principles of IAS 17.
Practical expedients applied
In applying IFRS 16 for the first time, the Group has used the following practical expedients
permitted by the standard:
• applying a single discount rate to a portfolio of leases with reasonably similar characteristics
• relying on previous assessments on whether leases are onerous as an alternative to perform-
ing an impairment review – there were no onerous contracts as at January 1, 2019, and
• using hindsight in determining the lease term where the contract contains options to extend
or terminate the lease.
The Group has also elected not to reassess whether a contract is, or contains a lease at the
date of initial application. Instead, for contracts entered into before the transition date the
Group relied on its assessment made applying IAS 17 and IFRIC 4, Determining Whether an
Arrangement Contains a Lease.
Measurement of lease liabilities
DKK thousand
Jan 1, 2019
Reconciliation
Operating lease obligations disclosed at December 31, 2018
Discounted using the lessee’s incremental borrowing rate of
at the date of initial application
Initial recognition of lease liabilities during 2019
Adjustments as a result of recognition of non-lease components
Adjustments as a result of a different treatment of extension and
termination options
Adjustments as a result of lease liabilities to be recognized in subsequent years
Lease liabilities recognized at January 1, 2019
Of which are:
– Current lease liabilities
– Non-current lease liabilities
67,507
-11,723
-32,198
1,241
4,529
-19,308
10,048
7,118
2,930
10,048
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
Con Fin – Note 2
6161
Notes
Note 2 – Revenue
Accounting policies
Revenue comprises license payments, milestone payments and royalty income. License
payments which provide the buyer with the right to use the license as it exists at the date of
transfer are recognized upon transfer of the associated licensing rights at the point at which
the buyer obtains the right to use the license. Milestone payments related to the collaborative
research agreements with commercial partners are recognized when it is highly probable that
Zealand Pharma will become entitled to the milestone which is generally when the milestone is
achieved. Royalty income from licenses is based on third-party sales of licensed products and is
recognized in accordance with contract terms in the period in which the sales occur.
Revenue from transactions involving the rendering of services which are consumed by the cus-
tomer simultaneously with delivery is recognized along with delivery of the services.
Upon entering into agreements with multiple components, Management determines whether
individual components are distinct, which is the case if the buyer can obtain benefits from the
goods or service and the promise is distinct within the context of the contract. If no individual
components are distinct, the contract is treated as having a single performance obligation.
Accounting for the Alexion Pharmaceuticals, Inc. Agreement
In March 2019, Zealand entered into a license, research and development agreement with
Alexion Pharmaceuticals, Inc. (Alexion) to develop novel therapies to treat complement medi-
ated diseases. This agreement provided Zealand an immediate cash injection as well as further
external validation of Zealand’s peptide platform.
The collaboration with Alexion is not limited to C3 but offers the potential to work on identifi-
cation of peptide inhibitors to up to three additional components of the complement cascade.
Zealand will have responsibility for the C3 project and other targets up to IND and Alexion will
then progress the peptides into clinical development.
Under the Alexion license, research and development agreement, Zealand has received an
upfront non-refundable payment of USD 25 million for the C3 program and a concurrent USD
15 million equity investment in Zealand at a premium to the market price. The agreement also
provides the potential for development-related milestones of up to USD 115 million, as well as
up to USD 495 million in sales-related milestones and high single- to low double-digit royalty
payments. The 3 additional programs will provide further non-refundable upfront payments
(USD 15 million each), development and sales milestone and royalties.
Accounting treatment
The non-refundable up-front fee was allocated to the combined license, research and devel-
opment services, and is being recognized as revenue along with provision of the research and
development services under the lead program. Expenses incurred to provide the services is
being recognized when incurred. Further, the premium over the market share price on the Zea-
land shares subscribed by Alexion, DKK 12.7 million, is attributed to the Agreement as further
consideration and consequently also recognized over the period over which the R&D servic-
es are provided. Revenue is recognized based on the percentage of completion of the R&D
services, which is estimated based on the expenses incurred during that period. In total, Alexion
has paid USD 40 million, corresponding to DKK 262.9 million that as of December 31, 2019 has
affected equity by DKK 85.6 million, deferred revenue by DKK 139.9 million, and revenue by
DKK 37.4 million in 2019. Hence the cash flow from operating activities is DKK 177.3 million and
the cash flow from financing activities is DKK 85.6 million.
Milestone payments, if any, will be recognized as revenue when the relevant milestones are
achieved as they relate to performance obligations already satisfied at this stage. Royalty pay-
ments, if any, will be recognized along with the underlying sales.
Significant judgment applied
Determination of whether the license transferred and the research and development services
constitute separate performance obligations, or form part a single performance obligation
comprising a combined output has a significant impact on the accounting treatment. Zealand
has applied significant judgment to determine whether the promised services are distinct and
concluded that Alexion cannot benefit from the license alone. It is Zealand assessment that the
R&D services under this agreement requires specific Zealand know-how and expertise which
cannot be easily identified or sourced externally. Therefore, Alexion would not in the absence
of the contractual provisions have had the practical ability to engage a third-party R&D service
provider to provide the agreed R&D services.
As the nature of the collaboration with Alexion may affect the accounting treatment of the
agreement, Zealand has considered whether the agreement takes the form of a collaborative
partnership with Alexion rather than a customer-vendor agreement. After consideration of all
facts and circumstances, Zealand has assessed that the agreement takes the form of a custom-
er-vendor relationship. Accordingly, the agreement is treated under the guidelines of IFRS 15
Revenue from Contracts with Customers.
As any additional programs are optional and paid for separately, they are not considered part
of the initial agreement. It has been considered whether the options for additional compo-
nents represent a material right and, thus, a separate performance obligation under the initial
agreement to which a portion of the initial upfront payment should be allocated. Zealand has
determined that the probability of exercising the option is low and in combination with the fact
that the development is significantly less advanced than the lead target, we have determined
that the options do not represent a material right.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 62
Notes
Note 2 – Revenue (continued)
Accounting for the Sanofi License Agreement
In 2003, Zealand entered into a license agreement with Sanofi (the Sanofi License Agreement),
pursuant to which Zealand granted Sanofi exclusive rights to its patents, know-how and other
intellectual property relating to lixisenatide, for all fields. Pursuant to the Sanofi License Agree-
ment, which has been amended over the years, Sanofi assumed responsibility for the further
development, manufacturing and marketing of lixisenatide, and we cannot research or develop
lixisenatide while the Sanofi License Agreement remains in effect.
Under the Sanofi License Agreement, Zealand were eligible to receive remaining milestone
payments relating to commercialized products of up to USD 100 million, contingent on the
achievement of certain sales levels, as well as royalties on global sales of such products. Royal-
ties correspond to tiered, low-double-digit percentages of Sanofi’s global net sales of lixisenati-
de (branded as AdlyxinR in the U.S. and as LyxumiaR in the EU and in other countries) plus a
10% royalty on global net sales of a combination of lixisenatide and insulin glargine 100 units/ml
(LantusR) marketed under the brand name SoliquaR 100/33 in the U.S. and as SuliquaR in the EU.
In 2016, Sanofi challenged the validity of certain patents owned by a competitor, AstraZeneca
(and its affiliates), in both administrative and court proceedings in the U.S. and in certain other
countries, and AstraZeneca brought counterclaims in the U.S. proceedings asserting that prod-
ucts containing lixisenatide infringe its patents. Sanofi and AstraZeneca subsequently agreed to
settle all claims and counterclaims between them in various proceedings relating to lixisenatide.
Our financial obligations related to this now-resolved intellectual property dispute could reduce
our net revenue from the original commercial milestone payments from Sanofi relating to Soli-
qua R 100/33/SuliquaR. The amount and timing of any such reductions of future revenue are
not currently known, but they will not exceed USD 15 million in total. Refer to note 25.
Zealand pay Alkermes plc 13% of all payments received on lixisenatide while lixisenatide is sub-
ject to a commercialization agreement such as the Sanofi License Agreement. Zealand also pay
one of the inventors of the Structure Induced Probe (SIP) technology employed in lixisensatide
a 0.5% royalty on amounts received in connection with drug candidates that, like lixisenatide,
are produced using the SIP technology.
Milestone payments have been recognized as revenue when the relevant milestones are
achieved.
All future royalties and all but up to USD 15 million of future milestone payments relating to the
Sanofi License Agreement were sold to Royalty Pharma in September 2018. Refer to note 7.
Accounting for the Boehringer Ingelheim License Agreements
In 2011, Zealand entered into a license, research and development collaboration agreement
with Boehringer Ingelheim International GmbH (BI) to advance novel GLP-1/glucagon du-
al-acting peptide receptor agonists (GGDAs) for the treatment of patients with type 2 diabetes
62
and obesity. Under the terms of the 2011 BI License Agreement, BI paid a fixed amount per
full-time employee and other costs related to all research, development and commercialization
in respect of the compounds covered by the agreement.
Zealand is eligible to receive license and milestone payments of up to EUR 386 million, of
which EUR 365 million was outstanding at December 31, 2019, related to the achievement of
pre-specified development, regulatory and commercial milestones for the lead product. We are
also eligible to receive tiered royalties ranging from high single-digit to low double-digit per-
centages on BI’s sales of all products stemming from this collaboration. In addition, we retain
copromotion rights in Scandinavia.
In 2014, Zealand entered into a second global license, research and development collaboration
agreement with BI (the 2014 BI License Agreement). This agreement pertained to a collabo-
ration on a specific therapeutic peptide project from our portfolio of preclinical programs for
a period of up to four and a half years, with the aim of developing novel drugs to improve the
treatment of patients with cardiometabolic diseases. In 2015, BI selected a novel peptide thera-
peutic to be advanced into preclinical development under this agreement.
Pursuant to this agreement, we have worked with BI to advance the therapeutic peptides
stemming from this research collaboration into preclinical development. BI is responsible
for conducting preclinical and clinical development as well as for the commercialization of
products stemming from the agreement and funding all activities under the agreement. We
are eligible to receive license and milestone payments of up to EUR 295 million for the first
compound to be developed and marketed under the collaboration, of which EUR 283 million
was outstanding at December 31, 2019. We are also eligible to receive tiered royalties ranging
from high single-digit to low-double-digit percentages on global sales of products arising from
this collaboration. We retain copromotion rights in Scandinavia and are not eligible for royalty
payments in those countries if we exercise such rights.
No product candidates out licensed to BI are currently marketed, and accordingly we have not
received any royalty payments to date under our licensing agreements with BI.
In September 2019, Boehringer Ingelheim and Zealand announced that Boehringer Ingelheim
plans to initiate Phase 2 development of the GLP-1/glucagon dual agonist BI 456906. The
Phase 2 trial for BI 456906 is expected to be initiated in first part of 2020 and will trigger a EUR
20 million milestone payment to Zealand at which time the revenue will be recognized.
Milestone payments are recognized as revenue when the relevant milestones are achieved.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 6363
Notes
Note 2 – Revenue (continued)
Accounting for other license agreements
In 2019, Zealand recognized revenue related to a Material Transfer Agreement with an undis-
closed counterpart. The revenue related to a license option has been recognized in the period
in which the services were rendered.
Zealand is managed and operated as one business unit, which is reflected in the organizational
structure and internal reporting. No separate lines of business or separate business entities have
been identified with respect to any of the product candidates or geographical markets and no
segment information is currently disclosed in the internal reporting.
In 2018, Zealand entered into a Material Transfer agreement with an undisclosed counterpart.
A milestone payment was recognized as revenue, when the relevant milestone was achieved.
Such Material Transfer agreement related to the delivery of an existing material to the undis-
closed third party. No remaining performance obligations exist related to such agreement.
Milestone payments are recognized as revenue when the relevant milestones are achieved.
All Zealand revenue can be attributed to countries other than Denmark.
Revenue from Alexion
In 2019, we recognized DKK 37.4 million as income from the license, research and develop-
ment agreement signed in March 2019 reflecting the progress on the lead project. Under the
agreement DKK 139.9 million is accounted for as deferred revenue at December 31, 2019.
Recognized revenue can be specified as follows for all agreements:
DKK 0.6 million of other revenue is recognized related to other projects with Alexion.
DKK thousand
2019
2018
2017
Alexion Pharmaceuticals Inc.
Undisclosed counterpart
Protagonist Therapeutics, Inc.
Sanofi-Aventis Deutschland GmbH
Boehringer Ingelheim International GmbH
Total license and milestone revenue
Sanofi-Aventis Deutschland GmbH
Total royalty revenue
38,021
3,312
-
-
-
41,333
-
9,845
3,274
-
-
13,119
-
-
1,662
69,603
29,750
101,015
-
0
24,858
24,858
35,307
35,307
Total revenue
41,333
37,977
136,322
Royalty revenue can be specified as follows:
Soliqua®
Lyxumia®
Total royalty revenue
-
-
0
17,786
7,072
24,858
18,655
16,652
35,307
On September 6, 2018, Zealand entered into an agreement under which all rights to sales based
royalties and milestone payments under the Sanofi agreement were transferred to Royalty
Pharma for a fixed consideration. The gain net of transaction costs and settlement of the liabili-
ty to Alkermes plc and another investor is included in other operating income. Refer to note 7.
Revenue from Sanofi
In 2018, we recognized DKK 24.9 million as royalty income, reflecting sales of Lyxumia® of
EUR 9.5 million and sales of Soliqua® 100/33 of EUR 23.8 million. No milestone revenue was
received.
In 2017, we recognized DKK 69.6 million in revenue from milestone payments from Sanofi
under the Sanofi License Agreement in connection with the approval of Suliqua® in the EU in
January 2017. In addition, in 2017 we recognized DKK 35.3 million as royalty income, reflecting
sales of Lyxumia® of EUR 22.4 million and sales of Soliqua® 100/33 of EUR 25.1 million.
Revenue from Boehringer Ingelheim
No revenue was recognized from BI in 2019 or 2018, as no milestone event was achieved.
In 2017, we recognized DKK 29.8 million in revenue from milestone payments from BI related
to the initiation of the Phase 1 trial for the long-acting amylin analog.
Revenue from other agreements
In 2018 and 2019, we recognized DKK 9.8 million and DKK 3.3 million, respectively, in revenues
from a milestone payment and license option payments, respectively, from undisclosed coun-
terparts relating to two Material Transfer Agreements.
In 2017 and 2018, we recognized DKK 1.7 million and DKK 3.3 million, respectively, in revenue
from milestone payments from Protagonist Therapeutics in connection with the start of Phase
1 and 2, respectively, with the novel hepcidin mimetic PTG-300.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
64
Notes
Note 3 – Royalty expenses
Accounting policies
Royalty expenses comprise contractual amounts payable to third parties that are derived from
the milestone payments and royalty income earned from the corresponding collaboration
agreements.
We have agreed to pay some of our revenue in deferred payments or royalties to third parties.
At the time of the dissolution of a former joint venture with Elan Corporation, plc (Elan) and
certain of its subsidiaries that were party to the joint venture agreement with us, we agreed to
pay royalties to Elan – now Alkermes plc, as successor in interest to a termination agreement
between us and the Elan entities – including 13% of future payments we receive in respect of
lixisenatide under the Sanofi License Agreement.
In addition, we have agreed to pay a royalty of 0.5% of the total amounts we receive in connec-
tion with our SIP-modified peptides, including lixisenatide, to one of the inventors of our SIP
technology, who is one of our employees. The royalty to be paid to this inventor is calculated
on the basis of all the amounts we receive, including license payments, milestone payments
and sales. In 2019, the royalty expenses relate to mentioned inventor.
In 2018 and 2017, the royalty expenses related to royalties from sales of Lyxumia® and Soliqua®
100/33 and milestone payments received from Sanofi.
As further discussed in note 7, the arrangement was settled in 2018 as part of transferring the
right to future royalty and milestone payments under the Sanofi agreement.
Con Fin – Note 3-4
64
Note 4 – Research, development and administrative expenses
Accounting policies
Research expenses comprise salaries, contributions to pension schemes and other expenses,
including patent expenses, as well as depreciation and amortization directly attributable to
the Group’s research activities. Research expenses are recognized in the income statement as
incurred.
Development expenses comprise salaries, contributions to pension schemes and other expens-
es, including depreciation and amortization, directly attributable to the Group’s development
activities. Development expenses are recognized in the income statement as incurred, except
where the capitalization criteria is met.
No indirect costs that are not directly attributable to research and development activities are
included in the disclosure of research and development expenses recognized in the income
statement. Overhead expenses have been allocated to research and development or adminis-
trative expenses based on the number of employees in each department, determined accord-
ing to the respective employees’ associated undertakings.
Judgment applied related to research and development expenses
A development project involves a single product candidate undergoing a large number of tests
to demonstrate its safety profile and its effect on human beings, prior to obtaining the nec-
essary final approval for the product from the appropriate authorities. The future economic
benefits associated with the individual development projects are dependent on obtaining such
approval. Considering the significant risk and duration of the development period for biological
products, Management has concluded that whether the intangible asset will generate probable
future economic benefits cannot be estimated with sufficient certainty until the project has
been finalized and the necessary final regulatory approval of the product has been obtained.
Accordingly, Zealand has not recognized such assets at this time, and all research and develop-
ment expenses are therefore recognized in the income statement when incurred.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
Con Fin – Note 5-6
6565
Notes
Note 4 – Research, development and administrative expenses (continued)
Note 5 – Fees to auditors appointed at the Annual General Meeting
Capitalization of development costs assumes that, in the Group’s opinion, the development
of the technology or the product has been completed, all necessary public registrations and
marketing approvals have been received, and expenses can be reliably measured. Furthermore,
it must be established that the technology or the product can be commercialized and that the
future income from the product can cover not only the production, selling and administra-
tive expenses but also development expenses. Zealand has not capitalized any development
expenses in 2019, 2018 or 2017.
Administrative expenses
Administrative expenses include expenses for administrative personnel, expenses related to
company premises, depreciation on right-of-use assets, investor relations, etc. Overhead ex-
penses have been allocated to research and development or administrative expenses according
to the number of employees in each department, based on the respective employees’ associat-
ed undertakings.
DKK thousand
2019
2018
2017
Audit
Audit-related services and other assurance engagements
Tax advice
Other
Total fees
1,847
1,731
0
12
3,590
1,661
718
106
0
2,485
1,199
2,418
114
196
3,927
The fee for audit-related services and other assurance engagements and other services provid-
ed to the Group by Deloitte Statsautoriseret Revisionspartnerselskab in 2019 consisted of assis-
tance work in relation to existing internal control processes, other auditor’s reports on various
statements for public authorities, and other accounting advisory services.
Note 6 – Information on staff and remuneration
DKK thousand
Total staff costs can be specified as follows:
Wages and salaries
Share-based payment costs
Pension schemes (defined contribution plans)
Other payroll and staff-related costs
Total
The amount is charged as:
Research and development expenses
Administrative expenses
Total
2019
Restated
2018
Restated
2017
175,104
14,764
13,430
14,932
218,230
141,661
17,474
11,065
9,783
179,983
112,614
19,311
9,135
10,135
151,195
178,089
40,141
218,230
153,601
26,382
179,983
118,573
32,622
151,195
Average number of employees
173
146
128
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
66
Notes
66
Note 6 – Information on staff and remuneration (continued)
DKK thousand
2019
2018
2017
Base
board fee
Committee
Fees
Total
fees
Base
board fee
Committee
Fees
Total
fees
Base
board fee
Committee
Fees
Total
fees
Remuneration to the Board of Directors
Martin Nicklasson
Kirsten Drejer¹
Alain Munoz
Michael Owen
Bernadette Mary Connaughton
Jeffrey Berkowitz
Leonard Kruimer
Jens Peter Stenvang²
Hanne Heidenheim Bak²
Rosemary Crane⁵
Catherine Moukheibir⁵
Helle Haxgart², ⁴
Rasmus Just², ³
Total
1
2
3
4
5
The disclosed remuneration for board members excludes minor mandatory social security costs paid by the company.
It also excludes reimbursed expenses incurred in connection with board meetings, such as travel and accomodation.
Kirsten Drejer was appointed vice chairman at the General Meeting on April 4 in 2019.
Employee-elected board members; the table only includes remuneration for board work.
This board member resigned from the Board in 2017.
This board member resigned from the Board in 2018.
These board members resigned from the Board in 2019.
750
467
400
400
267
267
267
400
400
133
133
0
0
3,884
100
0
50
50
0
33
100
0
0
17
50
0
0
400
850
467
450
450
267
300
367
400
400
150
183
0
0
4,284
650
200
300
300
0
0
0
300
300
333
300
100
0
2,783
100
0
50
50
0
0
0
0
0
50
150
0
0
400
750
200
350
350
0
0
0
300
300
383
450
100
0
3,183
550
0
250
250
0
0
0
250
198
350
250
21
229
2,348
100
0
33
50
0
0
0
0
0
50
150
0
0
383
650
0
283
300
0
0
0
250
198
400
400
21
229
2,731
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
Notes
Note 6 – Information on staff and remuneration (continued)
DKK thousand
2019
Remuneration to the Executive Management
Emmanuel Dulac¹
Adam Sinding Steensberg²
Matthew Donald Dallas³
Britt Meelby Jensen⁴
Mats Blom⁴
Total
Other Corporate Management⁵
Total
Total
2018
Remuneration to the Executive Management
Britt Meelby Jensen
Mats Blom
Total
Other Corporate Management⁵
Total
Total
2017
Remuneration to the Executive Management
Britt Meelby Jensen
Mats Blom
Total
Other Corporate Management⁵
Total
6767
Total
14,479
6,917
1,209
2,399
2,707
27,711
11,546
11,546
Base salary
Pension
Bonus contribution
Other
Warrant
short term compensation
expenses
benefits
3,100
2,807
588
1,745
655
8,895
6,559
6,559
9,072
1,032
534
419
248
11,305
2,580
2,580
620
505
0
175
66
1,366
389
389
855
269
5
60
61
1,250
46
46
832
2,304
82
0
1,677
4,895
1,972
1,972
15,454
13,885
1,755
1,296
6,867
39,257
4,189
2,621
6,810
6,689
6,689
2,513
1,031
3,544
2,653
2,653
419
262
681
604
604
320
273
593
1,035
1,035
Restated
0
1,888
1,888
Restated
7,441
6,075
13,516
4,471
4,471
15,452
15,452
13,499
6,197
1,285
1,628
6,359
28,968
3,915
2,496
6,411
4,416
4,416
2,482
999
3,481
1,787
1,787
392
250
642
442
442
231
271
502
388
388
Restated
4,554
1,747
6,301
Restated
11,574
5,763
17,337
3,125
3,125
10,158
10,158
9,426
27,495
Total
¹ Emmanuel Dulac was appointed as CEO at April 25, 2019. ² Former Interim CEO Adam Sinding Steensberg was appointed EVP, R&D and CMO at April 25, 2019. ³ Matthew Donald Dallas was appointed CFO at October 10, 2019.
⁴ Former CEO Britt Meelby Jensen and former CFO Mats Blom resigned from Zealand at February 28, 2019 and March 28, 2019, respectively. ⁵ Other Corporate Management in 2019 comprised three members (2018: Four and 2017: Two).
10,827
5,268
1,084
890
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
68
Notes
68
Note 6 – Information on staff and remuneration (continued)
Accounting policies
The value of services received as consideration for granted warrants is measured at the fair
value of the warrant. The fair value is determined at the grant date and is recognized in the
income statement as employee benefit expense over the period in which the warrants vest.
The offsetting entry to this is recognized under equity. An estimate is made of the number of
warrants expected to vest. Subsequently, an adjustment is made for changes in the estimate of
the number of warrants, which will vest, so the total expense is equal to fair value of the actual
number of warrants which vest. The fair value of warrants granted is estimated using the Black–
Scholes pricing model.
The 2010 employee incentive program
Number of warrants
Outstanding at January 1, 2019
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at December 31, 2019
Specified as follows:
Executive Management
Other employees
Total
Number of warrants
Outstanding at January 1, 2018
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at December 31, 2018
Specified as follows:
Executive Management
Other employees
Total
Program
of 2010
10/Feb/12
Program
of 2010
19/Nov/12
Program
of 2010
08/Feb/13
Program
of 2010
01/Apr/14
Program
of 2010
25/Mar/15
Program
of 2010
05/May/15
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
183,425
0
0
-183,425
0
0
0
0
72,000
0
-72,000
0
0
0
0
0
100,000
0
-28,000
0
72,000
0
72,000
72,000
100,000
0
-68,000
0
32,000
0
32,000
32,000
100,000
0
0
0
100,000
0
100,000
100,000
46,359
0
-36,000
0
10,359
0
10,359
10,359
46,359
0
0
0
46,359
0
46,359
46,359
Total
218,359
0
-176,000
0
42,359
0
42,359
42,359
429,784
0
-28,000
-183,425
218,359
0
218,359
218,359
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
Notes
Note 6 – Information on staff and remuneration (continued)
The 2010 employee incentive program (continued)
Number of warrants
Outstanding at January 1, 2017
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at December 31, 2017
Specified as follows:
Executive Management
Other employees
Total
Exercise period
From
Until
Black–Scholes parameters
Term (months)
Share price
Exercise price (DKK)
Volatility*
Risk-free interest rate
Cost price
Dividend
* The volatility rate used is based on the actual volatility of the Zealand share price.
Program
of 2010
10/Feb/12
Program
of 2010
19/Nov/12
Program
of 2010
08/Feb/13
Program
of 2010
01/Apr/14
Program
of 2010
25/Mar/15
Program
of 2010
05/May/15
6,250
0
0
-6,250
0
0
0
0
214,883
0
0
-214,883
0
0
0
0
261,137
0
-77,712
0
183,425
0
183,425
183,425
100,000
0
0
0
100,000
0
100,000
100,000
100,000
0
0
0
100,000
0
100,000
100,000
46,359
0
0
0
46,359
0
46,359
46,359
10/Feb/15
10/Feb/17
19/Nov/15
19/Nov/17
10/Feb/16
10/Feb/18
01/Apr/17
01/Apr/19
25/Mar/18
25/Mar/20
05/May/18
05/May/20
60
70.0
77.0
44.0%
0.37%
24.74
not expected
60
86.0
113.3
56.0%
0.86%
23.76
not expected
60
79.05
87.45
39.3%
0.66%
25.38
not expected
60
69.0
75.9
37.5%
0.71%
21.05
not expected
60
115.5
127.05
41.9%
-0.21%
37.78
not expected
60
92.0
101.2
43.7%
-0.10%
31.63
not expected
6969
Total
728,629
0
-77,712
-221,133
429,784
0
429,784
429,784
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
70
Notes
Note 6 – Information on staff and remuneration (continued)
The 2015 employee incentive program
Program Program Program Program Program Program Program Program Program Program Program Program Program Program Program Program Program Program Program
of 2015
of 2015
05/May/15 05/May/15 05/Apr/16 05/Apr/16 15/Jul/16 06/Apr/17 06/Apr/17 25/Aug/17 25/Aug/17 22/May/18 15/Oct/18 10/Apr/19 13/Jun/19 13/Jun/19 13/Jun/19 13/Jun/19 5/Dec/19 5/Dec/19 5/Dec/19
of 2015
of 2015
of 2015
of 2015
of 2015
of 2015
of 2015
of 2015
of 2015
of 2015
of 2015
of 2015
of 2015
of 2015
of 2015
of 2015
of 2015
70
Total
Number of warrants
Outstanding at January 1, 2019
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at December 31, 2019
Specified as follows:
Executive Management
Other employees
Total
Number of warrants
0
0
0
342,250
321,750
0
0
-9,050
-40,250
0 -242,550
-71,425
0
0
0
0
0
0
0
90,650
210,075
45,000
60,000
45,650
150,075
90,650
210,075
0
0
0
0
0
0
0
0
0
40,000
381,000
0
0
-40,000
-88,750
0
0
0
0
0
0
0
0
292,250
57,000
235,250
292,250
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
510,000
40,000
0
0
0
0
0
0
0
0 1,635,000
0
-92,000
0
0
0
0
0
0
397,750
168,388
8,659
8,659
8,658
16,304
16,304
16,307 641,029
-17,500
-26,716
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0 -314,266
0 -313,975
0
0
418,000
40,000
380,250
141,672
8,659
8,659
8,658
16,304
16,304
16,307 1,647,788
65,000
0
0
117,894
353,000
40,000
380,250
23,778
418,000
40,000
380,250
141,672
0
8,659
8,659
0
8,659
8,659
0
8,658
8,658
9,093
7,211
9,092
7,212
9,092 372,171
7,215 1,275,617
16,304
16,304
16,307 1,647,788
Outstanding at January 1, 2018
100,000
349,750
328,750
85,434
40,000
405,500
93,392
14,566
6,608
0
0
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at December 31, 2018
Specified as follows:
Executive Management
Other employees
Total
0
-100,000
0
0
0
0
-7,000
-85,434
0
0
0
0
0
0
-7,500
0
0
0
342,250
321,750
75,000
25,000
267,250
296,750
342,250
321,750
0
0
0
0
0
0
0
0
0
0
0
0
40,000
381,000
0
57,000
40,000
324,000
40,000
381,000
0
0
0
0
615,500
40,000
-24,500
-93,392
-14,566
-6,608 -105,500
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
510,000
40,000
60,000
0
450,000
40,000
510,000
40,000
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0 1,424,000
0 655,500
0 -437,000
0
0
-7,500
0
0 1,635,000
0 217,000
0 1,418,000
0 1,635,000
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
Notes
Note 6 – Information on staff and remuneration (continued)
The 2015 employee incentive program
Program Program Program Program Program Program Program Program Program Program Program Program Program Program Program Program Program Program Program
of 2015
of 2015
05/May/15 05/May/15 05/Apr/16 05/Apr/16 15/Jul/16 06/Apr/17 06/Apr/17 25/Aug/17 25/Aug/17 22/May/18 15/Oct/18 10/Apr/19 13/Jun/19 13/Jun/19 13/Jun/19 13/Jun/19 5/Dec/19 5/Dec/19 5/Dec/19
of 2015
of 2015
of 2015
of 2015
of 2015
of 2015
of 2015
of 2015
of 2015
of 2015
of 2015
of 2015
of 2015
of 2015
of 2015
of 2015
of 2015
7171
Total
Number of warrants
Outstanding at January 1, 2017
100,000
357,250
345,000
100,000
40,000
0
0
0
0
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
0
0
0
0
0
0
0
-7,500
-16,250
-14,566
0
0
0
0
0
0
0
0
0
0
424,000
93,392
14,566
6,608
-18,500
0
0
0
0
0
0
0
0
0
0
0
Outstanding at December 31, 2017
100,000
349,750
328,750
85,434
40,000
405,500
93,392
14,566
6,608
Specified as follows:
Executive Management
100,000
75,000
25,000
85,434
0
57,000
93,392
14,566
6,608
0
274,750
303,750
0
40,000
348,500
0
0
0
100,000
349,750
328,750
85,434
40,000
405,500
93,392
14,566
6,608
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0 942,250
0 538,566
0
0
0
-56,816
0
0
0 1,424,000
0 457,000
0 967,000
0 1,424,000
Other employees
Total
Exercise period
From
Until
Black–Scholes parameters
Term (months)
Share price (DKK)
Exercise price (DKK)
Volatility*
Cost price (DKK)
Dividend
05/May/16 05/May/18 05/Apr/19 05/Apr/17 15/Jul/19 06/Apr/20 06/Apr/18 25/Aug/17 06/Apr/18 22/May/21 15/Oct/21 10/Apr/22 13/Jun/22 13/Jun/20 13/Jun/21 13/Jun/22 05/Dec/20 05/Dec/21 05/Dec/22
05/May/20 05/May/20 05/Apr/21 05/Apr/21 15/Jul/21 06/Apr/22 06/Apr/22 25/Aug/22 06/Apr/22 22/May/23 15/Oct/23 10/Apr/24 13/Jun/24 13/Jun/24 13/Jun/24 13/Jun/24 05/Dec/24 05/Dec/24 05/Dec/24
60
92.0
101.2
43.7%
60
92.0
101.2
43.7%
60
60
129.5
129.5
142.45
142.45
43.5%
43.5%
60
126.0
138.6
45.0%
60
123.0
135.3
43.6%
60
123.0
135.3
43.6%
60
118.5
142.45
43.0%
60
118.5
135.3
43.0%
Risk-free interest rate
-0.10%
-0.10%
-0.04%
-0.04%
-0.33%
-0.24%
-0.24%
-0.16%
-0.16%
31.63
31.63
44.42
44.42
44.23
41.92
41.92
36.74
38.58
60
100.8
100.8
42.6%
0.05%
36.98
60
90.0
90.0
42.5%
48
127.0
127.0
43.5%
48
138.6
138.6
43.0%
48
138.6
138.6
43.0%
48
138.6
138.6
43.0%
48
138.6
138.6
43.0%
48
220.0
220.0
41.9%
48
220.0
220.0
41.9%
48
220.0
220.0
41.9%
-0.03%
-0.45%
-0.59%
-0.59%
-0.59%
-0.59%
-0.63%
-0.63%
-0.63%
32.83
41.94
45.04
45.04
45.04
45.04
69.52
69.52
69.52
not
not
expected expected expected expected expected expected expected expected expected expected expected expected expected expected expected expected expected expected expected
not
not
not
not
not
not
not
not
not
not
not
not
not
not
not
not
not
* The average traded share price on the exercise date(s) of the 2010 warrant program was 124.6 and the average traded share price on the exercise date(s) of the 2015 warrant program was 151.7.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
72
Notes
72
Note 6 – Information on staff and remuneration (continued)
Employee warrant programs
In order to motivate and retain key employees and encourage the achievement of common
goals for employees, Management and shareholders, the Group has established an incentive
plan based on warrant programs. Incentive programs have been offered in 2005, 2007 and in
the 2009-2019 period.
The warrants are granted in accordance with the authorizations given to the Board of Directors
by the shareholders. The Board of Directors has fixed the terms of and size of the grants, taking
into account authorizations from the shareholders, the Group’s guidelines for incentive pay,
an assessment of expectations of the recipient’s work efforts and contribution to the Group’s
growth, as well as the need to motivate and retain the recipient. Grant takes place on the
date of establishment of the program. Exercise of warrants is by default subject to continuing
employment with the Group. The warrants granted are subject to the provisions of the Danish
Public Companies Act regarding termination of employees prior to their exercise of warrants in
the case of recipients covered by the Act.
The exercise price is determined by the closing price of Zealand’s shares on Nasdaq Copenha-
gen on the day prior to the grant date. For warrants granted before April 19, 2018, the exercise
price is determined by the closing price of Zealand’s shares on Nasdaq Copenhagen on the day
prior to the grant date plus 10%.
Warrants expire automatically after five years. Warrants vest either after 3 years of service, with
1/36 each month from the grant date, or with 1/3 after one year, 1/3 after two years and 1/3
after three years. The service cost is recognized over the respective vesting periods.
Warrants may be exercised four times a year during a four-week period starting from the date
of the publication of Zealand’s Annual Report or interim reports.
For warrants granted in 2015 and earlier, the volatility rate used is based on the actual volatility
of the Zealand share price. For warrants granted after January 1, 2016, the volatility rate used
is based on the 5-year historical volatility of the Zealand share price. For warrants granted after
January 1, 2019, the volatility rate used is based on the 4-year historical volatility of the Zealand
share price calculated as the vesting period of 3 years plus 50% of the exercise period (two
years). The change in the accounting estimate is based on more information on the average
length of time for which similar warrants in the past have remained outstanding. The change
does only impact warrant expenses recognized in staff expenses in the current or future finan-
cial period related to warrants granted since January 1, 2019.
2010 employee incentive program
This program was established in 2010 for Zealand’s Board of Directors, Executive Management,
employees and consultants.
The Board of Directors was authorized to issue up to 2,750,000 warrants in the period until No-
vember 2, 2015. The program has expired and a total of 2,355,495 warrants have been granted.
As of December 31, 2019, 1,755,809 warrants have been exercised, 422,327 warrants have ex-
pired without being exercised, and 135,000 warrants have forfeited. The total proceeds amount
to DKK 145.1 million (2018: DKK 127.4 million and 2017: DKK 125.3 million). As of December
31, 2019, 42,359 warrants can still be exercised.
2015 employee incentive program
This program was established in 2015 for Zealand’s Executive Management and employees.
The Board of Directors was authorized to issue up to 2,750,000 warrants in the period until
April, 2020. As of December 31, 2019, 2,788,595 warrants have been granted, 321,475 warrants
have been exercised, and 819,332 warrants have forfeited. This means that the remaining num-
ber of warrants that can be granted is 780,737. The total proceeds amount to DKK 35.5 million
(2018: DKK 0.8 million and 2017: DKK 0.0 million). As of December 31, 2019, 1,647,788 warrants
can still be exercised.
2019 long-term incentive program (LTIP) for Corporate Management
This program was established in 2019 for Zealand’s Corporate Management.
Under the LTIP, the Executive Management and Other Corporate Management are eligible to
receive a number of performance share units (“PSUs”) at no cost, as determined by the Board of
Directors. Thereafter, PSUs are expected to be granted annually (together with any share-based
long-term incentive program, up to a maximum of 10% of Zealand’s share capital).
The targets for the first PSUs granted on June 13, 2019 under the LTIP are related to Zealand's
filing of a submission for a New Drug Approval ("NDA") to the Food and Drug Administration
("FDA") in the United States and Zealand's receipt of an approval letter from the FDA for this
NDA application.
The PSUs will vest over a three-year period. The PSUs that have not vested will lapse without
any compensation. Each vested PSU entitles the holder to receive one share in Zealand at no
cost provided that the targets are met.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 Con Fin – Note 7
7373
Notes
Note 6 – Information on staff and remuneration (continued)
Note 7 – Other operating income
The number of performance share units granted is 22,915 determined based on the average
share price of the shares of the Company for the three-day trading period following the latest
open trading window preceding the allotment.
The program is initially valued at DKK 3.2 million.
DKK thousand
Number of shares
At January 1
Granted during the year
Vested during the year
Forfeited during the year
At December 31
2019
2018
0
22,915
0
-3,150
19,765
0
0
0
0
0
Effect on income statement
In 2019, the fair value of warrants and PSUs recognized in the income statement amounts to
DKK 14.8 million in total of which DKK 0.5 million relate to PSUs (2018: DKK 17.5 million and
2017: DKK 19.3 million), of which DKK 3.2 million relate to the Executive Management (2018:
DKK 1.9 million and 2017: DKK 6.3 million).
DKK thousand
The amount is charged as:
Research and development expenses
Administrative expenses
Total
2019
Restated
2018
Restated
2017
12,191
2,573
14,764
13,919
3,555
17,474
11,291
8,020
19,311
Accounting policies
Other operating income comprises gains from sale of intangible assets, research funding from
business partners and government grants. A gain from disposal of intangible assets is recog-
nized when control over the asset is transferred to the buyer. The gain is determined as the
disposal proceeds less the carrying amount, if any, and disposal costs.
Research funding is recognized in the period when the research activities have been performed
and government grants are recognized periodically when the work supported by the grant has
been reported.
Government grants are recognized when a final and firm right to the grant has been obtained.
Government grants are included in Other operating income, as the grants are considered to be
cost refunds.
DKK thousand
2019
2018
2017
Government grants
Gross proceeds from sale of future
royalties and milestones
Royalty expenses regarding the above sale of
future royalties and milestones
Fee, advisors regarding the above sale of
future royalties and milestones
Research funding
Total other operating income
444
630
567
0 1,310,237
0
-176,882
0
0
-34,459
0
444 1,099,526
0
0
0
40
607
Zealand entered in September 2018 into an agreement to sell future royalties and USD 85.0 mil-
lion of potential commercial milestones for Soliqua® 100/33/ Suliqua® and Lyxumia®/ Adlyxin®
to Royalty Pharma. Under the agreement, all rights and obligations under the Sanofi Licensing
agreement apart from potential payments from Sanofi of up to USD 15.0 million, expected
in 2020 and 2022 (refer to note 25) have been transferred to the buyer. Zealand had in 2018
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
74
Notes
Con Fin – Note 7-9
74
Note 7 – Other operating income (continued)
Note 9 – Financial expenses
Accounting policies
Financial expenses include interest expenses, as well as realized and unrealized exchange rate
adjustments and fair value adjustments of securities. In addition, expenses related to the royalty
bond until settlement in September 2018 were amortized over the expected duration of the
bond and recognized as financial expenses until it was settled in September 2018. The royalty
bond is described further in note 22.
Interest expense is recognized in the income statement in accordance with the effective inter-
est rate method.
DKK thousand
2019
2018
2017
Interest expenses from financial liabilities measured
at amortized costs
Amortization of financing costs
Fair value adjustments of Marketable securities
Loss on sale of Marketable securities
Other financial expenses
Exchange rate adjustments
Total financial expenses
3,205
0
0
0
185
0
3,390
15,080
18,347
1,389
881
1,625
0
37,322
18,913
5,748
0
0
949
7,899
33,509
received USD 205.0 million (DKK 1,310.2 million) upon closing of the transaction on September
17, 2018. In 2018, royalty expenses to third parties amounted to 13.5% or DKK 176.9 million
and fees to advisors amounted to DKK 34.5 million. The Sanofi license agreement was classified
as an intangible asset upon adoption of IFRS 15, and the agreement with Royalty Pharma was
treated as a sale of this license. The payment to the third parties was considered additional cost
price for a license forming part of the rights under the Sanofi agreement and therefore forming
part of the gain.
As part of the license agreements with Boehringer Ingelheim ('BI'), BI is responsible for con-
ducting preclinical and clinical development, as well as for commercializing the products stem-
ming from the agreement and funding all activities under the agreement. In addition, Zealand
received government grants in 2019, 2018 and 2017.
Note 8 – Financial income
Accounting policies
Financial income includes interest from trade receivables, as well as realized and unrealized
exchange rate adjustments, fair value adjustments of marketable securities and dividends from
marketable securities.
Interest income is recognized in the income statement in accordance with the effective interest
rate method.
DKK thousand
2019
2018
2017
Interest income from financial assets measured
at amortized costs
Fair value adjustments of Other investments
and Marketable securities
Exchange rate adjustments
Dividend, Marketable securities
Total financial income
5,413
4,263
2,048
2,846
5,518
878
14,655
0
4,705
1,020
9,988
74
0
0
2,122
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
Con Fin – Note 10
7575
Notes
Note 10 – Income tax benefit
Accounting policies
Income tax on results for the year, which comprises current tax and changes in deferred tax,
is recognized in the income statement, whereas the portion attributable to entries in equity is
recognized directly in equity.
Current tax liabilities and current tax receivables are recognized in the statement of financial
position as tax calculated on the taxable income for the year adjusted for tax on previous years’
taxable income and taxes paid on account/prepaid.
Deferred tax is measured according to the statement of financial position liability method in
respect of temporary differences between the carrying amount and the tax base of assets and
liabilities.
Deferred tax liabilities are generally recognized for all taxable temporary differences, and de-
ferred tax assets are recognized to the extent that it is probable that taxable profits will be avail-
able against which deductible temporary differences can be utilized. Such deferred tax assets
and liabilities are not recognized if the temporary difference arises from the initial recognition
(other than in a business combination) of other assets and liabilities in a transaction that affects
neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not
recognized if the temporary difference arises from the initial recognition of goodwill.
Deferred tax liabilities are recognized for taxable temporary differences arising on investments
in subsidiaries except where the Group is able to control the reversal of the temporary differ-
ence and it is probable that the temporary difference will not be reversed in the foreseeable
future. Deferred tax assets arising from deductible temporary differences associated with such
investments and interest are only recognized to the extent that it is probable that there will be
sufficient taxable profits against which to utilize the benefits of the temporary differences and
they are expected to be reversed in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each statement of financial position
date and reduced to the extent that it is no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
This judgment is made on an ongoing basis and is based on recent historical losses carrying
more weight than factors such as budgets and business plans for the coming years, including
planned commercial initiatives. The creation and development of therapeutic products within
the biotechnology and pharmaceutical industry is subject to considerable risks and uncertain-
ties. Zealand has so far reported significant losses and, consequently, has unused tax losses.
Management has concluded that deferred tax assets should not be recognized at December
31, 2019.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off
current tax assets against current tax liabilities, they relate to income taxes levied by the same
taxation authority and the Group intends to settle its current tax assets and liabilities on a net
basis.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the
liability is settled or the asset is realized, based on tax laws and rates that have been enacted or
substantively enacted at the statement of financial position date.
Income tax receivables are recognized in accordance with the Danish tax credit scheme (Skat-
tekreditordningen). Companies covered by the tax credit scheme may obtain payment of the
tax base of losses originating from research and development expenses of up to DKK 25 million
(tax value of DKK 5.5 million).
Under Danish tax legislation, Zealand is eligible to receive DKK 5.5 million (DKK 0.0 million in
2018 and DKK 5.5 million 2017) in cash relating to the surrendered tax loss of DKK 108 million
(none in 2018 and DKK 156.5 million for 2017) based on qualifying research and development
expenses. These tax receipts comprise the entire current tax benefit in 2019 and 2017, respec-
tively.
The income from sale of future royalties and milestones in 2018 resulted in a positive net
result, meaning that Zealand was not eligible for similar tax income based on qualifying
research and development expenses, but was able to utilize a portion of the unrecognized
deferred tax asset.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 76
Notes
Con Fin – Note 11
76
Note 10 – Income tax benefit (continued)
Note 11 – Basic and diluted earnings per share
DKK thousand
Net result for the year before tax
Corporate tax rate in Denmark
Expected tax benefit/(expenses)
Adjustment for non-deductible expenses
Adjustment for non-taxable income
Adjustment for exercised warrants
Adjustment for R&D super deduction
Tax effect on exercise of warrants
Tax effect on expired warrants
Warrant - share price development
Change in tax assets (not recognized)
Total income tax expense/benefit
DKK thousand
Breakdown of unrecognized deferred tax assets:
Tax losses carried forward (available indefinitely)
Research and development expenses
Rights
Non-current assets
Liabilities
Other
Total temporary differences
2019
Restated
2018
Restated
2017
Accounting policies
-576,677
22.0%
625,051
22.0%
-279,913
22.0%
126,869
-947
964
-1,653
1,676
6,092
175
4,050
-132,090
5,136
-137,511
-65
0
-2,228
1,427
8
151
0
94,445
-43,773
61,581
-62
0
-1,732
0
688
-4,407
0
-50,568
5,500
2019
Restated
2018
Restated
2017
681,531
460,007
35,849
51,677
139,890
70,306
1,439,260
580,937
136,755
35,849
50,308
0
79,986
872,670
210,148
43,019
67,590
0
104,377
883,835 1,297,804
Basic result per share
Basic result per share is calculated as the net result for the period that is allocated to the parent
company’s ordinary shares, divided by the weighted average number of ordinary shares out-
standing.
Diluted result per share
Diluted result per share is calculated as the net result for the period that is allocated to the
parent company’s ordinary shares, divided by the weighted average number of ordinary shares
outstanding and adjusted by the dilutive effect of potential ordinary shares.
The result and weighted average number of ordinary shares used in the calculation of basic and
diluted result per share are as follows:
DKK thousand
Net result for the year
Net result used in the calculation of basic and
diluted earnings/losses per share
Weighted average number of ordinary shares
Weighted average number of treasury shares
Weighted average number of ordinary shares used
in the calculation of basic earnings per share
Weighted average number of ordinary shares used
in the calculation of diluted earnings per share
2019
Restated
2018
Restated
2017
-571,541
581,278
-274,413
581,278
-571,541
-274,413
33,866,709 30,754,948 27,918,271
-64,223
-64,223
-64,223
33,802,486 30,690,725 27,854,048
33,802,486 30,696,404 27,854,048
Basic earnings/loss per share (DKK)
Diluted earnings/loss per share (DKK)
-16.91
-16.91
18.94
18.94
-9.85
-9.85
Corporate tax rate in Denmark
Calculated potential deferred tax asset at local tax rate
Write-down of deferred tax asset
Recognized deferred tax asset
22.0%
316,637
-316,637
0
22.0%
194,444
-194,444
0
22.0%
285,517
-285,517
0
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
Con Fin – Note 12
7777
Notes
Note 11 – Basic and diluted earnings per share (continued)
Note 12 – Licenses, rights and patents
The following potential ordinary shares are anti-dilutive at December 31, 2019 (dilutive at
December 31, 2018 and anti-dilutive December 31, 2017) and are therefore not included in the
weighted average number of ordinary shares for the purpose of diluted earnings per share:
Potential ordinary shares are excluded at December 31, 2019 due to anti-dilutive effect
(included at December 31, 2018, but excluded at December 31, 2017) related to:
DKK thousand
2019
2018
2017
Outstanding warrants under the 2010 employee
incentive program
Outstanding warrants under the 2015 employee
incentive program
Outstanding Performance Share Units (PSUs) under
the LTIP 2019 program
Total outstanding warrants
42,359
218,359
429,784
1,647,788 1,635,000 1,424,000
19,765
0
1,709,912 1,853,359 1,853,784
0
- out of which these warrants and PSUs are dilutive
0
- out of which these warrants and PSUs are anti-dilutive 1,709,912 1,781,359 1,853,784
72,000
0
Accounting policies
Separately acquired licenses, rights and patents are initially measured at cost. Licenses, rights
and patents acquired in connection with the purchase of a legal entity where substantially all
of the fair value of the gross assets acquired is concentrated in a single asset are considered an
asset acquisition and initially recognized at cost at the acquisition date. The cost will include the
fair value on the date of acquisition of any contingent considerations. Any subsequent changes
to the fair value will be recorded against the asset's cost.
The acquired intangibles have a finite useful life and are subsequently carried at cost less
accumulated amortizations using the straight-line method over the estimated useful life and
impairment losses. Amortizations will recognized in the income statement as R&D expenses
when the intangibles are available for use based on the determined useful life.
If circumstances or changes in Zealand's operations indicate that the carrying amount of the
intangibles may not be recoverable, Management will review the intangibles for impairment.
At December 31, 2019 licenses, rights and patents comprises a right that will be included in a
future development project originating from the acquisition of Encycle Therapeutics in October
2019.
The right has been measured based on the overall cost of the transaction less the fair value of
the cash balance and trade payables also acquired. The fair value of the contingent considera-
tions related to Encycle Therapeutics was assessed to be zero as per the acquisition date based
on the significant uncertainty of the outcome of the development to be performed by Zealand.
DKK thousand
Cost at January 1, 2019
Additions
Cost at December 31, 2019
Amortization at January 1, 2019
Amortization at December 31, 2019
Carrying amount at December 31, 2019
Licenses,
rights
and patents
-
2,480
2,480
-
-
2,480
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
78
Notes
Con Fin – Note 13
78
Note 13 – Property, plant and equipment
Accounting policies
Plant and machinery, other fixtures and fittings, tools and equipment and leasehold improve-
ments are measured at cost less accumulated depreciation.
Cost comprises acquisition price and costs directly related to acquisition until the time when
the Group starts using the asset.
Tangible assets under construction are recorded as work in progress until construction has
been completed and use of asset commenced.
The basis for depreciation is cost less estimated residual value at the end of the useful life. As-
sets are depreciated using the straight-line method over the expected useful lives of the assets.
The depreciation periods are as follows:
• Buildings 5-13 years
• Plant and machinery 5-10 years
• Other fixtures and fittings, tools and equipment 3-5 years
Gains and losses arising from disposal of plant and equipment are stated as the difference
between the selling price less the costs of disposal and the carrying amount of the asset at the
time of the disposal. Gains and losses are recognized in the income statement under Research
and development expenses and Administrative expenses.
At the end of each reporting period, the Group reviews the carrying amount of property, plant
and equipment as well as non-current asset investments to determine whether there is an
indication that those assets have suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated to determine the extent of the impairment loss (if
any). If it is not possible to estimate the recoverable amount of an individual asset, the Group
estimates the recoverable amount of the cash-generating unit to which the asset belongs. If
a reasonable and consistent basis of allocation can be identified, assets are also allocated to
cash-generating units, or allocated to the smallest group of cash-generating units for which a
reasonable and consistent allocation basis can be identified.
The recoverable amount is the higher of fair value less costs of disposal and value in use. The
estimated future cash flows are discounted to their present value using a pre-tax discount rate
that reflects the current market assessments of the time value of money and the risks specific
to the asset for which the estimates of future cash flows have not been adjusted.
No impairments have been recognized for 2019, 2018 and 2017.
DKK thousand
Cost at January 1, 2019
Transfer
Additions
Retirements
Cost at December 31, 2019
Accumulated depreciation
at January 1, 2019
Transfer
Depreciation for the year
Retirements
Accumulated depreciation
at December 31, 2019
Carrying amount
at December 31, 2019
Depreciation for the
financial year has been
charged as:
Research and
development expenses
Administrative expenses
Total
Cost at January 1, 2018
Adjustment to prior year
Retirements
Cost at December 31, 2018
Accumulated depreciation
at January 1, 2018
Depreciation for the year
Retirements
Accumulated depreciation
at December 31, 2018
Carrying amount
at December 31, 2018
Depreciation for the
financial year has been
charged as:
Research and
development expenses
Administrative expenses
Total
Plant and Other fixtures
and fittings
machinery
Building
improvements
Assets under
construction
55,545
0
3,419
-1,811
57,153
41,895
0
3,483
-1,682
43,696
13,457
3,483
0
3,483
53,629
2,748
-832
55,545
38,774
3,941
-820
41,895
13,650
5,130
27
7,630
-286
12,501
3,336
27
1,085
-284
4,164
8,337
926
159
1,085
4,382
1,290
-542
5,130
3,429
449
-542
10,800
-27
3,918
-918
13,773
10,614
-27
157
-884
9,860
3,913
134
23
157
10,800
-
-
10,800
10,496
118
-
3,336
10,614
1,794
186
3,941
-
3,941
382
67
449
100
18
118
0
0
14,001
0
14,001
0
0
0
0
0
14,001
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
Con Fin – Note 14
7979
Notes
Note 14 – Right-of-use assets
Accounting policies
The Group leases an office building, equipment and vehicles. The rental contract for the office
building has been made for a minimum period of 13 years (terminable by the landlord after 15
years). Management has assessed the lease period to be 13 years. Equipment and vehicles are
leased over a period of 3-4 years with no extension option.
Contracts may contain both lease and non-lease components. The group allocates the con-
sideration in the contract to the lease and non-lease components according to the specific
pricing of the services in the agreements.
Lease payments are allocated between principal and finance cost. The finance cost is charged
to the income statement over the lease period to ensure a constant periodic rate of interest on
the remaining balance of the liability for each period.
Right-of-use assets are measured at cost comprising the following:
• the amount of the initial measurement of lease liability
• any lease payments made at or before the commencement date less any lease incentives
received
• any initial direct costs and restoration costs.
Lease terms are negotiated on an individual basis and contain a wide range of different terms
and conditions. The lease agreements do not impose any covenants other than the security
interests in the leased assets that are held by the lessor.
Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the
lease term on a straight-line basis. If the Group is reasonably certain to exercise a purchase
option, the right-of-use asset is depreciated over the underlying asset’s useful life.
Until the 2018 financial year, all leases were classified as operating leases, but are from January
1, 2019 recognized as a right-and-use asset and corresponding liability at the date at which the
asset is available for use by Zealand. IFRS 16 determines whether a contract contains a lease on
the basis of whether the customer has the right to control the use of an identified asset for a pe-
riod of time in exchange for consideration. Zealand applies the definition of a lease and related
guidance set out in IFRS 16 to all contracts entered into or changed on or after January 1, 2019.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease
liabilities include the net present value of the following lease payments:
• fixed payments less any lease incentives receivable
• variable lease payment that are based on an index or a rate, initially measured using the index
or rate as at the commencement date
Lease payments to be made under reasonably certain extension options are also included in
the measurement of the liability.
Short-term and low value leases are also recognized as right-of-use assets.
The lease payments are discounted using the interest rate implicit in the lease. If that rate
cannot be readily determined, which is generally the case for leases in the Group, the Group’s
incremental borrowing rate is used, being the rate that the group would have to pay to borrow
the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar
economic environment with similar terms, security and conditions.
The Group is exposed to potential future increases in variable lease payments based on an in-
dex or rate, which are not included in the lease liability until they take effect. When adjustments
to lease payments based on an index or rate take effect, the lease liability is reassessed and
adjusted against the right-of-use asset.
Amounts recognized in the statement of financial position
The statement of financial position shows the following amounts relating to leases:
DKK thousand
Right-of-use assets
Buildings
Other fixtures and fittings
Lease liabilities
Current
Non-current
DKK thousand
Depreciation charge of right-of-use-assets
Land and buildings
Other fixtures and fittings
Interest expense (included in finance expenses)
The total cash outflow for leases in 2019 was DKK 9.3 million.
Dec 31,
2019
Jan 1,
2019
7,750
2,298
10,048
7,118
2,930
10,048
84,148
1,484
85,632
7,692
78,068
85,760
2019
7,724
1,094
8,818
621
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
Con Fin – Note 15-19
80
80
Notes
Note 15 – Other investments
Accounting policies
Other investments are measured on initial recognition at cost, and subsequently at fair value.
Changes in fair value are recognized in the income statement under financial items.
The Group’s other investments consist of a USD 5.3 million (2018: USD 5.0 million) investment
in Beta Bionics, Inc., the developer of iLet™, a fully integrated dual-hormone pump (bionic
pancreas) for autonomous diabetes care. The investment in Beta Bionics, Inc. is recorded at fair
value through profit and loss. This investment represents 1.6% (2018: 2.0%) ownership of Beta
Bionics, Inc., and is recorded at a fair value of DKK 35.6 million as of December 31, 2019 (DKK
32.6 million as of December 31, 2018).
In determining fair value, Zealand considered the impact of any recent share capital issuances
by Beta Bionics as an indicator of the fair value of the shares. In particular, Beta Bionics under-
took a capital offering in June 2019 and the share price at that point was used as the basis for
determining fair value. Management has determined that there has been no significant changes
to fair value since then accordingly the fair value as at December 31, 2019 has been measured
on a consistent basis. Measurement is considered a level 3 measurement.
A fair value adjustment of DKK 2.2 million and currency conversion impact of DKK 0.8 million,
respectively, have been recognized in financial income in 2019 (2018: DKK 0.0 million).
Note 17 – Prepaid expenses
Accounting policies
Prepaid expenses comprise amounts paid in respect of goods or services to be received in
subsequent financial periods. Clinical trials, which are outsourced to Clinical Research Organ-
izations (“CROs”), take several years to complete. As such, Management is required to make
estimates based on the progress and costs incurred to-date for the ongoing trials. Judgements
are made in determining the amount of costs to be expensed during the period, or recognized
as prepayments or accruals on the statement of financial position.
Prepayments are measured at cost and are tested for impairment at the statement of financial
position date.
The increase by DKK 19.0 million from 2018 (DKK 11.7 million) to 2019 (DKK 30.8 million) is
primarily related to an increase in prepaid insurance, taken as a result of higher insurance costs
because of the increased liability risk from the late stage pipeline and ongoing clinical trials.
Note 18 – Other receivables
Accounting policies
Other receivables are measured on initial recognition at fair value and subsequently at amor-
tized cost, usually equal to the nominal value.
Note 16 – Trade receivables
Accounting policies
Trade receivables are recognized and derecognized on a settlement date basis. They are
measured at nominal value less expected credit losses based on historical experience. Zealand
applies the simplified approach for determining expected credit losses.
Trade receivables are mainly related to milestone and royalty payments from our collaboration
agreements and are due in 30-60 days.
DKK thousand
VAT
Other
Total other receivables
2019
2018
5,437
2,498
7,935
2,980
388
3,368
There are no overdue receivables and the write-down for expected credit losses is not material.
Note 19 – Marketable securities
At December 31, 2019, Zealand had no trade receivables related to milestone payments.
Accounting policies
At December 31, 2018, Zealand had trade receivables related to the milestone from Protagonist
Therapeutics, Inc.
The Group’s Marketable securities portfolio comprises a bond portfolio. The investment strate-
gy allows for regular sales and Management has determined that the “hold to collect” or “hold
to collect and sell” criteria are not met. Consequently, the securities are classified at fair value
through profit or loss. Refer to note 26, Financial risks.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
Con Fin – Note 20-21
Notes
Note 20 – Cash and cash equivalents
Note 21 – Share capital (continued)
Accounting policies
Share capital
Cash is measured on initial recognition at fair value and subsequently at amortized cost, usually
equal to the nominal value.
DKK thousand
DKK
USD
EUR
Total cash and cash equivalents
Note 21 – Share capital
Accounting policies
2019
2018
732,405
306,748
41,907
1,081,060
343,585
96,526
420,524
860,635
Consideration paid and proceeds from selling treasury shares recognized directly in equity
within retained losses. Capital reductions through cancellation of treasury shares reduce the
share capital by an amount equal to the original cost price of the shares. Dividend payments are
recognized as a deduction of equity and a corresponding liability when declared.
Share capital
Share capital at January 1, 2019
Capital increase on March 15, 2019
Capital increase on March 20, 2019
Capital increase on April 5, 2019
Capital increase on May 28, 2019
Capital increase on June 14, 2019
Capital increase on August 23, 2019
Capital increase on September 5, 2019
Capital increase on September 13, 2019
Capital increase on November 22, 2019
Capital increase on December 13, 2019
Share capital at December 31, 2019
Share capital at January 1, 2018
Capital increase on September 14, 2018
Capital increase on December 14, 2018
Share capital at December 31, 2018
30,786,827
72,000
802,859
18,250
45,539
89,315
16,500
3,975,000
59,171
158,225
30,975
36,054,661
30,751,327
7,500
28,000
30,786,827
Share capital at January 1, 2017
Capital increase on March 23, 2017
Capital increase on April 13, 2017
Capital increase on May 30, 2017
Capital increase on June 15, 2017
Capital increase on August 14, 2017
Capital increase on August 18, 2017
Capital increase on September 1, 2017
Capital increase on September 22, 2017
Capital increase on November 20, 2017
Share capital at December 31, 2017
Share capital at January 1, 2016
Capital increase on March 30, 2016
Capital increase on April 14, 2016
Capital increase on May 26, 2016
Capital increase on June 16, 2016
Capital increase on September 6, 2016
Capital increase on September 23, 2016
Capital increase on September 29, 2016
Capital increase on November 17, 2016
Capital increase on November 25, 2016
Capital increase on December 8, 2016
Share capital at December 31, 2016
Share capital at January 1, 2015
Capital increase on March 21, 2015
Capital increase on April 11, 2015
Capital increase on June 2, 2015
Capital increase on June 20, 2015
Capital increase on September 8, 2015
Capital increase on September 26, 2015
Capital increase on November 4, 2015
Capital increase on November 13, 2015
Capital increase on December 4, 2015
Share capital at December 31, 2015
8181
26,142,365
9,500
22,000
5,000
8,537
4,375,000
156,250
1,500
28,675
2,500
30,751,327
24,352,769
46,613
50,453
43,071
41,269
7,400
45,457
1,475,221
8,200
57,913
13,999
26,142,365
23,193,047
120,833
106,220
51,487
46,521
383,190
150,702
60,843
176,456
63,470
24,352,769
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
82
Notes
Con Fin – Note 22
82
Note 21 – Share capital (continued)
The share capital solely consists of one class of ordinary shares all issued of DKK 1 each and all
shares rank equally. The shares are negotiable instruments with no restrictions on their transfer-
ability. All shares have been fully paid.
On March 20, 2019, a total of 802,859 new shares have been subscribed through a direct share
issue to Alexion Pharmaceuticals, Inc. in connection with entering into the license agreement
with Zealand Pharma A/S with net proceeds of DKK 85.6 million, including costs of DKK 0
million. On September 5, 2019, a total of 3,975,000 new shares have been subscribed through
a private placement and directed share issue to existing shareholder Van Herk Investments
B.V. with net proceeds of DKK 545.6 million, including costs of DKK 14.0 million. Other capital
increases in 2019 and 2018 related to exercise of warrant programs.
Expenses directly related to capital increases are deducted from equity. In 2019 expenses of
DKK 0.4 million (2018: DKK 0.1 million) related to the exercise of warrant programs.
At December 31, 2019, there were 64,223 treasury shares (2018: 64,223), equivalent to 0.2%
(2018: 0.2%) of the share capital and corresponding to a market value of DKK 15.1 million (2018:
DKK 5.3 million). 22,915 treasury shares have been allocated to performance shares units (PSUs)
as part of Zealand Pharma’s long-term incentive program (LTIP) granted June 13, 2019. Of
these a total of 19,765 PSU’s remain. See note 6 for a further description of the LTIP program.
Rules on changing the Articles of Association
All resolutions put to the vote of shareholders at general meetings are subject to adoption by
a simple majority of votes, unless the Danish Companies Act (Selskabsloven) or our Articles of
Association prescribe other requirements.
Note 22 – Royalty bond
Accounting policies
The royalty bond was initially measured at the time of borrowing at fair value less any transac-
tion costs and subsequently measured at amortized cost corresponding to the capitalized value
using the effective interest method. Consequently, the difference between the proceeds of the
loan and the amount to be repaid is recognized as a financial expense in the income statement
over the term of the loan.
On September 6, 2018 Zealand entered into an agreement to sell future royalties and USD 85
million of potential commercial milestones for Soliqua® 100/33/ Suliqua® and Lyxumia®/Adlyx-
in® to Royalty Pharma. Zealand received USD 205.0 million (DKK 1,310.2 million) upon closing
of the transaction on September 17, 2018. Zealand also redeemed the outstanding royalty bond
of USD 24.7 million (DKK 157.6 million).
Zealand will remain eligible for a payment from Sanofi up to USD 15.0 million in 2020 and 2022.
Refer to note 25.
The table below details changes in the Group’s liabilities arising from financing activities re-
garding the royalty bond, including both cash and non-cash changes. Liabilities arising from
financing activities are those for which cash flows were, or future cash flows will be, classified
in the Group’s consolidated statements of cash flows as cash flows from financing activities.
DKK thousand
January 1
Financing cash flows (repayment)
Amortization of financing costs
Exchange rate adjustments
December 31
2019
2018
0
0
0
0
0
135,734
-158,311
18,347
4,230
0
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
8383
2019
2018
170
36,082
6,843
0
29,949
73,044
925
34,971
6,682
22,803
15,483
80,864
Con Fin – Note 23-25
Notes
Note 23 – Deferred revenue
Note 24 – Other liabilities (continued)
The Group has recognized the following liabilities related to contracts with customers.
DKK thousand
DKK thousand
2019
2018
Deferred revenues at January 1
Customer payment received
Revenue recognized during the year
Total deferred revenue
Non-current deferred revenue
Current deferred revenue
0
177,315
-37,425
139,890
83,639
56,251
139,890
0
0
0
0
0
0
0
Deferred revenue occurred in connection with the agreement with Alexion Pharmaceuticals,
Inc. as disclosed in Note 2. An up-front payment of USD 25 million (DKK 177.3 million) was
received of which DKK 37.4 million has been recognized during 2019.
Management expects that approx. DKK 56 million of the up-front payment received will be rec-
ognized as revenue during 2020. The remaining payment is expected to be recognized during
2021 and 2022 according to the progress of the development project.
Note 24 – Other liabilities
Accounting policies
Financial liabilities are recognized initially at fair value less transaction costs. In subsequent pe-
riods, financial liabilities are measured at amortized cost corresponding to the capitalized value
using the effective interest method.
Provisions are measured as the best estimate of the costs needed at the statement of financial
position date to settle obligations. Provisions also include accruals, and contingent payments
on the conclusion of agreements, contracts, etc.
Severance payment
Employee benefits
Royalty payable to third party
Investment in Beta Bionics
Other payables
Total other liabilities
Note 25 – Contingent assets, liabilities and other contractual obligations
Contingent assets include potential future milestone payments. Contingent liabilities and other
contractual obligations include contractual obligations related to agreements with contract
research organizations (CROs), milestone payments and lease commitments.
Accounting policies
Contingent assets and liabilities are disclosed, unless the possibility of an inflow or outflow of
resources embodying economic benefits is virtually certain.
At December 31, 2019, Zealand is still eligible for a payment from Sanofi of up to USD 15.0
million in 2020 and 2022. However, it is Management’s opinion that the amount of any payment
cannot be determined on a sufficiently reliable basis, and therefore have not recognized an
asset in the statement of financial position of the Group.
At December 31, 2019, total contractual obligations related to agreements with CROs amount-
ed to DKK 318.9 million (DKK 230.2 million for 2020 and DKK 88.8 million for the years 2021 up
to and including 2023).
Zealand may be required to pay future development, regulatory and commercial milestones
related to the acquisition of Encycle Therapeutics. Refer to note 12.
Accounting policies
Up until 2018, Lease agreements were classified as either finance or operating leases based on
the criteria in IAS 17 Leases. Lease payments under operating leases and other rental agree-
ments were recognized in the income statement over the term of the agreements. In 2018,
none of the Group’s leases were classified as finance leases. Refer to note 1 for accounting
policy for leases effective since January 1, 2019.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
Con Fin – Note 26
84
84
Notes
Note 26 – Financial risks
The objective of Zealand’s financial management policy is to reduce the Group’s sensitivity
to fluctuations in exchange rates, interest rates, credit rating and liquidity. Zealand’s financial
management policy has been endorsed by Zealand’s Audit Committee and ultimately approved
by Zealand’s Board of Directors.
Interest rate risk
Zealand has a policy of avoiding financial instruments that expose the Group to any unwanted
financial risks. As of December 31, 2019, Zealand is free of interest bearing debt. Up until the
redemption in September 2018 Zealand had a fixed rate royalty bond.
Zealand is exposed to various financial risks, including foreign exchange rate risk, interest rate
risk, credit risk and liquidity risk.
Capital structure
Zealand aims to have an adequate capital structure in relation to the underlying operating
results and research and development projects, so that it is always possible to provide sufficient
capital to support operations and long-term growth targets.
The Board of Directors finds that the current capital and share structure is appropriate for the
shareholders and the Group.
Exchange rate risk
Most of Zealand’s financial transactions are in DKK, USD and EUR.
Due to Denmark’s long-standing fixed exchange rate policy vis-à-vis the EUR, Zealand has
evaluated that there is no transaction exposure or exchange rate risk regarding transactions in
EUR.
Zealand’s milestone payments have been agreed in foreign currencies, namely USD and EUR.
However, as milestone payments are unpredictable in terms of timing, the payments are not
included in the basic exchange rate risk evaluation.
As Zealand conducts clinical trials and toxicology studies around the world, Zealand will be
exposed to exchange rate risks associated with the denominated currency, which is primarily
USD based on volume and fluctuations against DKK. To date, Zealand’s policy has been to man-
age the transaction and translation risk associated with the USD passively, placing the revenue
received from milestone payments in USD in a USD account for future payment of Zealand’s
expenses denominated in USD, covering payments for the next 12-24 months and thus match-
ing Zealand’s assets with its liabilities.
Up until September 2018, a USD denominated royalty bond was outstanding which up until
this point in time established a significant exchange rate risk vs. USD. After redemption of the
remaining outstanding amount, USD 24.7 million, Zealand is debt free.
As of December 31, 2019, Zealand holds DKK 306.7 million (DKK 96.5 million) of its cash in USD.
During 2019, all cash has been held in current bank accounts in USD, EUR and DKK. Interest
rates on bank deposits in DKK and EUR have been negative since 2018, while USD accounts
have generated a low level of interest income.
During 2019 and 2018, Zealand has invested in low risk marketable securities. The Group’s mar-
ketable securities portfolio comprises bonds in Danish kroner. The average weighted duration
of the bond portfolio on the statement of financial position date was 3 years in both years.
Credit risk
Zealand is exposed to credit risk in respect of receivables, bank balances and bonds. The max-
imum credit risk corresponds to the carrying amount. Management believes that credit risk is
limited, as the counterparties to the trade receivables are large global pharmaceutical compa-
nies.
Cash and bonds are not deemed to be subject to credit risk, as the counterparties are banks
with investment-grade ratings (i.e. BBB- or higher from Standard & Poor’s).
Liquidity risk
The purpose of Zealand’s cash management is to ensure that the Group has sufficient and
flexible financial resources at its disposal at all times.
Zealand’s short-term liquidity is managed and monitored by means of the Company’s quarter-
ly budget revisions to balance the demand for liquidity and maximize the Company’s interest
income by matching its free cash in fixed-rate, fixed-term bank deposits and bonds with its
expected future cash burn.
Sensitivity analysis
The table shows the effect on profit/loss and equity of reasonably likely changes in the financial
variables in the statement of financial position.
DKK thousand
Fluctuation Effect
Fluctuation
Effect
2019
2018
USD
+/-10% 30,657
+/-10%
9,627
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
8585
DKK thousand
2019
2018
Categories of financial instruments
Deposits
Trade receivables
Other receivables
Cash and cash equivalents
Financial assets at amortized cost
Marketable securities
Other investments
Financial assets measured at fair value through profit or loss
Lease liabilities
Trade payables
Other liabilities
Financial liabilities measured at amortized cost
9,012
751
7,935
1,081,060
1,098,758
2,762
3,274
3,368
860,635
870,039
299,448
35,632
335,080
298,611
32,582
331,193
85,760
57,533
73,044
216,337
0
32,652
80,864
113,516
The fair value of securities is based on Level 1 in the fair value hierarchy.
138,269
23,359
54,709
216,337
The fair value of other investments is based on level 3 in the fair value hierarchy. Refer to note
15.
32,652
80,864
113,516
0
0
0
0
0
0
32,652
80,864
113,516
The carrying amount of financial assets and financial liabilities approximated the fair value.
Notes
Note 26 – Financial risks (continued)
Contractual maturity (liquidity risk)
A breakdown of the Group’s aggregate liquidity risk on financial assets and liabilities is given
below.
The following table details the Group’s remaining contractual maturity for its financial liabilities
with agreed repayment periods. The table has been prepared using the undiscounted cash
flows for financial liabilities, based on the earliest date on which the Group can be required to
pay. The table includes both interest and principal cash flows. To the extent that the specific
timing of interest or principal flows is dependent on future events, the table has been prepared
based on Management’s best estimate of such timing at the end of the reporting period. The
contractual maturity is based on the earliest date on which the Group may be required to pay.
With the exception of leasing, there are no interest cash-flows to be included in the table below
for the existing financial liabilities as they are not interest-bearing financial liabilities.
DKK thousand
months 1-5 Years
> 5 Years
Total
< 12
57,533
7,692
73,044
0
23,359
0
0
54,709
0
57,533
85,760
73,044
Trade payables
Leasing
Other liabilities
Total financial liabilities
at December 31, 2019
Trade payables
Other liabilities
Total financial liabilities
at December 31, 2018
All cash flows are non-discounted and include all liabilities under contracts.
Interest payments on the royalty bond redeemed in September 2018 were calculated using the
fixed interest rate (9.375%) and the expected payback time as of each statement of financial
position date.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
Con Fin – Note 27-31
86
86
Notes
Note 27 – Related parties
Note 29 – Change in working capital
Zealand has no related parties with controlling interest.
DKK thousand
2019
2018
2017
Zealand’s other related parties comprise the Company’s Board of Directors and Corporate
Management.
Remuneration to the Board of Directors and Corporate Management is disclosed in note 6.
No further transactions with related parties were conducted during the year.
(Increase)/decrease in receivables
Increase/(decrease) in payables
Adjustment for non-cash investing activities
Cash outflow for investment in Beta Bionics
Change in working capital
-21,059
17,061
-7,932
22,803
10,873
-471
13,256
0
0
12,785
1,306
-12,610
0
0
-11,304
Ownership
The following shareholders are registered in Zealand’s register of shareholders as owning
minimum 5% of the voting rights or minimum 5% of the share capital (1 share equals 1 vote) at
March 12, 2020:
• Van Herk Investments, Rotterdam, Netherlands
• Sunstone Capital A/S, Copenhagen, Denmark
• Wellington Management Company LLP, Boston, U.S.
Note 28 – Adjustments for non-cash items
DKK thousand
Depreciation
Warrant compensation expenses
Income tax income
Income tax expense
Financial income
Financial expenses
Non paid royalty expenses regarding sale of
future royalties and milestones
Exchange rate adjustments
Total adjustments
2019
Restated
2018
Restated
2017
13,682
14,763
-5,999
614
-9,306
3,390
0
-7,937
9,207
4,508
17,474
0
43,773
0
19,736
4,757
19,311
-5,500
0
-2,048
25,610
6,575
9,864
101,930
0
-17,596
24,534
Note 30 – Significant events after the balance sheet date
On February 10, 2020, Zealand announced a bid to acquire substantially all assets of Valeritas
Holdings, Inc. for a total cash consideration of USD 23 million. On February 9, 2020, Valeritas
Holdings, Inc. and its subsidiaries filed voluntary petitions under Chapter 11 of the US Bankrupt-
cy Code in the US Bankruptcy Court. If Zealand's bid is selected, the sale will be subject to ap-
proval by the Bankruptcy Court and certain other closing conditions. There can be no certainty
that the transaction will be concluded.
No other significant events have occurred after the end of the reporting period.
Note 31 – Approval of the annual report
The Annual Report has been approved by the Board of Directors and Executive Management
and authorized for issue on March 12, 2020.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
Par Fin – Contents
Contents –
Parent company
Financial statements of the parent company
Income statement
Statement of comprehensive income
Statement of financial position
Statement of cash flows
Statement of changes in equity
Notes
1
Significant accounting policies, and significant
accounting estimates and assessments
2 Revenue
3
Fees to auditors appointed at the Annual
General Meeting
4
Information on staff and remuneration
5 Financial income
6 Financial expenses
7 Basic and diluted earnings per share
8
Investments in subsidiaries
9 Other investments
10 Prepaid expenses
11 Other receivables
12 Cash and cash equivalents
13 Share capital
8787
97
97
98
99
99
99
99
99
99
14 Other liabilities
15
Contingent assets, liabilities and
other contractual obligations
16 Financial risks
17 Transactions with related parties
18 Adjustments for non-cash items
19 Change in working capital
20 Allocation of result
21
Significant events after the balance sheet date
22 Approval of the annual report
88
88
89
90
90
91
91
91
92
95
95
95
96
96
97
97
97
97
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 88
88
Par Fin – Income Statement
Financial statements of the parent company
Income statement
DKK thousand
Revenue
Research and development expenses
Administrative expenses
Other operating income
Operating result
Income from subsidiaries
Financial income
Financial expenses
Result before tax
Corporate tax
Net result for the year
Earnings per share – DKK
Basic earnings/loss per share
Diluted earnings/loss per share
¹ See note 1 to the consolidated financial statements.
Statement of comprehensive income
Note
2
4
3,4
Restated1
2018
2019
DKK thousand
41,333
-553,085
-75,977
444
-587,285
13,119
-437,955
-42,953
630
-467,159
Net result for the year
Other comprehensive income (loss)
Comprehensive result for the year
¹ See note 1 to the consolidated financial statements.
Note
Restated1
2018
2019
-570,167
0
-570,167
498,512
0
498,512
5
6
0 1,000,000
12,904
-3,512
542,233
14,755
-3,137
-575,667
5,500
-570,167
-43,721
498,512
7
7
-16.87
-16.87
16.24
16.24
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
Par Fin – Financial position
8989
Financial statements of the parent company
Statement of financial position at December 31
DKK thousand
Note
Restated1 Restated1
2017
2018
2019
DKK thousand
Note
Restated1 Restated1
2017
2018
2019
Assets
Non-current assets
Plant and machinery
Other fixtures and fittings, tools and equipment
Buildings
Right-of-use asset
Fixed assets under construction
Investment in subsidiaries
Deposits
Other investments
Total non-current assets
13,457
8,337
3,913
85,632
14,001
2,601
8,968
35,557
172,466
8
9
13,650
1,794
186
0
0
380
2,762
32,582
51,354
Current assets
Trade receivables
Receivables from subsidiaries
Prepaid expenses
Corporate tax receivable
Other receivables
Marketable securities
Cash and cash equivalents
Total current assets
10
733
3,271
30,494
6,682
7,936
299,448
12 1,019,811
3,274
0
11,698
1,278
3,103
298,611
804,303
1,368,375 1,122,267
11
Liabilities and equity
Share capital
Share premium
Retained loss
Equity
Deferred revenue
Lease liabilities
Non-current liabilities
Trade payables
Payables to subsidiaries
Lease liabilities
Deferred revenue
Other liabilities
Current liabilities
Total liabilities
Total equity and liabilities
¹ See Note 1 to the consolidated financial statements.
14,855
953
304
0
0
380
2,729
9,312
28,533
0
127
7,253
5,500
4,950
75,111
493,575
586,516
13
36,055
30,787
30,751
2,646,418 1,954,721 1,934,494
-918,596 -1,417,107
-1,488,763
548,138
1,193,710 1,066,912
83,639
78,068
161,707
57,082
0
7,692
56,251
64,399
185,424
0
0
0
32,409
546
0
0
73,754
106,709
0
0
0
29,424
0
0
0
37,487
66,911
14
347,131
106,709
1,540,841 1,173,621
66,911
615,049
Total assets
¹ See Note 1 to the consolidated financial statements.
1,540,841 1,173,621
615,049
Significant accounting policies, and significant
accounting estimates and assessments
Contingent assets, liabilities and other
contractual obligations
Financial risks
Transactions with related parties
Allocation of result
Significant events after the balance sheet date
Approval of the annual report
1
15
16
17
20
21
22
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
90
Total
Par Fin – Equity
Par Fin – Cash flow
90
Financial statements of the parent company
Statement of cash flows
Statement of changes in equity
DKK thousand
Net result for the year
Adjustments for non-cash items
Change in working capital
Financial income received
Financial expenses paid
Deferred revenue
Income tax receipt
Income tax paid
Cash inflow/outflow from operating activities
Change in deposit
Investment in subsidiaries
Purchase of other investments
Purchase of marketable securities
Sale of marketable securities
Dividends on marketable securities
Purchase of property, plant and equipment
Sale of fixed assets
Cash outflow from investing activities
Note
Restated1
2018
2019
DKK thousand
Share
capital premium
Share Retained
loss
18
19
8
9
-570,167
7,975
5,284
5,387
-3,137
139,890
93
0
-414,675
-6,206
-2,221
-22,803
0
0
878
-21,036
25
-51,363
52,468
645,145
-14,444
-8,689
674,480
498,512
58,505
11,250
3,269
-1,242
0
5,500
-45,000
530,794
-33
0
0
-299,849
74,230
1,020
-4,038
0
-228,670
2,884
0
-22
0
2,862
Equity at January 1, 2019
as originally presented
Correction of error (net of tax)¹
Restated equity at January 1, 2019
Comprehensive income for the year
Net result for the year
Warrant compensation expenses
Capital increases
Costs related to capital increases
Equity at December 31, 2019
Equity at January 1, 2018
as originally presented
Correction of error (net of tax)¹
Restated equity at January 1, 2018
Comprehensive income for the year
Net profit for the year (restated)¹
Warrant compensation expenses
Capital increases
Restated equity at December 31, 2018
1 See note 1 to the consolidated financial statements.
30,787 1,976,736
-22,016
30,787 1,954,720
0
-940,611 1,066,912
0
-918,595 1,066,912
22,016
0
0
-570,167
-570,167
0
5,268
0
13,796
697,613
-14,444
36,055 2,646,417 -1,488,762 1,193,710
13,796
692,345
-14,444
0
0
30,751 1,956,514 -1,439,127
22,020
-22,020
30,751 1,934,494 -1,417,107
548,138
0
548,138
0
0
498,512
498,511
0
36
17,400
2,826
30,787 1,954,720
0
0
17,401
2,862
-918,595 1,066,912
Proceeds from issuance of shares related to exercise of warrants
Proceeds from issuance of shares
Costs related to issuance of shares
Leasing installments
Cash inflow from financing activities
Decrease/increase in cash and cash equivalents
Cash and cash equivalents at January 1
Exchange rate adjustments
Cash and cash equivalents at December 31
208,442
804,303
7,066
1,019,811
304,986
493,575
5,742
804,303
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
Par Fin – Note 1-2-3
9191
Notes
Note 1 – Significant accounting policies, and significant accounting
estimates and assessments
Note 2 – Revenue
Significant accounting policies
Basis of preparation
The financial statements of the parent company have been prepared in accordance with Inter-
national Financial Reporting Standards (IFRS) as adopted by the EU and additional requirements
under the Danish Financial Statements Act.
The accounting policies for the financial statements of the parent company are unchanged
from the previous financial year except for a change of accounting policy for leases as de-
scribed in note 1 to the consolidated financial statements. The accounting policies are the
same as for the consolidated financial statements with the adjustments described below. For a
description of the accounting policies of the group, please refer to the consolidated financial
statements.
Recognized revenue can be specified as follows:
DKK thousand
Alexion Pharmaceuticals, Inc.
Undisclosed counterpart
Protagonist Therapeutics, Inc.
Total license and milestone revenue
Please refer to note 2 to the consolidated financial statements.
2019
2018
38,021
3,312
-
41,333
-
9,845
3,274
13,119
Note 3 – Fees to auditors appointed at the Annual General Meeting
Note disclosures have only been included in the consolidated financial statements where the
amounts recognized in the separate financial statements for the parent company are identical.
DKK thousand
In the narrative sections of the financial statements, comparative figures for 2018 are shown in
brackets.
Investments in subsidiaries
Please refer to note 8 Investments in subsidiaries.
Restatement (management judgement)
Management has reconsidered the allocation of expenses of warrants.
For more details on the restatements and the description of the impact on the separate fi-
nancial statements of the parent company for 2018, please refer to note 1 in the consolidated
financial statements as the impact is identical to the consolidated financial statements.
Audit
Audit-related services and other assurance engagements
Tax advice
Other
Total fees
2019
2018
1,783
1,731
0
12
3,526
1,661
718
106
0
2,485
The fee for audit-related services and other assurance engagements and other services provid-
ed to the Parent Company by Deloitte Statsautoriseret Revisionspartnerselskab in 2019 consist-
ed of assistance work in relation to existing internal control processes, other auditor’s reports
on various statements for public authorities, and other accounting advisory services.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
92
Notes
Par Fin – Note 4
92
Note 4 – Information on staff and remuneration
DKK thousand
Total staff salaries can be specified as follows:
Wages and salaries
Share based incentive payments
Pension schemes (defined contribution plans)
Other payroll and staff-related costs
Total
The amount is charged as:
Research and development expenses
Administrative expenses
Total
Average number of employees
Restated1
2018
2019
168,237
13,715
13,420
14,227
209,599
141,661
17,478
11,065
9,779
179,973
170,575
39,024
209,599
153,525
26,458
179,983
169
146
For remuneration to the Board of Directors please refer to note 6 to the consolidated financial
statements.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
Notes
Note 4 – Information on staff and remuneration (continued)
DKK thousand
Base salary
Bonus
Pension
contribution
Other
short term
benefits
Warrant
compensation
expenses
2019
Remuneration to the Executive Management
Emmanuel Dulac¹
Adam Sinding Steensberg²
Britt Meelby Jensen³
Mats Blom³
Total
Other Corporate Management⁴
Total
Total
2018
Remuneration to the Executive Management
Britt Meelby Jensen
Mats Blom
Total
Other Corporate Management
Total
Total
¹ Emmanuel Dulac was appointed as CEO at April 25, 2019.
² Former Interim CEO Adam Sinding Steensberg was appointed EVP, R&D and CMO at April 25, 2019.
3 Former CEO Britt Meelby Jensen and former CFO Mats Blom resigned from Zealand at February 28, 2019 and March 28, 2019, respectively.
4 Other Corporate Management in 2019 comprised three members (2018 and 2017: Two).
13,499
3,100
2,807
1,745
655
8,307
3,889
3,889
9,072
1,032
419
248
10,771
1,512
1,512
12,196
12,283
4,189
2,621
6,810
6,689
6,689
2,513
1,031
3,544
2,653
2,653
6,197
620
505
175
66
1,366
389
389
1,755
419
262
681
604
604
1,285
855
269
60
61
1,245
5
5
1,250
320
273
593
1,035
1,035
1,628
832
2,304
0
1,677
4,813
1,074
1,074
5,887
Restated
0
1,888
1,888
4,471
4,471
6,359
9393
Total
14,479
6,917
2,399
2,707
26,502
6,869
6,869
33,371
Restated
7,441
6,075
13,516
15,452
15,452
28,968
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
94
Notes
Note 4 – Information on staff and remuneration (continued)
The 2010 employee incentive program
Please refer to the consolidated financial statements, note 6.
The 2015 employee incentive program
94
Number of warrants
Outstanding at January 1, 2019
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at December 31, 2019
Specified as follows:
Executive Management
Other employees
Total
Number of warrants
Outstanding at January 1, 2018
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at December 31, 2018
Specified as follows:
Executive Management
Other employees
Total
Program
of 2015
05/may/15
Program
of 2015
05/may/15
Program
of 2015
05/Apr/16
Program
of 2015
05/Apr/16
Program
of 2015
15/Jul/16
Program
of 2015
06/Apr/17
Program
of 2015
06/Apr/17
Program
of 2015
25/Aug/17
Program
of 2015
25/Aug/17
Program
of 2015
22/May/18
Program
of 2015
10/Apr/19
Program
of 2015
13/Jun/19
Total
0
0
0
0
0
0
0
0
0
342,250
321,750
0
-9,050
-242,550
0
0
-40,250
-71,425
0
90,650
210,075
45,000
45,650
90,650
60,000
150,075
210,075
0
0
0
0
0
0
0
0
0
40,000
381,000
0
0
-40,000
-88,750
0
0
0
0
0
0
0
0
292,250
57,000
235,250
292,250
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
510,000
0
-92,000
0
0
0
397,750
-17,500
0
0
0
1,595,000
168,388
-26,716
0
0
566,138
-314,266
-313,975
0
418,000
380,250
141,672
1,532,897
65,000
353,000
418,000
0
117,894
344,894
380,250
380,250
23,778
1,188,003
141,672
1,532,897
100,000
349,750
328,750
85,434
40,000
405,500
93,392
14,566
6,608
0
0
0
-7,000
-85,434
0
0
0
0
615,500
-24,500
-93,392
-14,566
-6,608
-105,500
0
-100,000
0
0
0
0
0
0
0
0
-7,500
0
0
0
342,250
321,750
75,000
267,250
342,250
25,000
296,750
321,750
0
0
0
0
0
0
40,000
381,000
0
40,000
40,000
57,000
324,000
381,000
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
510,000
60,000
450,000
510,000
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1,424,000
655,500
-437,000
-7,500
0
1,635,000
217,000
1,418,000
1,635,000
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
Par Fin – Note 5-7
9595
Notes
Note 4 – Information on staff and remuneration (continued)
Note 7 – Basic and diluted earnings per share
The 2019 long-term incentive program (LTIP) for Corporate Management
The result and weighted average number of ordinary shares used in the calculation of basic and
diluted result per share are as follows:
Number of shares
At January 1
Granted during the year
Vested during the year
Forfeited during the year
At December 31
Note 5 – Financial income
2019
2018
0
19,853
0
-3,150
16,703
0
0
0
0
0
DKK thousand
2019
2018
Interest income from financial assets measured at amortized costs
Fair value adjustments of Other investments and Marketable securities
Dividend, Marketable securities
Exchange rate adjustments
Total financial income
5,387
2,846
878
5,644
14,755
3,269
0
1,020
8,615
12,904
Note 6 – Financial expenses
DKK thousand
Other financial expenses
Fair value adjustments of Marketable securities
Loss on sale of Marketable securities
Exchange rate adjustments
Total financial expenses
2019
2018
3,137
0
0
0
3,137
1,242
1,389
881
0
3,512
DKK thousand
Net result for the year
Net result used in the calculation of basic and diluted
earnings/losses per share
Weighted average number of ordinary shares
Weighted average number of treasury shares
Weighted average number of ordinary shares used in the
calculation of basic earnings/losses per share
Weighted average number of ordinary shares used in the
calculation of basic and diluted earnings/losses per share
Basic earning/loss per share (DKK)
Diluted earning/loss per share (DKK)
Restated1
2018
2019
-570,167
498,512
-570,167
498,512
33,866,709 30,754,948
-64,223
-64,223
33,802,486 30,690,725
33,802,486 30,696,404
-16.87
16.24
-16.87
16.24
Regarding a specification of potential ordinary shares, which are dilutive or antidilutive, please
refer to note 11 to the consolidated financial statements.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
Par Fin – Note 8-9
96
Notes
Note 8 – Investments in subsidiaries
Accounting policies
Investments in subsidiaries are measured at cost in the parent company’s financial statements.
Where the recoverable amount of the investment is lower than cost, the investments are writ-
ten down to this lower value.
DKK thousand
Cost at January 1, 2019
Additions
Cost at December 31, 2019
Value adjustments at January 1, 2019
Value adjustments for the year
Value adjustments at December 31, 2019
Carrying amount at December 31, 2019
Cost at January 1, 2018
Additions
Cost at December 31, 2018
Value adjustments at January 1, 2018
Value adjustments for the year
Value adjustments at December 31, 2018
Carrying amount at December 31, 2018
380
2,221
2,601
0
0
0
2,601
380
0
380
0
0
0
380
96
Voting
rights
100%
100%
100%
100%
100%
100%
Company summary
Domicile Ownership
Zealand Pharma A/S subsidiaries:
ZP Holding SPV K/S
ZP General Partner 1 ApS
Zealand Pharma US, Inc.
Encycle Therapeutics, Inc.
ZP SPV 3 K/S
ZP General Partner 3 ApS
ZP Holding SPV K/S subsidiaries:
ZP SPV 1 K/S
ZP General Partner 2 ApS
Denmark
Denmark
United States
Canada
Denmark
Denmark
100%
100%
100%
100%
100%
100%
Denmark
Denmark
100%
100%
100%
100%
Pursuant to section 146(1) of the Danish Financial Statements Act, Management has chosen to
submit an exemption declaration ('Undtagelseserklæring' in Danish) and has not issued annual
reports for ZP SPV 1 K/S and ZP Holding SPV K/S.
The financial statements of the two companies are fully consolidated in the consolidated finan-
cial statements of Zealand Pharma A/S.
No income has been received from subsidiaries during the year (2018: Dividend of DKK 1,000.0
million).
Note 9 – Other investments
Please refer to note 15 to the consolidated financial statements.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
Par Fin – Note 10-15
9797
2019
2018
170
34,446
0
29,783
64,399
925
34,940
22,803
15,086
73,754
Note 14 – Other liabilities
DKK thousand
Severance payment
Employee benefits
Investment in Beta Bionics
Other payables
Total other liabilities
2019
2018
5,448
2,488
7,936
2,771
332
3,103
Note 15 – Contingent assets, liabilities and other contractual obligations
Zealand Pharma A/S is part of a Danish joint taxation. Consequently, referring to the Danish
Corporation Tax Act regulations, Zealand Pharma A/S is liable for any income taxes, etc. for the
jointly taxed companies and Zealand Pharma A/S is likewise liable for any obligations to with-
hold tax at source on interest, royalties and returns for the jointly taxed companies.
2019
2018
Please refer to note 25 to the consolidated financial statements for information on contractual
obligations.
698,666
299,695
21,450
1,019,811
309,482
95,025
399,796
804,303
Notes
Note 10 – Prepaid expenses
The increase in Prepaid expenses of DKK 18.8 million from 2018 to 2019 is primarily related to
higher insurance costs because of the increased liability risk from the late stage pipeline and
ongoing clinical trials.
Note 11 – Other receivables
DKK thousand
VAT
Other
Total other receivables
Note 12 – Cash and cash equivalents
DKK thousand
DKK
USD
EUR
Total cash and cash equivalents
Note 13 – Share capital
Please refer to note 21 to the consolidated financial statements.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
98
Notes
Par Fin – Note 16
98
Note 16 – Financial risks
Please refer to note 26 to the consolidated financial statements.
Contractual maturity (liquidity risk)
A breakdown of the Company’s aggregate liquidity risk on financial assets and liabilities is given
below.
The following table details the Company’s remaining contractual maturity for its financial liabil-
ities with agreed repayment periods. The table has been prepared using the undiscounted cash
flows for financial liabilities, based on the earliest date on which the Company can be required
to pay. The table includes both interest and principal cash flows. To the extent that the specific
timing of interest or principal flows is dependent on future events, the table has been prepared
based on Management’s best estimate of such timing at the end of the reporting period. The
contractual maturity is based on the earliest date on which the Company may be required to
pay.
There are no interest cash-flows to be included in the table below for the existing financial
liabilities as they are not interest-bearing financial liabilities.
DKK thousand
months 1-5 Years
>5 years
Total
< 12
57,082
7,692
64,399
0
23,359
0
0
54,709
0
57,082
85,760
64,399
DKK thousand
Categories of financial instruments
Deposits
Trade receivables
Receivables from subsidiaries
Other receivables
Cash and cash equivalents
Financial assets measured at amortized cost
Marketable securities
Other investments
Financial assets measured at fair value through profit or loss
Trade payables
Payables to subsidiaries
Lease liabilities
Other liabilities
Financial liabilities measured at amortized cost
2019
Restated
2018
8,968
733
3,271
7,936
1,019,811
1,040,719
2,762
3,274
0
3,103
804,303
813,442
299,448
35,557
335,005
298,611
32,582
331,193
57,082
0
85,760
64,399
207,241
32,409
546
0
73,754
106,709
The fair value of marketable securities is based on Level 1 in the fair value hierarchy.
129,173
23,359
54,709
207,241
The fair value of other investments is based on level 3 in the fair value hierarchy.
32,409
546
73,754
106,709
0
0
0
0
0
0
0
0
32,409
546
73,754
106,709
At December 31, 2019 and 2018, the carrying amount of other financial assets and financial
liabilities approximated the fair value.
Trade payables
Leasing
Other liabilities
Total financial liabilities
at December 31, 2019
Trade payables
Payables to subsidiaries
Other liabilities
Total financial liabilities
at December 31, 2018
All cash flows are undiscounted and include all liabilities under contracts.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
Par Fin – Note 17-22
9999
Notes
Note 17 – Transactions with related parties
Note 20 – Allocation of result
The parent company had receivables from Group subsidiaries of DKK 3,271 thousand at De-
cember 31, 2019 (2018: payables of DKK 546 thousand). In 2019, interest paid by the parent
company to subsidiaries amounted to DKK 0 thousand (2018: DKK 0 thousand).
The Board of Directors proposes that the parent company’s 2019 net result of DKK -570.2
million (2018: net result of DKK 498.5 million) be carried forward to next year by transfer to
retained loss.
Note 18 – Adjustments for non-cash items
Note 21 – Significant events after the balance sheet date
Please refer to note 30 in the consolidated financial statements.
Note 22 – Approval of the annual report
Please refer to note 31 in the consolidated financial statements.
DKK thousand
Depreciation
Warrant compensation expenses
Income tax receipt
Income tax expense
Financial income
Financial expenses
Exchange rate adjustments
Total adjustments
Note 19 – Change in working capital
DKK thousand
Increase/decrease in receivables
Increase/decrease in payables
Adjustment for non-cash investing activities
Adjustment for cash outflow for investment in Beta Bionics
Change in working capital
2019
Restated
2018
13,682
13,796
-5,497
0
-9,227
3,137
-7,916
7,975
4,508
17,400
0
43,722
0
1,389
-8,514
58,505
2019
2018
-29,616
20,029
-7,932
22,803
5,284
-5,745
16,995
0
0
11,250
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
100
100
Par Fin – Alternative performance measures
Alternative performance measures for the Group (non-audited)
Net operating expenses
Net operating expenses consist of research, development and administrative expenses less
government grants and research funding (which are included in other operating income). Net
operating expenses is used to show the total cost level, excluding costs related to revenue,
i.e. royalty expenses. This is used to show the cost level that needs to be covered by revenues
minus royalty expenses in order to show an operating profit. The table below shows a reconcil-
iation of net operating expenses for the years ended 2019, 2018 and 2017:
DKK thousand
Research and development expenses
Administrative expenses
Government grants and research funding
Net operating expenses
2019
Restated
2018
Restated
2017
561,423
67,881
-444
628,860
438,219
43,543
-630
481,132
323,949
47,443
-607
370,785
Free cash flow
Free cash flow is calculated as the sum of cash flows from operating activities less purchase of
property, plant and equipment. A positive free cash flow shows that the Group is able to finance
its activities and that external financing or capital raises is thus not necessary for the Group’s
operating activities. Therefore, Executive Management believes that this non-IFRS liquidity
measure provides useful information to investors in addition to the most directly comparable
IFRS financial measure “Net cash flow from operating activities.” The table below shows a rec-
onciliation of free cash flow for 2019, 2018 and 2017:
DKK thousand
2019
Restated
2018
Restated
2017
Cash (outflow)/inflow from operating activities
Less purchase of property, plant and equipment
Free cash flow
-409,455
-21,036
-430,491
-461,420
-4,038
-465,458
-278,746
-7,226
-285,972
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019
Statement – Management
101101
Statement of the
Board of Directors
and Executive
Management
The Board of Directors and Executive Management have today
discussed and approved the Annual Report of Zealand Pharma
A/S for the financial year January 1 – December 31, 2019.
parent company’s operations and cash flows for the financial
year January 1 – December 31, 2019.
The consolidated financial statements and parent company
financial statements have been prepared in accordance with
International Financial Reporting Standards as adopted by the
EU and additional requirements under the Danish Financial
Statements Act.
We consider the accounting policies used to be appropriate. In
our opinion, the financial statements give a true and fair view of
the Group’s and the parent company’s financial position as of
December 31, 2019, and of the results of the Group’s and the
In our opinion, the Management’s review includes a fair review
of the development of the Group’s and the parent company’s
operations and economic conditions, the results for the year,
and the Group’s and the parent company’s financial position, as
well as a review of the principal risks and uncertainties to which
the Group and the parent company are exposed.
We recommend that the Annual Report be approved at the
Annual General Meeting.
Søborg, March 12, 2020
Executive Management
Emmanuel Dulac
President and
Chief Executive Officer
Matthew Douglas Dallas
Senior Vice President and
Chief Financial Officer
Adam Sinding Steensberg
Executive Vice President,
Research & Development, and
Chief Medical Officer
Board of Directors
Alf Gunnar Martin Nicklasson
Chairman
Kirsten Aarup Drejer
Vice Chairman
Jeffrey Berkowitz
Board member
Bernadette Connaughton
Board member
Leonard Kruimer
Board member
Alain Munoz
Board member
Michael John Owen
Board member
Hanne Heidenheim Bak
Board member
Employee elected
Jens Peter Stenvang
Board member
Employee elected
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 102
102
Statement – Independent auditor
Independent
auditor’s report
To the shareholders of Zealand Pharma A/S
Opinion
We have audited the consolidated financial state-
ments and the parent financial statements of Zealand
Pharma A/S for the financial year January 1 – De-
cember 31, 2019 which comprise the income state-
ment, statement of comprehensive income, state-
ment of financial position, statement of changes in
equity, statement of cash flows and notes, including
a summary of significant accounting policies, for the
Group as well as for the Parent. The consolidated
financial statements and the parent financial state-
ments are prepared in accordance with International
Financial Reporting Standards as adopted by the EU
and additional requirements of the Danish Financial
Statements Act.
Basis for opinion
We conducted our audit in accordance with Interna-
tional Standards on Auditing (ISAs) and the additional
requirements applicable in Denmark. Our responsi-
bilities under those standards and requirements are
further described in the Auditor’s responsibilities for
the audit of the consolidated financial statements
and the parent financial statements section of this
auditor’s report. We are independent of the Group in
accordance with the International Ethics Standards
Board of Accountants' Code of Ethics for Professional
Accountants (IESBA Code) and the additional require-
ments applicable in Denmark, and we have fulfilled
our other ethical responsibilities in accordance with
these requirements. We believe that the audit evi-
dence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
In our opinion, the consolidated financial statements
and the parent financial statements give a true and
fair view of the Group’s and the Parent’s financial
position at December 31, 2019, and of the results
of their operations and cash flows for the financial
year January 1 – December 31, 2019 in accordance
with International Financial Reporting Standards as
adopted by the EU and additional requirements of the
Danish Financial Statements Act.
Our opinion is consistent with our audit book com-
ments issued to the Audit Committee and the Board
of Directors.
To the best of our knowledge and belief, we have
not provided any prohibited non-audit services
as referred to in Article 5(1) of Regulation (EU) No
537/2014.
We were first appointed auditors of Zealand Pharma
A/S on April 29, 2014 for the financial year 2014. We
have been reappointed annually by decision of the
general meeting for a total contiguous engagement
period of six years up to and including the financial
year 2019.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 Key audit matters
Key audit matters are those matters that, in our pro-
fessional judgement, were of most significance in our
audit of the consolidated financial statements and
the parent financial statements for the financial year
January 1 – December 31, 2019. These matters were
addressed in the context of our audit of the consol-
idated financial statements and the parent financial
statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion
on these matters.
Collaboration Agreement with Alexion
Pharmaceuticals, Inc.
On March 20, 2019 Zealand Pharma A/S entered
into a Collaboration Agreement with Alexion Phar-
maceuticals, Inc. (“Alexion”). Under the terms of the
agreement, Alexion and Zealand Pharma A/S entered
into an exclusive collaboration for the discovery and
development of subcutaneously delivered peptide
therapies directed to up to four complement path-
way targets. Zealand Pharma A/S leads the joint
discovery and research efforts through the preclinical
stage and Alexion leads development efforts begin-
ning with Investigational New Drug filing and Phase 1
studies. The agreement provides Alexion with exclu-
sive worldwide licenses and commercial rights to the
peptide therapies developed in the collaboration.
Zealand Pharma A/S received a non-refundable up-
front fee of USD 25 million for the first target and
Alexion made a concurrent USD 15 million equity
investment in Zealand Pharma A/S at a premium to
the market price. For the lead target, the agreement
provides the potential for development-related
milestones of up to USD 115 million, as well as up to
USD 495 million in sales-related milestones and the
potential for high single- to low double-digit royalty
payments.
Management has allocated the non-refundable up-
front fee to the combined license and research and
development services and is recognized as revenue
along with provision of the research and develop-
ment services under the lead program. Expenses
incurred to provide the services are recognized when
incurred. Further, the premium over the market share
price on the Zealand Pharma A/S shares subscribed
by Alexion, DKK 12.7 million, is attributed to the
agreement as further consideration and consequent-
ly also recognized over the period over which the
research and development services are provided.
In total for the year ended December 31, 2019,
Alexion has paid USD 40 million (DKK 262.9 million)
that has affected equity by DKK 85.6 million from the
equity investment excluding the additional premi-
um and deferred revenue by DKK 177.3 million. Of
this DKK 177.3 million of initially deferred revenue at
the time of the transaction in March 2019, DKK 37.4
million of Revenue has been recognized for the year
ended December 31, 2019, and DKK 139.9 million
remains recorded in Deferred Revenue as of Decem-
ber 31, 2019.
103103
Refer to notes 1, 2 and 23 in the consolidated finan-
cial statements.
We have identified this transaction as a key audit
matter as there is significant accounting judgement
taken by Management regarding the initial account-
ing for this transaction and as this is a significant
transaction that is out of the scope of the normal
business undertaken by Zealand Pharma A/S.
How the matter was addressed in the audit
Based on our risk assessment procedures focused on
the Group’s business process and internal controls
for significant unusual transactions during the year,
we tested the appropriateness of the recognition and
disclosures related to the transaction. We read the
Collaboration Agreement as well as Management’s
accounting memo and discussed it with Manage-
ment and evaluated the related accounting treatment
including disclosures. We obtained Management’s
calculation of the accounting impact of the transac-
tion and evaluated the validity of the calculation by
testing the accuracy and completeness of the inputs
to such calculation.
Statement on the Management review
Management is responsible for the Management
review.
Our opinion on the consolidated financial statements
and the parent financial statements does not cover
the Management review, and we do not express any
form of assurance conclusion thereon.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 104
104
In connection with our audit of the consolidated
financial statements and the parent financial state-
ments, our responsibility is to read the Management
review and, in doing so, consider whether the Man-
agement review is materially inconsistent with the
consolidated financial statements and the parent fi-
nancial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated.
Moreover, it is our responsibility to consider whether
the Management review provides the information
required under the Danish Financial Statements Act.
Based on the work we have performed, we conclude
that the Management review is in accordance with
the consolidated financial statements and the parent
financial statements and has been prepared in ac-
cordance with the requirements of the Danish Finan-
cial Statements Act. We did not identify any material
misstatement of the Management review.
Management's responsibilities for the
consolidated financial statements and the parent
financial statements
Management is responsible for the preparation of
consolidated financial statements and parent fi-
nancial statements that give a true and fair view in
accordance with International Financial Reporting
Standards as adopted by the EU and additional re-
quirements of the Danish Financial Statements Act,
and for such internal control as Management deter-
mines is necessary to enable the preparation of con-
solidated financial statements and parent financial
statements that are free from material misstatement,
whether due to fraud or error.
the economic decisions of users taken on the basis
of these consolidated financial statements and these
parent financial statements.
In preparing the consolidated financial statements
and the parent financial statements, Management is
responsible for assessing the Group’s and the Parent’s
ability to continue as a going concern, for disclosing,
as applicable, matters related to going concern, and
for using the going concern basis of accounting in
preparing the consolidated financial statements and
the parent financial statements unless Management
either intends to liquidate the Group or the Entity or
to cease operations, or has no realistic alternative but
to do so.
Auditor's responsibilities for the audit of the
consolidated financial statements and the parent
financial statements
Our objectives are to obtain reasonable assurance
about whether the consolidated financial statements
and the parent financial statements as a whole are
free from material misstatement, whether due to
fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs and the
additional requirements applicable in Denmark will
always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are
considered material if, individually or in the aggre-
gate, they could reasonably be expected to influence
As part of an audit conducted in accordance with
ISAs and the additional requirements applicable in
Denmark, we exercise professional judgement and
maintain professional scepticism throughout the
audit. We also:
• Identify and assess the risks of material misstate-
ment of the consolidated financial statements and
the parent financial statements, whether due to
fraud or error, design and perform audit procedures
responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis
for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than
for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrep-
resentations, or the override of internal control.
• Obtain an understanding of internal control rele-
vant to the audit in order to design audit proce-
dures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on
the effectiveness of the Group’s and the Parent’s
internal control.
• Evaluate the appropriateness of accounting pol-
icies used and the reasonableness of accounting
estimates and related disclosures made by Man-
agement.
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 • Conclude on the appropriateness of Management’s
use of the going concern basis of accounting in
preparing the consolidated financial statements
and the parent financial statements, and, based on
the audit evidence obtained, whether a material
uncertainty exists related to events or conditions
that may cast significant doubt on the Group's and
the Parent’s ability to continue as a going concern.
If we conclude that a material uncertainty exists,
we are required to draw attention in our auditor’s
report to the related disclosures in the consolidat-
ed financial statements and the parent financial
statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on
the audit evidence obtained up to the date of our
auditor’s report. However, future events or condi-
tions may cause the Group and the Entity to cease
to continue as a going concern.
• Evaluate the overall presentation, structure and
content of the consolidated financial statements
and the parent financial statements, including the
disclosures in the notes, and whether the consoli-
dated financial statements and the parent financial
statements represent the underlying transactions
and events in a manner that gives a true and fair
view.
• Obtain sufficient appropriate audit evidence re-
garding the financial information of the entities or
business activities within the Group to express an
opinion on the consolidated financial statements.
We are responsible for the direction, supervision
and performance of the group audit. We remain
solely responsible for our audit opinion.
We communicate with those charged with govern-
ance regarding, among other matters, the planned
scope and timing of the audit and significant audit
findings, including any significant deficiencies in in-
ternal control that we identify during our audit.
We also provide those charged with governance with
a statement that we have complied with relevant
ethical requirements regarding independence, and to
communicate with them all relationships and other
matters that may reasonably be thought to bear on
our independence, and where applicable, related
safeguards.
From the matters communicated with those charged
with governance, we determine those matters that
were of most significance in the audit of the consol-
idated financial statements and the parent financial
Other
105105
statements of the current period and are therefore
the key audit matters. We describe these matters in
our auditor’s report unless law or regulation pre-
cludes public disclosure about the matter or when,
in extremely rare circumstances, we determine that
a matter should not be communicated in our re-
port because the adverse consequences of doing
so would reasonably be expected to outweigh the
public interest benefits of such communication.
Copenhagen, March 12, 2020
Deloitte
Statsautoriseret Revisionspartnerselskab
Business Registration No 33 96 35 56
Sumit Sudan
State-Authorized
Public Accountant
MNE no mne33716
Kåre Valtersdorf
State-Authorized
Public Accountant
MNE no mne34490
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 106
106
Other – COVER
Other
information
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 Other – Sources - Company info
Sources
Transforming Peptides
1 J. Lau and M. Dunn, Therapeutic peptides: Historical perspectives, current devel-
opment trends, and future directions. Bioorganic & Medicinal Chemistry, version 26,
issue 10, 1 June 2018, p. 2700-2707
Pipeline Overview
1
Partnered with Boehringer Ingelheim. Zealand eligible for EUR 366m in outstand-
ing milestones
2
3
Partnered with Boehringer Ingelheim. Zealand eligible for EUR 283m in outstand-
ing milestones
Partnered with Aexion Pharmaceuticals. Zealand eligible for USD 610m in out-
standing milestones
4 Acquired with Encycle Therapeutics
Severe hypoglycemia
¹ Kalra 2013, UK Hypoglycemia Study Group
2 American Diabetes Association, diabetes.org
3
cdc.gov and diabetes.org and www.diabetesselfmanagement.com/diabetes-
resources/tools-tech/insulin-pumps
4 National Diabetes Statistics Report. CDC. 2014
5
Company announcement No. 23/2018, Zealand Pharma achieves primary and
key secondary endpoints in pivotal Phase 3 trial with dasiglucagon for severe
hypoglycemia
Company announcement No. 15/2019, Zealand Pharma achieves primary and key
secondary endpoints in second pivotal Phase 3 trial with dasiglucagon for severe
hypoglycemia
Company announcement No. 35/2019, Zealand Pharma achieves primary and
key secondary endpoints in pediatric Phase 3 trial with dasiglucagon for severe
hypoglycemia
6
7
107107
Company
information
Zealand Pharma A/S
Sydmarken 11
2860 Søborg
Denmark
CVR no.: 20 04 50 78
Tel: +45 88 77 36 00
Fax: +45 88 77 38 98
Zealand Pharma U.S., Inc.
434 W 33rd Street
PH Floor
New York, NY 10001
info@zealandpharma.com
www.zealandpharma.com
Established
April 1, 1997
Registered office
Gladsaxe
Auditors
Deloitte
Statsautoriseret Revisionspartnerselskab
CVR no.: 33 96 35 56
Congenital hyperinsulinism
1
https://www.orpha.net/consor/cgi-bin/ (not including transient cases due to
perinatal stress or diabetic mother)
2 Congenital Hyperinsulinism International. Available at: http://congenitalhi.org
3 Thornton PS et al., J Pediatr. 2015;167(2):238-45
4
Meissner T et al., Long-term follow-up of 114 patients with congenital hyper-
insulinism. Eur J Endocrinol 2003;149:43-510
5 Yorifuji et al. Pediatrics International 2014;56:467
6 Eljamel et al. Orphanet Journal of Rare Diseases 2018;13:123
Automated diabetes management
¹ ADA Section 8 2017: p71A
2 ADA Section 6 2017: p60C; p61A
3
Nicole C. Foster, et al, and for the T1D Exchange Clinic Network. Diabetes
Technology & Therapeutics. Feb 2019.
Short bowel syndrome
¹ Pironi L et al. Clin Nutr 2016;352:247–307
2 Jeppesen P. Expert Opinion Orphan Drugs 2013;1:515–25
3 Bielawska B. Nutrients 2017;9:466–60
4 Transparency Market Research; Short Bowel Syndrome Market, 2017
5
Torres C. Current Paediatr 2006;16:291–7; Bielawska B. Nutrients 2017;9:466–79;
Pironi L et al. Clin Nutr 2016;352:247–307; Hofstetter S et al. Curr Med Res Opin
2013;29:495–504
Obesity/Type 2 diabetes
¹ Company announcement No. 29/2019, September 3, 2019
2
Skarbaliene, J., Pagler, T., Eickelmann, P., and Just, R. Anti-obesity effects of the
novel long-acting amylin analogue ZP4982 in high-fat diet fed rats. Poster, the
American Diabetes Association’s (ADA) 76th Scientific Sessions, New Orleans,
2016
Zealand Pharma ∞ Annual Report 2019Zealand Pharma ∞ Annual Report 2019 Zealand Pharma A/S
Sydmarken 11
DK-2860 Søborg
Denmark
Tel: +45 88 77 36 00
Fax: +45 88 77 38 98
CVR no.: 20 04 50 78
www.zealandpharma.com
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