Zealand Pharma
Annual Report 2023

Plain-text annual report

Changing lives with next-generation peptide therapeutics Annual Report 2023 Zealand Pharma A/S Sydmarken 11 DK-2860 Søborg Company reg. no. 20045078 Contents 2 Contents Management review Financial statements The big picture Our business Sustainability: Our patients, people and operations Corporate Governance 3 12 29 45 Consolidated financial statements 80 Financial statements of the parent company 139 Reports Other information 156 160 See our pipeline Read more on page 15 Obesity Read more on pages 16-18 Other supplementary reports 2023 Remuneration Report Follow us Zealand Pharma ∞ Annual Report 2023The big picture Contents The big picture Our business Sustainability Corporate governance Financial statements 3 The big picture Our purpose Zealand Pharma at a glance Letter from the CEO and the Chair 2023 Achievements Financial highlights and key figures 2024 Outlook and objectives 4 5 6 9 10 11 Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 4 Our purpose Changing lives with next-generation peptide therapeutics Our ambition is to be the world's best peptide drug discovery and development company. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 5 Zealand Pharma at a glance Find out more about Zealand at zealandpharma.com/about-us Zealand Pharma A/S was founded in 1998 and is a biotechnology company focused on the discovery, design and development of innovative peptide-based medicines. 25 years of expertise in peptide R&D with a validated platform that has delivered two drugs to market and a rich pipeline of both clinical and pre-clinical programs. Our strategy is to pursue global co-development and commercialization partnerships that complement and extend our capabilities to bring new medicine to patients with unmet medical needs. Employees as of December 31, 2023, with 80% in research and development and related functions. 253 4 R&D focus areas include becoming a key player in the fast- developing obesity space leading in the rare diseases congenital hyperinsulinism and short bowel syndrome advancing potential treatment options for chronic inflammatory diseases and type 1 diabetes expanding our pipeline through in-house research and external opportunities Zealand Pharma ∞ Annual Report 2023 Contents The big picture Our business Sustainability Corporate governance Financial statements 6 Letter from the CEO and the Chair In 2023, we celebrated 25 years as a biotechnology company focused on the discovery, design and development of peptide therapeutics. It was an extraordinary year for Zealand Pharma. We delivered on key strategic objectives, including significant advancement of our obesity portfolio, two regulatory submissions to the US FDA for our rare disease assets, and a strengthened financial position, all of which pave the way for a very exciting 2024. Positioning our differentiated obesity portfolio By focusing on R&D, we have been able to prioritize investments and organizational resources in our differ- entiated obesity assets, which we believe hold substantial value potential and could represent some of the thera- peutic keys needed to unlock solutons for the greatest healthcare challenge of our time: the obesity pandemic. In 2023, we reported clinical data that have helped to position and significantly increase our confidence in our Martin Nicklasson Chair of the Board of Directors Adam Steensberg President and Chief Executive Officer Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 7 differentiated obesity portfolio. We highlighted these data, along with the scientific rationale behind our programs, at an R&D Event in December that featured key external experts in the field of obesity. Survodutide - differentiated glucagon/ GLP-1 receptor dual agonist In 2023, our partner Boehringer Ingelheim reported data from the Phase 2 trial in people living with overweight or obesity with survodutide, the glucagon/GLP-1 receptor dual agonist co-invented with Zealand Pharma. After 46 weeks, survodutide dose-dependently reduced body weight by up to 18.7% on average. Of note, the weight loss had not plateaued by the end of treatment on the trial, indicating potential for additional weight loss in trials of longer duration. Boehringer subsequently initiated a Phase 3 program with survodutide in people living with over- weight or obesity, SYNCHRONIZETM, which includes three global registrational trials. If successful, Boehringer and Zealand could be third to market in this new era of weight- loss medications. Finally, positive topline results reported from the Phase 2 trial in metabolic dysfunction-associated steatohepatitis, or MASH, provide evidence of clear differ- entiation and potentially position survodutide as a leading GLP-1-containing weight-loss medication in the future. Dapiglutide - first-in-class GLP-1/ GLP-2 receptor dual agonist Our first-in-class GLP-1/GLP-2 receptor dual agonist, dapiglutide, adds GLP-2 pharmacology to a potent GLP-1 receptor agonist, designed to improve gut integrity and address low-grade inflammation that is associated with obesity and can result in several comorbidities, including cardiovascular disease, liver disease, and neuro-inflam- mation. Dapiglutide is being evaluated in two clinical trials initiated in 2023, the Phase 2a investigator-led DREAM trial and a company-sponsored Phase 1b dose-titration trial. The data from these trials are expected in 2024 and will provide insights into the effects of dapiglutide on body weight as well as biomarkers of inflammation. Petrelintide - long-acting amylin analog We believe that long-acting amylin analogs may represent an alternative to GLP-1 receptor agonists for the treatment of overweight and obesity. Used as monotherapy, long- acting amylin analogs have the potential to achieve GLP-1 receptor agonist-like weight loss, but with improved tolera- bility and the potential to offer a better patient experience. Pre-clinical data also suggest a high-quality weight loss with the preferential loss of fat and a preservation of lean muscle mass. We believe our long-acting amylin analog, petrelintide, shows potential to be best-in-class. In March, we reported data from the first-in-human clinical trial with petrelintide, demonstrating an average weight loss of 4.2% (4.8% placebo-corrected) at day 7 after a single subcuta- neous 2.4 mg dose. Subsequently in July, clinical data from Part 1 of a multiple ascending dose (MAD) trial, six, once- weekly, low doses of 0.6 mg and 1.2 mg of petrelintide led to average weight loss above 5%. Petrelintide was well-tol- erated with no serious or severe treatment-emergent adverse events and no withdrawals. Importantly, all gastro- intestinal events reported in the trial were mild. We are now Important data read-out "We believe our long-acting amylin analog, petrelintide, shows potential to be best-in- class. We are now investigating significantly higher doses of petrelintide over 16 weeks in Part 2 of the MAD trial and anticipate these important results in the first half of 2024." Watch the recording of our Obesity R&D Event on December 5, 2023 https://event.webcasts. com/viewer/landing. jsp?ei=1647538&tp_key=93047ac522 Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 8 Strong financial position "Despite the challenging financing environment for many biotechnology companies, we have significantly strengthened our financial position to invest in our R&D pipeline." investigating significantly higher doses of petrelintide over 16 weeks, in Part 2 of the MAD trial, and anticipate these important results in the first half of 2024. Approaching patients with our rare disease assets During 2023, we submitted New Drug Applications to the US FDA for dasiglucagon, our glucagon analog, for the treatment of congenital hyperinsulinism (CHI) and glepa- glutide, our long-acting GLP-2 analog, for the treatment of short bowel syndrome (SBS). In the first half of 2024, we expect to resubmit the appli- cation for dasiglucagon in CHI for up to three weeks of dosing, contingent on a successful reinspection of the third-party manufacturing site where the FDA has identified deficiencies to be addressed. Importantly, the deficiencies were not specific to dasiglucagon, and no concerns regarding the clinical trial conduct and clinical data package for dasiglucagon were cited. The third-party manufacturer believes it has resolved these deficiencies and is ready for a reinspection. Also in the first half of 2024, we look forward to continued dialogue with the FDA as we work to complete the second part of the New Drug Application covering use of dasiglucagon beyond three weeks of dosing. Separately, we expect the US FDA to notify us of the PDUFA date for glepaglutide in SBS in the coming weeks. In parallel with these regulatory activities, and in line with our strategy to focus on R&D, we will pursue agreements with commercial partners for both our rare disease assets so that these treatments may reach as many patients as possible. Strong financial position to support an exciting and eventful 2024 Despite the challenging financing environment for many biotechnology companies, we have significantly strength- ened our financial position to invest in our R&D pipeline. In April, we raised DKK 1.5 billion (USD ~220 million) from a directed issue and private placement of 6,578,948 new ordinary shares. We also simplified our balance sheet, repaying a loan to Oberland Capital in full and securing a new credit facility provided by Danske Bank, which is undrawn. In December, we were proud to announce the backing from the European Investment Bank, supporting the continued journey of Zealand Pharma with a EUR 90 million finance agreement. During 2023, we received milestone payments from existing partners, including Boehringer Ingelheim, Sanofi and Novo Nordisk. Finally, in January 2024, we announced a directed issue and private placement to two reputable institutional investors, raising an additional DKK 1.45 billion (USD 214 million) to further strengthen the investment in our differentiated obesity assets. As we embark on a very exciting 2024, we believe we are very well-positioned to invest significantly in our differentiated obesity assets and advance our rare disease assets towards patients. Dr. Alain Munoz and Dr. Mike Owen will step down from the Board of Directors at the next AGM. As exemplary members of the Board, they have made substantial contri- butions and helped to steer Zealand's robust pipeline to its present success. We thank them for their dedicated service and wise counsel over the years. Finally, we thank our dedicated colleagues who have contributed to the company's success in the past year, the patients and their caregivers who have taken part in our clinical trials, as well as our partners and our shareholders for their continued support of Zealand Pharma. Martin Nicklasson Chair of the Board of Directors Adam Steensberg President and Chief Executive Officer Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 9 2023 Achievements In 2023, we delivered on our strategic objectives and achieved significant pipeline progress. 2023 Achievement Advanced obesity portfolio Survodutide (glucagon/GLP-1 receptor dual agonist) • Boehringer Ingelheim and Zealand Pharma reported positive Phase 2 results with survodutide in people living with overweight or obesity • Boehringer Ingelheim initiated the Phase 3 program SYNCHRONIZETM with survodutide in people living with overweight or obesity Petrelintide (long-acting amylin analog) • Reported positive results with petrelintide from both the single ascending dose trial and Part 1 of the multiple ascending dose trial (6-week trial) • Initiated Part 2 of the multiple ascending dose trial with petrelintide, investigating significantly higher doses in people living with overweight or obesity over a longer duration (16 weeks) using a dose-escalation scheme Dapiglutide (GLP-1/GLP-2 receptor dual agonist) • Investigator-led Phase 2a trial DREAM, investigating the effects of dapiglutide on body weight, gut permeability, and inflammation, was initiated • Initiated the 13-week Phase 1b dose-titration trial with dapiglutide, investigating higher doses than the previous multiple ascending dose trial and the DREAM trial Progressed rare disease assets towards regulatory submission Dasiglucagon in congenital hyperinsulinism • Submitted New Drug Application to the US FDA for dasiglucagon in congenital hyperinsulinism Glepaglutide in short bowel syndrome • Submitted New Drug Application to the US FDA for glepaglutide in short bowel syndrome Ensured Phase 1 readiness for inflammation assets • Completed pre-clinical activities with ZP10068 (complement C3 inhibitor in collaboration with Alexion Pharmaceuticals) to ensure Phase 1 readiness • Completed pre-clinical activities with ZP9830 (Kv1.3 Ion Channel Blocker) to ensure Phase 1 readiness Strengthened financial position • Met financial guidance on Net Operating Expenses between DKK 800-900 million • Extended cash runway into 2027, driven by a capital raise of DKK 1.5 billion, a loan facility with the European Investment Bank of DKK 670 million, and a Revolving Credit facility of DKK 350 million provided by Dansle Bank, as well as a capital raise of DKK 1.45 billion in early January 2024 Other significant activities • Submitted the marketing authorization application to the European Medicines Agency for dasiglucagon injection for the treatment of severe hypoglycemia in people with diabetes • Advanced double materiality assessment to identify ESG focus areas, forming the basis of refined ESG strategy Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 10 Financial highlights and key figures DKK thousand 2023 2022 2021 2020 2019 DKK thousand 2023 2022 2021 2020 2019 Income statement Revenue Royalty expenses Gross profit Research and development expenses 342,788 -9,138 103,986 - 323,614 103,986 108,546 -10,970 97,576 192,001 - 192,001 41,333 -415 40,918 Statement of financial position Cash and cash equivalents 449,311 1,069,234 1,129,103 960,221 1,081,060 Marketable securities Cash, cash equivalents and marketable securities Total assets 1,183,746 108,611 299,042 297,345 299,448 1,633,057 1,177,845 1,428,145 1,257,566 1,380,508 1,979,993 1,539,806 2,067,629 1,761,949 1,599,514 -684,902 -614,044 -581,511 -595,847 -561,423 Total shareholders' equity 1,592,839 815,911 927,803 1,229,311 1,242,673 Sales and marketing expenses -30,627 -32,298 -62,600 -20,795 - General and administrative expenses -185,302 -237,210 -235,609 -201,594 -67,881 Cash used in operating activities -425,668 -942,311 -1,211,971 -688,716 -409,455 Cash flow Other operating items 4,979 -57,587 -2,173 - 444 Net operating expenses -895,852 -941,139 -881,893 -818,838 -628,860 Cash (used in)/provided by investing activities -1,094,033 281,259 -18,121 -196,807 -51,666 Operating result -572,238 -837,153 -784,317 -626,235 -587,942 Net financial items Result before tax -136,627 -134,888 25,430 -47,292 11,265 -708,865 -972,041 -754,887 -673,527 -576,677 Corporate tax 5,126 6,431 3,949 4,814 5,136 Cash provided by financing activities Purchase of intangible assets Purchase of property, plant and equipment 907,014 -12,508 587,500 1,332,751 760,941 674,480 - - - - -11,241 -11,710 -22,133 -25,044 -21,036 Free cash flow -436,909 -954,021 -1,234,104 -713,760 -430,491 -703,739 -965,610 -754,938 -668,713 -571,541 Other Net result for the year from continuing operations Net result for the year from discontinued operations - -236,525 -263,211 -178,016 - Net result for the year -703,739 -1,202,135 -1,018,149 -846,729 -571,541 Loss per share from continuing operations, basic/diluted (DKK) Loss per share, basic/diluted (DKK) -12.44 -12.44 -20.90 -26.02 -17.61 -23.75 -17.43 -22.07 -16.91 -16.91 Undrawn borrowing facilities (note 4.2) 722,645 Share price (DKK) Number of shares ('000 shares) Market capitalization (MDKK) Equity ratio (%) Equity per share (DKK) Average number of full time employees Number of full-time employees at the end of the year 373.2 58,751 21,787 80% 27.28 235 253 - 201.4 51,702 9,305 53% 17.66 247 196 - 145.1 43,634 6,220 45% 21.26 346 355 - 220.6 39,800 8,464 70% 32.04 297 329 - 235.4 36,055 8,487 78% 34.52 173 179 Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 11 2024 Outlook and objectives In 2024 we are focused on maximizing the value potential of our pipeline. 2024 Objectives Advance obesity portfolio Survodutide • Boehringer Ingelheim to report data from Phase 2 trial in NASH • Boehringer Ingelheim to enroll patients in Phase 3 obesity trials SYNCHRONIZETM-1 and SYNCHRONIZETM-2 Dapiglutide • Report data from Phase 2a investigator-led trial DREAM • Report data from Phase 1b 13-week dose-titration trial Petrelintide • Report data from Part 2 of Phase 1b MAD trial (16-week trial) • Initiate Phase 2b trial Progress rare disease assets towards patients Dasiglucagon for congenital hyperinsulinism • Resubmit Part 1 of NDA covering up to three weeks of dosing • Submit analyses from continuous glucose monitoring datasets supporting approval beyond three weeks of dosing • Engage in commercial partnership discussions Glepaglutide for short bowel syndrome • Engage in commercial partnership discussions Initiate first-in-human trials with inflammation assets • Initiate first-in-human trial with ZP9830 (Kv1.3 Ion Channel Blocker) • Alexion to initiate first-in-human trial with ZP10068 (Complement C3 Inhibitor) Maintain a strong financial position • Meet financial guidance and ensure disciplined financial management • Maintain sufficient cash runway Deliver on environmental, social and governance responsibility • Launch refined ESG strategy based on double materiality assessment • Establish ESG reporting framework to prepare for CSRD, including CO2 baselining Financial guidance DKK million 2024 Guidance 2023 Actual Revenue anticipated from existing and new license and partnership agreements No guidance due to uncertain size and timing Net operating expenses1 1 Net operating expenses consist of R&D, S&M, G&A and other operating items Financial guidance based on foreign exchange rates as of February 27, 2024 1,100 - 1,200 343 896 Zealand Pharma ∞ Annual Report 2023Our business Contents The big picture Our business Sustainability Corporate governance Financial statements 12 Our business 25 years of peptide expertise R&D pipeline Obesity Rare diseases Inflammation Type 1 Diabetes Financial review 13 15 16 19 23 25 26 Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 13 25 years of peptide expertise 25 years of peptide expertise We have 25 years of expertise in discovery, design and development of peptide-based medicines. We engineer peptide analogs to enhance biological activity, extend duration of action and increase stability to provide innovative and better treatments for a broad range of diseases. Our journey towards becoming experts in peptide R&D 1998 Foundation Zealand Pharma is founded by SIP® inventor Dr. Bjarne Due Larsen and Lars Hellerung Christiansen 2010 Initial Public Offering Zealand Pharma shares are listed on Nasdaq OMX Copenhagen 2016 First drug product approval by US FDA Adlyxin (lixisenatide) and Soliqua (insulin glargine and lixisenatide), partnered with Sanofi, are approved by the US FDA for the treatment of T2DM in the United States (approved in Europe by EMA in 2013) 2020 Approval by US FDA of Zegalogue® for the treatment of severe hypoglycemia in people with diabetes 2023 Celebration of 25-year anniversary Zealand Pharma celebrates 25-year anniver- sary in eventful year that includes regulatory submissions to the US FDA for dasiglucagon in congenital hyperinsulinism and glepa- glutide in short bowel syndrome, as well as strong clinical advancement of obesity portfolio 25 1999 2011 2019 2022 Invention of Lixisenatide GLP-1 agonist lixisenatide is invented Partnership with Boehringer Ingelheim Partnership with Alexion Pharmaceuticals Zealand Pharma enters partnership agreement with Boehringer Ingelheim to develop drug candidates for T2DM and obesity Zealand Pharma enters partnership agreement with Alexion Pharmaceuticals to discover and develop therapies for complement-mediated diseases New strategy and CEO - Zealand Pharma launches new strategy, focusing on R&D and scaling back commercial activities, and Dr. Adam Steensberg (former Chief Medical Officer) is appointed as new CEO - Sale of V-Go to MannKind Corporation and partner- ship agreement with Novo Nordisk for Zegalogue® Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 14 Validated peptide platform Since our foundation in 1998, we have built a unique peptide platform and design process based on a deep understanding of peptide chemistry, formulation know-how and intellectual property rights combined with advanced computer science. The success of our peptide discovery and development platform has been validated by bringing two drug prod- ucts to market in collaboration with partners Sanofi and Novo Nordisk, as well as advancing our novel peptide analogs currently in clinical development. What are peptides? Peptides are composed of amino acids and are produced by all living organisms, including humans. Many peptides are hormones that carry information between cells or organs to perform a wide range of essential functions, such as regulating appetite, blood glucose or stimulating tissue growth. Native peptides have powerful biological functions but many are inherently unstable and short-lived in the blood- stream. To convert native peptides into effective peptide therapeutics, these characteristics must be modified, while maintaining or enhancing the biological activity. This involves modifying the amino acid sequence of the peptide, usually by substituting with another amino acid. We use nature’s own inventions Through our deep understanding of peptide chemistry and biology, we focus this substitution process on key amino acids to remove the weak points that result in poor solubility, stability or activity. We have successfully applied this approach to glucagon, amylin, GLP-1, GLP-2 and GIP to create new drug candidates. Enhancing the natural property of a peptide or combining activities of two or more peptides into single peptides can present new therapeutic opportunities. We use endoge- nous human peptides and peptides from animal venoms to develop new therapeutic candidates. We also manipu- late bacteria to produce peptide libraries. In other words, we make broad use of nature’s own inventions in an effort to improve human health and quality of life. We continue to optimize our peptide platform through new technologies and scientific advancements. We also access cutting-edge technology through research collab- orations. Our R&D capabilities and pre-clinical programs provide opportunities to grow our scientific and medical presence. Zealand Pharma ∞ Annual Report 2023Pipeline Contents The big picture Our business Sustainability Corporate governance Financial statements 15 R&D pipeline Our R&D pipeline of investigational candidates aims to address unmet medical needs across therapeutic areas. Product Candidate* Preclinical Phase 1 Phase 2 Phase 3 Registration Dapiglutide (GLP-1R/GLP-2R Dual Agonist) Petrelintide (amylin analog) ZP6590 (GIP receptor agonist) Obesity Obesity Obesity Survodutide (GCGR/GLP-1R dual agonist)1 Obesity and MASH Dasiglucagon: Continuous Subcutaneous Infusion Congenital Hyperinsulinism Glepaglutide (GLP-2 Analog) Short Bowel Syndrome ZP 9830 (Kv1.3 Ion Channel Blocker) ZP 10068 (Complement C3 Inhibitor)2 Undisclosed Undisclosed Dasiglucagon: Bi-Hormonal Artificial Pancreas Systems Type 1 Diabetes management Dasiglucagon: Mini-Dose Pen Type 1 Diabetes exercise-induced hypoglycemia y t i s e b O e r a R s e s a e s i d n o i t a m m a l f n I 1 e p y T s e t e b a i d * 1 Investigational compounds whose safety and efficacy have not been evaluated or approved by the FDA or any other regulatory authority. Co-invented with Zealand Pharma, Boehringer Ingelheim is funding all activities and is exclusively responsible for clinical development. Up to EUR €315 million outstanding potential development, regulatory and commercial milestones to Zealand Pharma, plus high single to low double digit percentage royalties on global sales; 2 Licensed to Alexion: USD $610 million potential development, regulatory and commercial milestones and high single to low double digits percentage royalties on net sales. Zealand Pharma ∞ Annual Report 2023 Obesity Obesity Contents The big picture Our business Sustainability Corporate governance Financial statements 16 Obesity Obesity Watch our CEO discuss the obesity pandemic at https://vimeo.com/916606203 Overweight and obesity are associated with more than 220 complications and co-morbidities, including cardiovascular disease, liver disease, type 2 diabetes, kidney disease, and neuroinflammation. An obesity pandemic - the greatest healthcare challenge of our time The worldwide prevalence of obesity has nearly tripled since the mid-1970s, with 650 million adults and 389 million adolescents and children suffering from obesity today. In the U.S. alone, more than 40% of the population are consid- ered obese. More than 3 million people die each year due to complications from overweight or obesity.1 This is equiv- alent to the estimated number of global deaths attributable to COVID-19 during 2020, just every year.2 The obesity pandemic we are witnessing today is the result of an increasing number of people having been obese since their 30s and 40s. In the next few decades, we could start seeing the consequences of adults having been obese since they were children or teenagers. Shockingly, in the U.S. today, the prevalence of over- weight and obesity among 2-4 year old children is 30%.3 A complex, multifactorial disease requiring more treatment options Obesity is a complex disease that may be treated by targeting a number of unique metabolic pathways. For many years, the weight-loss medications available have had limited efficacy and/or, for many, been asso- ciated with considerable side effects. Since 2021, two weight-loss medications with better efficacy and safety profiles have been approved. Nevertheless, the treatment rate today is approximately 2%.4 Thus, there remains a substantial unmet medical need for more and better treatment options for the very heterogeneous popula- tion suffering from overweight and obesity, for example treatments based on emerging modalities with potential to deliver similar efficacy as the recently approved treat- ments but with better tolerability, fat-specific weight loss, or treatments targeting obesity-related comorbidities. 1 World Health Organization (WHO). Fact sheet. Obesity. 9 June 2021. https://www.who.int/news-room/facts-in-pictures/detail/6-facts-on-obesity 2 World Health Organization (WHO). Data stories. The true death toll of COVID-19. https://www.who.int/data/stories/the-true-death-toll-of-covid-19-estimating-global-excess-mortality 3 Trust for America's Health (TFAH). The State of Obesity 2023. 20-Year Report Anniversary Retrospective. September 2023. 4 IQVIA. Insights Brief. Obesity Treatment Rates Increase as GLP-1 Inhibitors Prosper. 17 March 2023. https://www.iqvia.com/library/white-papers/obesity-treatment-rates-increase-as-glp-1-inhibitors-prosper Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 17 Obesity Targeting obesity with differentiated product candidates Survodutide Targeting obesity and NASH with a glucagon/ GLP-1 receptor dual agonist Survodutide (BI456906) is a long-acting glucagon/GLP-1 receptor dual agonist for once-weekly subcutaneous administration. Activating the glucagon and GLP-1 recep- tors simultaneously may reduce body weight by both increasing energy expenditure and reducing food intake. The molecule is designed with a strong relative potency of 8:1 in favor of GLP-1 receptors compared to glucagon receptors. This design leverages the weight loss and glycemic control of GLP-1 receptors with some activity on the glucagon receptors, which are present in the liver. Development status A Phase 2 trial with survodutide in people with type 2 diabetes demonstrated average dose-dependent decreases in blood sugar, HbA1c, of up to -1.88% after 16 weeks compared to -1.47% with open-label weekly sema- glutide 1.0 mg. In addition, a Phase 2 trial with survodutide in people living with overweight or obesity demonstrated 1 Quek et al. Lancet Gastroenterol Hepatol 2023;8(1):20–30; 2. average body weight reductions of up to -18.7% after 46 weeks. Based on the positive results seen in these Phase 2 trials, Boehringer Ingelheim has in 2023 initiated a Phase 3 program, SYNCHRONIZETM, in people living with over- weight or obesity. Finally, positive topline phase 2 results were recently reported with survodutide in metabolic dysfunction-associated steatohepatitis (MASH), formerly nonalcoholic steatohepatitis (NASH), one of the most prev- alent and serious obesity-related comorbidities, providing evidence for differentiation from current GLP-1 based therapies. In people living with overweight and obesity, it is estimated that 75% have metabolic dysfunction-associated fatty liver disease (MAFLD), formerly non-alcoholic fatty liver disease (NAFLD) and 34% have MASH.1 Survodutide was co-invented by Boehringer Ingelheim and Zealand Pharma. Boehringer Ingelheim is funding all activities and is exclusively responsible for clinical devel- opment related to survodutide. Zealand has EUR 315 million in outstanding potential milestone payments and is eligible for high-single to low-double digit percentage royalties on global sales. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 18 Obesity Dapiglutide Petrelintide Targeting obesity and low-grade inflammation with a GLP-1/GLP-2 receptor dual agonist A next-generation weight-loss medication, representing an alternative to GLP-1 receptor agonists Dapiglutide is a long-acting GLP-1/GLP-2 receptor dual agonist for once-weekly subcutaneous administration. This is a first-in-class peptide designed to leverage the weight loss effects of a potent GLP-1 agonist and address comorbidities associated with low-grade inflammation through improved intestinal barrier function by GLP-2. People living with obesity have increased translocation of bacteria from the gut lumen into the bloodstream due to a reduced integrity of the intestinal barrier, or “leaky gut”, driving a state of low-grade inflammation.1 This obesity-related low-grade inflammation can result in comorbidities, such as cardiovascular disease, liver disease, and neuro-inflammation. Development status A Phase 1 multiple ascending dose (MAD) trial with dapiglutide in healthy volun- teers demonstrated average dose-dependent weight loss of up to -4.3% after four weeks, supporting further clinical development in obesity. Two clinical trials with dapiglutide are currently ongoing: DREAM, the investigator-led 12-week trial evaluating the effects of dapiglutide on body weight, gut permeability, and inflammation; and the Phase 1b 13-week dose-titration trial investigating higher doses of dapiglutide than the previous trials. Results from DREAM are expected in the first half of 2024, whereas results from the Phase 1b dose-titration trial are expected in the second half of 2024. 1 Vetrani et al. Nutrients 2022;14(10):2103. 2 Mathiesen et al. Eur J Endocrinol 2022;186(6):R93–R111 3 Roth et al. Proc Natl Acad Sci U S A 2008;105(20):7257–7262 Petrelintide (ZP8396) is a long-acting amylin analog suitable for once-weekly subcu- taneous administration that has been designed with chemical and physical stability at neutral pH, minimizing fibrillation and allowing for co-formulation with other peptides. Amylin is produced in the pancreatic beta cells and co-secreted with insulin in response to ingested nutrients. Amylin analogs have been shown to increase satiety by a direct effect on the amylin receptor and by restoring sensitivity to the hormone leptin.2,3 This is in contrast to GLP-1 receptor agonists that primarily lower body weight by reducing appetite. Current clinical or preclinical data suggest a potential of long-acting amylin analogs to deliver weight loss comparable to GLP-1 receptor agonists but with improved tolerability for a better patient experience and high-quality weight loss by preserving lean muscle. Development status In 2023, we reported results from both a single ascending dose (SAD) trial and Part 1 of a MAD trial with petrelintide. In the SAD trial, one single dose of petrelintide 2.4 mg led to average weight loss of -4.2% after one week (placebo-corrected -4.8%), whereas six once- weekly doses of petrelintide in low doses of 0.6 mg and 1.2 mg in Part 1 of the MAD trial showed average weight loss of -5.3% and -5.1%, respectively. Petrelintide was well-toler- ated with no serious or severe treatment-emergent adverse events and no withdrawals. All gastrointestinal adverse events reported were mild. Part 2 of the MAD trial is currently ongoing, exploring significantly higher doses of petrelintide over a longer duration of 16 weeks, with results expected in the first half of 2024. Zealand Pharma ∞ Annual Report 2023Rare diseases Contents The big picture Our business Sustainability Corporate governance Financial statements 19 Rare diseases Congenital Hyperinsulinism (CHI) CHI is a rare disease affecting newborns, infants and children caused by a defect in pancreatic beta-cells, resulting in insulin overproduction and leading to frequent, recurrent and often severe episodes of low glucose (hypoglycemia). Every year, an estimated one in 28,000 to 50,000 newborns are diagnosed with genetically determined CHI in the U.S. and Europe1. Julie Raskin CEO of Congenital Hyperinsulinism International A significant burden for the affected children and their families Frequent, recurrent and severe episodes of hypoglycemia in patients with CHI may result in brain damage. Complex care, including continuous enteral feeding or intravenous glucose, can result in lengthy and frequent hospitaliza- tions that make daily life difficult. More than half of CHI patients may be sub-optimally treated with current ther- apies. The most severely affected children may need to have their pancreas removed within months of birth to prevent hypoglycemia, which results in the development of life-long type 1 diabetes. The burden of managing CHI is significant for the affected children and their families and caregivers. External expert perspective "CHI leads to serious challenges for affected families. Brain injuries resulting in permanent disabilities occur all too frequently. There are also significant psychosocial effects as well as extra financial burdens on the family. The limited availability of safe and effective treatment options represents an urgent unmet medical need." Crosby lives with congenital hyperinsulinism 1 Amoux JB et al. (2011). Orphanet J Rare Dis, 6:63; Yau et al. (2020). Plos One, 15(2): e0228417. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 20 Rare diseases We are seeking to improve the lives of patients and their caregivers Dasiglucagon is an investigational glucagon analog designed to allow for continuous subcutaneous infusion via a wearable pump system.1 The potential of dasiglucagon in the management of CHI is supported by three Phase 3 clin- ical trials in newborns and children up to 12 years of age. In one Phase 3 trial (17103), dasiglucagon reduced the requirement for intravenous glucose in newly diag- nosed newborns and infants who were being treated in a hospital setting. By the end of the 25-day, two-part clinical study, 7 of 12 patients had weaned off intravenous glucose without needing a pancreatectomy. The second Phase 3 trial (17109) was conducted with children aged between 3 months and 12 years in a homecare setting. In this trial, dasiglucagon reduced time in hypoglycemia by approximately 50% and hypoglycemic events by 37-40% when measured by continuous glucose monitoring. The most frequently reported adverse events in both trials were skin reactions and gastrointestinal disturbances. 42 out of the 44 patients who participated in these two Phase 3 trials enrolled into a long-term extension trial that is ongoing. We expect to resubmit the New Drug Application for dasiglucagon in CHI for up to three weeks of dosing in the first half of 2024, contingent on a successful reinspection of the third-party manufac- turing site where the FDA has identified deficiencies to be addressed. Importantly, these deficiencies were not specific to dasiglucagon, and there were no concerns regarding the clinical trial conduct and clinical data package submitted for dasiglucagon. In the first half of 2024, we also expect to submit the second part of the New Drug Application covering use of dasiglucagon in CHI beyond three weeks of dosing. Dasiglucagon Zealand is pursuing a partnership agreement for the commerciali- zation of dasiglucagon for CHI Investigational compound and device that have not yet been approved for marketing by any regulatory authority 1 Zealand Pharma has a collaborative development and supply agreement with DEKA Research & Development Corporation and affiliates for the infusion pump system Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 21 Rare diseases Short Bowel Syndrome (SBS) Short bowel syndrome (SBS) is a rare, chronic and debilitating condition resulting in significantly reduced or complete loss of intestinal function. In the U.S. alone, there are an estimated 7,500 people living with SBS with intestinal failure who are dependent on parenteral support.1 Life-long dependency on parenteral support Short bowel syndrome (SBS) is a complex disease that occurs due to the physical loss of half or more of the small intestine, most often due to surgical removal. As a result, individuals with SBS often have a reduced ability to absorb nutrients and fluids. In more severe cases, referred to as SBS with intestinal failure (SBS-IF), patients are dependent on complex parenteral support (PS) to sustain life. SBS with intestinal failure is associated with significant medical complications, including liver and renal failure, metabolic complications, chronic fatigue, and life-threat- ening infections. Although lifesaving, management of PS is associated with a significant burden on healthcare systems and reduction in quality of life for patients and their families. Unmet medical need for more efficacious and convenient treatment options SBS can be treated in highly specialized, multi-dis- ciplinary centers, involving the use of agents that promote rehabilitation of the intestinal lining, such as GLP-2 analogs. The only currently available GLP-2 treatment requires weight-adjusted, daily subcu- taneous dosing via vial and syringe that involves a multi-step reconstitution process. More efficacious and convenient treatments to further reduce PS are needed, with the ultimate goal of achieving enteral autonomy. 1 SBS-IF patient estimates based on Zealand Pharma claims analysis, 2020 and Mundi et al. (2020), Characteristics of Chronic IF in the US Based on Analysis of Claims Data, JPEN in Press. Marianne lives with short bowel syndrome Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 22 Rare diseases We are developing a next-generation GLP-2 therapy for patients with SBS Glepaglutide is a long-acting GLP-2 analog that is stable in aqueous solution. We are developing glepaglutide as a ready-to-use, fixed dose product designed for subcu- taneous delivery via auto-injector. The Phase 3 program includes four clinical trials evaluating the potential for glepaglutide to reduce or eliminate the need for PS in SBS patients with intestinal failure. In the EASE-1 trial, glepaglutide administered twice a week reduced weekly PS volume at week 24 compared to placebo with statistical significance. Nine of 70 patients treated with glepaglutide in the trial weaned off paren- teral support within 24 weeks, while no placebo-treated patients were able to wean off parenteral support. Glepaglutide appeared to be well tolerated; the most frequently reported adverse events in the trial were injec- tion site reactions and gastrointestinal events. Glepaglutide Zealand is pursuing a partnership agreement for the commercialization of glepaglutide Investigational compound and device that have not yet been approved for marketing by any regulatory authority Zealand has submitted the New Drug Application (NDA) to the US FDA in December 2023. The regulatory submission is based on results from EASE-1 and two long-term (104 weeks) safety and efficacy extension trials, EASE-2 and EASE-3, where interim analyses conducted after 6 months showed that clinical response to glepaglutide across key endpoints was generally maintained or improved, as well as EASE-4, a mechanistic trial assessing the effects of glepaglutide on intestinal fluid and energy uptake. Palle Bekker Jeppesen Clinical Professor, Department of Clinical Medicine (Gastro- enterology and Hepatology) at the University of Copenhagen External expert perspective "Short Bowel Syndrome with Intestinal Failure (SBS-IF) is a rare, often neglected, debilitating disease, severely impacting patient quality of life. Severe nutrient malabsorption may lead to severe malnutrition and dehydration if not treated with parenteral support (PS) through a central venous catheter. Both symptoms of SBS-IF and potential PS complications impose significant life restrictions and daily challenges. Thus, there is an unmet need for new, convenient long-acting GLP-2 analog treatment options. If approved by the health authorities, the long-acting GLP-2 analog glepaglutide, provided in a ready-to-use autoinjector, offers a beneficial efficacy and safety profile with a twice-weekly dosing regimen." Zealand Pharma ∞ Annual Report 2023Inflammation Contents The big picture Our business Sustainability Corporate governance Financial statements 23 Inflammation Inflammation We believe that peptide medicines represent an opportunity for innovation in the treatment of chronic inflammatory diseases. We are progressing programs that represent high-profile targets shown to be difficult to address with small mole- cules and antibodies. Complement C3 inhibitor The complement system is a part of the innate immune system, and a central component of the complement cascade is the C3 protein. Altered activation of the comple- ment 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 glomerulopathy. There is currently only one approved drug to treat complement-mediated diseases: an antibody that blocks the complement C5, the final step in complement activation. We have selected a lead candidate molecule that acts on C3 (ZP10068), Henrik works in Medicinal Chemistry Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 24 Inflammation upstream of C5, and thus offers potential differentiation and broader utility than the current therapy. The candidate investigational peptide is selective and long-acting, with the potential to be best-in-class. For the lead candidate molecule, Zealand is eligible to receive up to USD 610 million in development and sales milestone payments, plus royalties on global sales in the high single to low double digits. We are currently progressing this molecule in collaboration with Alexion Pharmeceuticals (AstraZeneca Rare Disease). We have, in 2023, completed the pre-clinical activities with the lead candidate molecule to ensure readiness for the first-in-human clinical trials. Alexion will lead development efforts beginning with Investigational New Drug (IND) filing and Phase 1 trials, which we exoect Alexion to initiate in 2024. Kv1.3 ion channel blockers Kv1.3 is a potassium conducting ion channel, which is selectively upregulated on T effector memory cells. T effector memory cells play a key role in autoimmunity and chronic inflammation by releasing pro-inflammatory cytokines, which drive tissue damage. The anti-inflam- matory effects of blocking the Kv1.3 ion channel have been demonstrated in pre-clinical models of autoimmune diseases. The specific and selective location of the Kv1.3 on the effector memory T cells makes it an attractive pharma- ceutical target, as blocking preserves the protective effects of the rest of the immune system. ZP9830 is a potent and selective Kv1.3 blocker with potential to treat a broad range of T-cell-driven autoimmune diseases. We have, in 2023, completed the pre-clinical activities with ZP9830 and expect to initiate the first-in-human clinical trial in 2024. Zealand Pharma ∞ Annual Report 2023Type 1 Diabetes Contents The big picture Our business Sustainability Corporate governance Financial statements 25 Type 1 diabetes Type 1 Diabetes Despite newer insulins and better administration systems, most people with type 1 diabetes are unable to reach the glycemic goals defined by the American Diabetes Association. Advances have been made in insulin chemistry and delivery systems to help patients more effectively manage their disease. Despite this, achieving tight control over blood-glucose levels remains a daily challenge for those living with type 1 diabetes. The risk of diabetes complica- tions persists particularly in those who cannot optimize glucose control, or are at significant risk of hypoglycemia. Type 1 diabetes is not a single-hormone disease. Both insulin and glucagon secretion are dysfunctional in these patients. We believe that insulin-only treatment approaches do not mimic physiology and that therapies should be aimed at restoring physiology through bi-hormonal supple- mentation. The aqueous formulation of dasiglucagon potentially renders it suitable for chronic administration. We aspire to change type 1 diabetes management We are developing a pre-filled dasiglucagon cartridge intended for use in Bihormonal Artificial Pancreas systems. We have a collaboration with Beta Bionics, developer of the Bihormonal iLet® Bionic Pancreas (iLet Duo™), a pocket-sized, dual chamber (insulin and dasiglucagon), autonomous, glycemic control system. The iLet Duo™ is an investigational device that is limited to investigational use only. The iLet® Bionic Pancreas platform is designed to use adaptive, self-learning control algorithms together with continuous glucose monitoring and pump tech- nology, to autonomously compute and administer doses of insulin and/or glucagon and mimic the body’s natural ability to maintain tight glycemic control. With Beta Bionics, we are planning a Phase 3 program designed to support the marketing applications for the iLet DuoTM and a New Drug Application for the use of dasi- glucagon in Bihormonal Artificial Pancreas systems for the treatment of type 1 diabetes. Ditte works in Translational Pharmacology Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 26 Financial review • Revenue in 2023 of DKK 343 million was mainly driven by a EUR 30 million milestone payment from Boehringer Ingelheim associated with survodutide and USD 10 million from a milestone payment from Sanofi associ- ated with lixisenatide. • Net operating expenses in 2023 of DKK -896 million were mainly driven by investments in the clinical advancement of the obesity pipeline and progression of the late-stage rare disease assets towards regulatory submission. • Runway is extended into 2027 following the directed issue and private placements in April 2023 and in January 2024, bringing in gross proceeds of combined DKK 3 billion, and the new EUR 90 million (DKK 671 million) finance agreement with the European Investment Bank (EIB) announced in December 2023. Revenue Revenue in 2023 of DKK 343 million was mainly driven by EUR 30 million in milestone payment from Boehringer Ingelheim related to the Phase 3 initiation with survodu- tide in obesity in November 2023 and USD 10 million in milestone payment from Sanofi associated with lixisenatide. Out of the USD 10 million from Sanofi, Zealand has paid USD 1.3 million in royalty expenses to Alkermes, which was entitled to 13% of payments received by Zealand in respect of lixisenatide under the Sanofi License Agreement. As of December 31, 2023, there are no other outstanding milestone payments associated with the license agreement with Sanofi. All royalties related to lixisenatide were sold to Royalty Pharma in 2018. The remaining revenue of 2023 is mainly related to the license and development agreement for Zegalogue® with Novo Nordisk as well as proceeds from the agreement with Alexion. Net operating expenses Research and development expenses in 2023 of DKK -685 million were mainly driven by the clinical advancement of the obesity pipeline and progression of the late-stage rare disease assets towards regulatory submission. The spend for research and development expenses in 2023 has increased compared to 2022 due to the progression of clinical and regulatory activities with the main cost drivers being preparing the submission of the two NDAs for our DKK millions Revenue Gross profit Research and development expenses Sales and marketing expenses General and administrative expenses Other operating items Net operating expenses Operating result Net financial items Result before tax Cash and cash equivalents Marketable securities Cash, cash equivalents and marketable securities Equity Other 2023 2022 343 324 -685 -31 -185 5 -896 -572 -137 -709 449 1,184 1,633 1,593 104 104 -614 -32 -237 -58 -941 -837 -135 -972 1,069 109 1,178 816 Share price (DKK) Number of shares ('000 shares) Market capitalization (mDKK) Number of full-time employees at year-end 373 58,751 21,787 201 51,702 9,305 253 196 Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 27 rare disease assets to the US FDA and the significant clin- ical advancement of the obesity pipeline. In 2023, the investment in Beta Bionics was subject to a fair value adjustment of DKK -16 million. Selling and marketing expenses were at DKK -31 million (2022: DKK -32 million) and general and administrative expenses at DKK -185 million in 2023 (2022: DKK -237 million). The latter is significantly below 2022 due to cost reduction efforts following the announced restructuring on March 30, 2022. Equity On December 31, 2023, equity was DKK 1,593 million, reflecting a significant increase compared to December 31, 2022, mainly driven by the proceeds from the directed issue and private placement of new shares in April 2023 and partly offset by the loss for the period. Other operating items of DKK 5 million in 2023 comprise other operating income of DKK 16 million related to a reversal of inventory write-down associated with Zegalogue® and other operating expenses of DKK -11 million related to an impairment of the US Boston office lease. Financial items Financial items in 2023 of DKK -137 million (2022: -135 million) are mainly driven by the final repayment and termination of the loan with Oberland Capital in May 2023, partly offset by interest income on marketable securities. The significant increase in interest income compared to 2022 as described in note 4.7 Financial items, comes mainly from placement of surplus funds from the capital increase in April 2023 into marketable securities. In 2023, Zealand has purchased 300,000 new treasury shares. The treasury shares are allocated to performance share units (PSUs) and restricted share units (RSUs) as described further in note 4.8 Share capital. Cash position Cash, cash equivalents and marketable securities as of December 31, 2023, was DKK 1.6 billion and DKK 2.4 billion including the undrawn DKK 350 million Revolving Credit Facility provided by Danske Bank and the EIB loan (Tranche A), reflecting a significant increase compared to the DKK 1.2 billion in cash, cash equivalents and market- able securities as of December 31, 2022. The develop- ment in 2023 is mainly driven by the DKK 1.5 billion in gross proceeds from the directed issue and private place- ment of new shares in April 2023 partly offset by cash used in operating activities during the period (DKK -426 million) and settlement and repayment of the Oberland loan (DKK -526 million). As of December 31, 2023, Zealand has placed DKK 1.2 billion in low-risk marketable securities with an invested graded rating of AAA to -BBB, whereas cash and cash equivalents amount to DKK 0.4 billion. This is in line with the Company’s treasury policy. As of December 31, 2022, the split between marketable securities and cash and cash equivalents was largely opposite, with marketable secu- rities at DKK 0.1 billion and cash and cash equivalents at DKK 1.1 billion. The final repayment and termination of the loan agree- ment with Oberland Capital in May 2023 was refi- nanced through the undrawn Revolving Credit Facility provided by Danske Bank and the milestone payments from Boehringer Ingelheim and Sanofi associated with survodutide and lixisenatide, respectively. Both milestone payments totaling DKK 249 million have been received late 2023. In December 2023, Zealand entered into a new EUR 90 million (DKK 671 million) finance agreement with the European Investment Bank (EIB). The loan is structured Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 28 with part of the interest paid at recurring intervals during the term and part being deferred (non-compounding) for payment at maturity of each tranche. In addition, the EIB has entered into a warrant agreement with Zealand that will entitle the EIB to receive warrants in Zealand when each tranche is drawn down. The warrants will, subject to the warrant terms, entitle the warrant holder to subscribe for ordinary shares in Zealand at market price. Events after the reporting date As announced on January 8, 2024, the Board of Directors exercised the remaining authorization granted by Zealand's annual general meeting held on March 29, 2023, to increase the Group's share capital by issue of 3,761,470 new ordinary shares at a subscription price of DKK 386.45 per new share. The aggregate gross proceeds from the private placement amounts to DKK 1.45 billion and Zealand intends to use the net proceeds to further strengthen Zealand’s invest- ment in its differentiated assets targeting obesity. The new shares were issued on January 12, 2024, and Zealand received the proceeds on January 16, 2024. conditions for disbursement of the first tranche (Tranche A) have been met. In February 2024, Zealand Pharma has accepted disbursement offer for Tranche A and the related EUR 50 million (DKK 373 million) is expected to be received in March 2024. Aside from the above mentioned no events have occurred subsequent to the balance sheet date that could signifi- cantly affect the financial statements as of December 31, 2023. As announced on December 22, 2023, Zealand entered into a new EUR 90 million (DKK 671 million) finance agreement with the European Investment Bank (EIB). The Guidance Net operating expenses in 2023 of DKK -896 million was within the guidance of DKK 800-900 million. Cash position compared to FY22 (DKK million) 5000 Undrawn borrowing facilities Cash and cash equivalents Marketable securities 1 Cash position includes cash, cash equivalents and marketable securities. Undrawn borrowing facilities comprise DKK 350 million RCF in Danske Bank and Tranche A from EIB loan of EUR 50 million. 2 The two tranches are subject to pre-specified milestones being met. 4000 3000 2000 1000 0 4,104 1,450 298 1,178 1,069 109 -426 -93 -526 1,500 2,356 723 449 1,184 Cash position Dec-20221 Cash flow from operating activities Other cash adjustments Gross proceeds from capital increase April 2023 Repayment Oberland Capital loan May 2023 Cash position Dec-20231 EIB loan signed in December, 2023 (EUR 40 million for Tranche B and C)2 Gross proceeds from capital increase January 2024 Cash position including Jan-24 capital raise and EIB loan Zealand Pharma ∞ Annual Report 2023Sustainability Contents The big picture Our business Sustainability Corporate governance Financial statements 29 Sustainability: Our patients, people and operations Our responsibility Our business model Double Materiality Assessment Our patients Our people Our operations 30 32 34 35 38 42 Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 30 Our responsibility At Zealand, we are committed to changing lives with next-generation peptide therapeutics. Through our innovative pipeline, we seek to make a difference for people living with chronic diseases while acknowledging our responsibility to society, our employees, and the environment. Our focus areas As we pursue our ambition of becoming the world's best peptide drug discovery and development company, our impact on global health and society continues to increase. We recognize the importance of operating a responsible and sustainable business as we grow and expand our pipeline. In 2023, Zealand further refined the company's Environmental, Social and Governance (ESG) strategy. We have identified three pillars within sustainability that are affected by our activities: our patients, our people, and our operations. For each pillar, we have or will set clear goals and ambitions to ensure that Zealand continues to act responsibly and sustainably. You can read more about our work within each pillar throughout this chapter. Our patients We leverage innovation to advance the health and well- being of patients Our people We foster an engaging and enriching workplace for our people Our operations We take responsibility for the impact of our operations The Sustainable Development Goals (SDGs) We have adopted and incorporated selected UN Sustainable Development Goals that are aligned with our business impact and connect Zealand’s efforts with those of other companies to address global challenges. We remain committed to these UN Sustainable Development Goals: 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 sustain- able development Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 31 Our patients Our people Our operations We leverage innovation to advance the health and well-being of patients We foster an engaging and enriching workplace for our people We take responsibility for the impact of our operations Health and quality of life We work to develop patient-centric treatments that solve severe unmet medical needs Patient collaboration We engage with patients to ensure their voices are heard by the medical system Engagement We strive to make Zealand an enriching place to work Growth We support our employees in developing to their full potential Diversity and inclusion We foster an inclusive workplace for all groups and backgrounds Climate We recognize the importance of minimizing and mitigating our climate impact Ethics We ensure safeguards and controls to avoid adverse outcomes from our research and our business Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 32 Our business model Our business model is focused on delivering best-in-class treatment options that address patient needs and ease the burden on healthcare systems. Engaging with partners so that we can focus on our core competencies Our core strength as a company lies in therapeutic peptide design and development, which has led to our R&D pipeline of promising candidates targeting obesity, rare diseases, and inflammation. You can read more about our peptide platform on pages 13-14. Our strategy is to pursue global co-development and commercialization partnerships that complement and extend our capabilities to deliver new therapies to patients with unmet medical needs. We aim to engage with part- ners across the value chain. We also have partnerships with academic and scientific institutions, leading contract research organizations (CROs), contract manufacturing organizations (CMOs), and distribution partners. Find out more about our peptide platform Go to pages 13-14 Research Development Manufacturing Distribution Commercial execution Zealand core focus Partner-led Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 33 Working with sustainability at Zealand Sustainability is anchored with Corporate Management to ensure that our organization’s ethical compass is set from the helm, fostering accountability and guiding responsible decision-making. Governance The Board of Directors sets the overall corporate strategy for Zealand Pharma as well as our ESG strategy. The Audit Committee oversees ESG policies, governance, and reporting. Within Corporate Management, ESG is anchored with our Chief Financial Officer and our Chief People Officer. This ensures top-level commitment and underpins the importance of this emerging area. Accountability Our ESG steering committee, represented by members of the Corporate Management team from P&O, Finance, Operations and Legal, is responsible for executing our sustainability strategy and works diligently to ensure that ESG is embedded throughout the organization and inte- grated in our business model as well as to assure legal compliance. ESG governance structure Board of Directors Audit Committee Corporate Management ESG Steering Committee ESG is considered an integral part of the Zealand culture and DNA. We have undertaken extensive work to refine and formalize our efforts within ESG. Since 2022, ESG goals have been an integrated part of our Company Goals linked to our performance-based remuneration. This includes all employees as well as Corporate Management. In 2023, all sub-goals related to ESG were achieved. The 2024 ESG priorities therefore focus on CSRD readiness, ESG strategy, as well as efforts to enable measurable target setting within the "Our operations" pillar. Nicole works in Clinical Operations Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 34 Double Materiality Assessment We have advanced our double materiality assessment to shape the ESG strategy, pinpointing focus areas that align both with internal business impacts and external stakeholder priorities. Preparing for CSRD In 2023, we advanced our double materiality assessment to prepare for the upcoming Corporate Sustainability Reporting Directive (CSRD). The preliminary inside-out and outside-in assessment has been an important part of formalizing the appropriate ESG strategy for Zealand and identifying our ESG strategy pillars, highlighting the most material and impactful topics for Zealand and across the value chain. Zealand must comply with the CSRD by the financial year 2025. Based on the outcome of the double materiality assessment, Zealand is required to report on data points related to the 12 material topics and we are currently working on closing the identified data gaps for these to ensure compliance with CSRD. This chapter continues to be based on the requirements of the Danish Financial Statements Act and complies with relevant laws, standards, and guidelines for reporting on corporate social responsi- bility activities. Preliminary assessment of material topics Environmental Social Governance Climate change (incl. green house gas) Emissions) Employee engagement and development Animal welfare Energy management Diversity Equity and Inclusion Risk mgmt. and ethical business practices Patient access to medicines IP and Anti-trust Patient health and safety Privacy and data protection Health and Safety Ethical and responsible marketing Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 35 Our patients Zealand’s most important contribution to a sustainable society is through improvement of the health and well-being of patients by developing new medical treatments. Our first strategy pillar focuses on Health and Quality of Life and Patient Collaboration. Health and quality of life We work to develop patient- centric treatments that solve severe unmet medical needs Patient collaboration We engage with patients to ensure their voices are heard by the medical system Our investments in research and development are driven by the goal of addressing unmet medical needs, ultimately improving outcomes and care for patients Patients are the heart of our business. We work with patient communities, thought leaders and external experts as we aim to improve the lives of people by addressing unmet medical needs. Our commitment is within Research and Development (R&D). In 2023, 76% of our operating expenditure (OPEX) was focused on R&D and 80% of our employees work within the R&D organi- zation. This ratio is expected to remain steady in 2024, as we continue to invest in R&D and seek partnerships for commercialization of our late-stage assets. During 2023, Zealand was sponsoring seven active clinical trials. Over the course of these trials, Zealand expects up to 337 trial participants to be enrolled.1 In 2024, we expect this figure to increase, as we plan to initiate a compre- hensive Phase 2b trial with petrelintide in obesity and a Phase 1 trial with our Kv1.3 Ion Channel Blocker targeting inflammation. As part of our work to increase awareness of our medical advances, we attend scientific congresses to update the community on the development of our product candidates. In 2023, we attended 20 congresses and delivered 30 scientific communications, including 12 abstracts, four posters and eight oral presentations, as well as six manuscripts. As we move into 2024, the number of scientific publications and congress attend- ances are expected to be at a similar level. Health and quality of life We work to develop patient-centric treatments that address unmet medical needs. Our current pipeline includes potential treatment options for two rare diseases, chronic inflammation, as well as the greatest healthcare challenge of our time - obesity. You can read more about our pipeline and these disease areas on pages 15-25. Addressing the greatest healthcare challenge of our time For 300,000 years, the rate of obesity among humans has been low and stable… until now. During the last 50 years, obesity has become a global pandemic and arguably the greatest healthcare challenge of our time. Worldwide prevalence of obesity has nearly tripled between 1975 and today where 2 billion people are considered overweight 1 Petrelintide (Ph1b), Dapiglutide (Ph1b), Glepaglutide (EASE-2, EASE-3, EASE-4) Dasiglucagon for CHI (long-term extension trial), Dasiglucagon rescue pen (pediatric trial). Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 36 or obese. Obesity places a substantial burden on indi- vidual patients’ quality of life, impacting physical health, emotional well-being, and daily activities, often leading to challenges in mobility, increased risk of comorbid- ities, and psychological distress. More than 3 million people die each year as a consequence of obesity. This is equivalent to the estimated number of global deaths attributable to COVID-19 during 2020, just every year. We believe that our product candidates targeting obesity and obesity-related comorbidities represent some of the potential keys that can help unlock the challenges associated with the obesity pandemic. With more and better treatment options, our vision is that we can address obesity and obesity-related comorbidities during the next 50 years, preventing healthcare systems from becoming overwhelmed. reinspection of the third-party manufacturing site where the FDA has identified some deficiencies to be addressed. We also plan to submit the second part of the NDA supporting treatment beyond three weeks in the first half of 2024. In parallel, we will pursue a commercial partner- ship agreement to reach as many patients as possible. In 2023, we also submitted an NDA for glepaglutide for the treatment of short bowel syndrome (SBS). SBS with intestinal failure (SBS-IF) is a rare, often neglected, debilitating disease, severely impacting patient quality of life. Severe nutrient malabsorption may lead to severe malnutrition and dehydration if not treated with paren- teral support (PS) through a central venous catheter. Both symptoms of SBS-IF and potential PS complications impose significant life restrictions and daily challenges. Our long-acting GLP-2 analog, glepaglutide, provided in a ready-to-use autoinjector, may offer beneficial efficacy, safety/tolerability and convenience, reducing patient burden and improving quality of life. As with dasiglucagon for CHI, we will pursue a partnership agreement for the commercialization of glepaglutide to ensure maximum patient reach. Addressing unmet medical needs in rare diseases Dasiglucagon is designed to serve a critical need for newborns, infants, and children with congenital hyperin- sulinism (CHI). CHI imposes a drastically different lifestyle on affected families and is associated with significant morbidity as well as psychosocial and financial burden. The absence of safe and efficacious treatment options represents an urgent unmet medical need. We believe that dasiglucagon can substantially improve the quality of life of patients living with CHI and their families. In the first half of 2024, we expect to resubmit the New Drug Application (NDA) for dasiglucagon in CHI for up to three weeks of dosing, contingent on a successful Our patients KPIs 76% of operating expenditure (OPEX) allocated to R&D in 2023. 80% of full-time equivalents (FTEs) working in R&D in 2023. 337 sponsoring seven active clinical trials in 2023 in which up to 337 trial participants are expected to be enrolled. 30 scientific communications in 2023. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 37 Patient collaboration We engage with patients to ensure that their voices are heard by the medical system. As we develop our novel treatments, we have a focus on patients' needs informed by strong collaborations with patient organizations. Many continue to consider obesity a lifestyle choice, as opposed to a serious chronic disease, impacting the payer sentiment, patients’ desire to seek medical advice and treatment, as well as the attitude of healthcare profes- sionals towards prescribing anti-obesity medications. In rare diseases, this collaboration is especially critical to raise awareness and understanding of the diseases and improve access to care. At Zealand, we have long- standing relationships with organizations, including Congenital Hyperinsulinism International and The Oley Foundation (working with short bowel syndrome) through various initiatives such as funding support and clinical trial collaboration. We work with thought leaders and external experts in both disease areas of CHI and SBS to inform communities and maximize the reach of our potential medical treatment options. In 2023, we held both SBS and CHI Summits at our headquarters outside Copenhagen to gather key external experts and medical staff from sites that had participated in our clinical trials, as well as patient organizations, to exchange perspectives and insights directly relevant to our programs. Once our rare disease products are on the market, we will continue to monitor impacts on patient outcomes as well as expand efforts to inform and improve treatment decisions. As our obesity pipeline matures, we will engage with patient organizations where we, amongst other things, will work on changing the perception of the disease. Never compromising on quality When conducting clinical trials, quality is of essence to ensure patient safety, product quality and data integ- rity. To remain compliant and in control, we ensure that we integrate quality and data integrity in our processes. Our Development and Operations areas outsource good practice (GxP) activities to qualified and approved suppliers, where the sponsor and product ownership responsibilities remain with us. Our reliance on external partners to perform GxP activities poses an inherent risk that partners may not follow requirements of pharma- ceutical quality standards. Such non-compliance could in turn jeopardize patient safety, quality, access, and safety and efficacy of our medicines. Oversight of the activities is carried out to ensure compliance with the applicable requirements including Good Laboratory Practice (GLP), Good Manufacturing Practice (GMP), Good Clinical Practice (GCP), Good Pharmacovigilance Practice (GVP), appropriate standards for medical devices and others. We work in close partnerships with our suppliers to achieve quality products and processes. Our partners are selected and maintained through a rigorous process where we focus on business ethics and business continuity as well as capability and capacity of the services provided. This includes, but is not limited to, use of specialized Mike lives with short bowel syndrome computer systems, process understanding, regulatory understanding and suitability of the supplier’s own quality system. Elements in the assessment include quality audits, frequent follow-up and oversight, supplier management assessment, and evaluation of financial stability. Our Pharmaceutical Quality System is described in our Quality Manual, which also defines our Quality Policy. Ongoing evaluation of our quality system is performed through both internal audits and external inspections from relevant health authorities, including the Danish Medicines Agency and the US Food and Drug Administration. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 38 Our people We foster an engaging and enriching workplace for our people through our focus on Engagement, Growth, and Diversity & Inclusion. Id works in IT Kamal works in Medical Affairs Engagement We strive to make Zealand an enriching place to work Growth We support our employees in developing to their full potential Diversity and inclusion We foster an inclusive workplace for all groups and backgrounds At Zealand, we believe that engaged and motivated employees with a passion for making a difference bring a positive mindset and inspiring level of energy to work. Our highly skilled employees are at the center of the medical treatment options that we design and develop for patients. We pride ourselves on our ability to work together as one team and to foster a strong and engaging company culture founded on collaboration, courage, empowerment, and trust. The Zealand family continues to grow. We started 2023 with 196 employees and we ended 2023 with 253 employees. A total of 88 employees have been onboarded during the year. The turnover rate of 10.3% during 2023 is considered low, showcasing Zealand’s ability to attract and retain highly skilled workers even in a highly compet- itive market. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 39 We are BOLD We EMPOWER people Our DNA We can be TRUSTED We work as ONE TEAM Engagement We strive to make Zealand an enriching place to work. We do so by leveraging our DNA: We are BOLD, we EMPOWER people, we work as ONE TEAM, and we can be TRUSTED. Throughout our 25-year history, we have built a unique company culture where employees are given autonomy to shape their work with a strong focus on a deeper purpose. To support our employees’ well-being, we work systematically to maintain a safe, inclusive, secure, and healthy work environment. We have designed our poli- cies and governance systems to promote physical and psychosocial health, including a Works Council and an Occupational Safety and Health Committee (OSHA Committee), on which both management and employees are represented and where matters related to our work environment are regularly discussed. We have a hybrid working environment that allows our employees to work from home when it suits the individual employee and the specific work tasks. We continue to focus on optimizing the work-life balance of all our employees to ensure their well-being. Our commitment to an engaged workforce is evident from our latest engagement survey where Zealand employees responded with a high response rate (92%) and reported a high level of positive engagement (8.8/10). As part of our ESG strategy development in 2023, we aim for a continuous high target of a positive engagement score of +8. Zealand Pharma employees in brief 253 employees at the end of 2023 10.3% turnover rate during 2023 8.8 overall engagement score (target of >8.0 out of 10) Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 40 Results from the 2023 engagement survey also high- lighted future focus areas to ensure high engagement is maintained. We will continue to focus on work-life balance, optimization of processes and available technol- ogies, and clear communication around the strategy and direction for Zealand. In 2024, we will launch a new leadership development program for leaders across the organization. The lead- ership development program will, among other things, focus on creating a shared leadership framework, enhance strategic thinking, and provide better tools for open conversations and assembling the right team. We will also strengthen our HR Business Partner function to equip managers with the right tools to promote employee engagement and to assist people managers in their employee development skills. Health and safety Laboratory operations contain inherent risks; therefore, we work systematically to maintain a safe and healthy work environment for all employees. Several procedures are in place, including a manual describing our policies on occupational safety and health (OSHA). All our employees are trained in the standard safety protocol and they are given the tools to manage their own occupational safety. We conduct quarterly safety walk throughs of our facili- ties and a near-accident reporting system is maintained to build on our strong safety track record and safeguard against potential future accidents. In 2023, one near- accident was reported under our near-accident reporting initiative (2022: 4) and we had one "obligated to notify" accident (2022: 0). Growth At Zealand, we support our employees in developing to their full potential. We prioritize employee growth via hands-on practical learning and delegating new respon- sibilities in a supportive environment. This strategy is backed by structured regular review processes to discuss performance and identify plans for future learning oppor- tunities. While individuals have ownership of their own development, they are constantly supported with tools and mentorship to grow. To support our growth initiatives, we plan to launch a consistent and transparent career framework for all employees, and offer relevant training. We are also devel- oping and launching an internal mentorship program during 2024 to leverage our strong internal competencies. Diversity and Inclusion We foster an inclusive workplace for all individuals regard- less of their background. We value diversity not only because we believe that this is the socially responsible thing to do, but because we believe that diverse teams arrive at better solutions, eventually benefitting patients, our company, and society at large. We are committed to providing equal employment oppor- tunities for all employees, and we evaluate recruitment of new employees, training and development opportunities Christin works in Molecular Pharmacology Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements for existing employees, promotions, and other personnel decisions regardless of race, color, gender identity or expression, religion, age, sexual orientation, national origin, disability, military or veteran status, part-time or full-time employee status, or any other basis. We acknowledge that diversity goes beyond gender and that we as a company embrace diverse backgrounds in terms of experience and competencies. In Zealand, we do not only have a diverse team in terms of gender, but also value different educational, cultural, and industry backgrounds. The age range of our employees is 27 to 68 (average of 47.1), showcasing our ability to attract young as well as experienced talent. One of the founders of Zealand, as well as the first employee to be hired, are still with us today, having celebrated their 25th anniversary along with the company. Inclusion is a focus area in our annual engagement survey with dedicated questions and a commitment to showcase this in future annual reports. In 2024, we plan to formalize and communicate our diver- sity and inclusion policy. Diversity in management Under Danish law, when reporting diversity in manage- ment, the Board of Directors and Executive Management (Zealand's CEO and CFO) are considered. We acknowl- edge that diversity in management as well as the organ- ization creates a better position for fruitful dicision making. As with the remaining organization, Management is selected and evaluated based on their capabilities, regardless of race, color, gender identity or expression, religion, age, sexual orientation, national origin or disa- bility. In 2023, there were no changes to the Executive Management nor Board of Directors, but as described the Board composition will change in 2024. If the Board observers are elected as members, they will bring exten- sive pharmaceutical industry experience and contribute to our diversity in terms of nationality, ethnicity and educa- tional background. Statutory gender reporting under Danish law We strive to achieve balanced representation of genders at all management levels, from the Board of Directors to the heads of departments. Board of Directors1 Total number of members Underrepresented gender (%) Other management positions2 Total number of members Underrepresented gender (%) 41 2023 7 29% 22 45% The Board of Directors consisted of two women and five men elected at the Annual General Meeting in 2023 and is therefore regarded as having an equal gender distribution (underrepresented gender: 29%). Consequently, Zealand is not obligated to set a gender distribution target for the Board. At the Annual General Meeting in 2024, two Board observers stand for election, one woman and one man. If elected, they will replace two male members of the Board, resulting in a female representation of 43% going forward. As of December 31, 2023, Other Management Positions2 consisted of 22 employees of which 45% were women, thus giving an equal gender distribution. A target is there- fore not required. 1 Shareholder elected board members of Zealand Pharma A/S 2 Corporate Management and their direct reports with managerial responsibilities, all employed by Zealand Pharma A/S Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 42 Our operations At Zealand, we take proactive responsibility for the impact of our operations. Our Operations pillar is centered around Climate and Ethics. Climate We recognize the importance of minimizing and mitigating our climate impact Ethics We ensure safeguards and controls to avoid adverse outcomes from our research and our business Climate While Zealand’s environmental footprint and risks associ- ated with climate-related matters are currently considered relatively low, we recognize the importance of minimizing and mitigating our climate impact. We are continuously evaluating and implementing initiatives that can reduce any negative impact on the environment from our oper- ations. This is very close to the heart of our employees who have organized a Green Initiatives Group with the ambition of minimizing resource consumption, waste, and energy usage in our laboratory facilities. During 2024, we plan to calculate our CO2 baseline, including scope 1-3 emissions. This will enable us to set a formal decarbonization roadmap to prioritize our efforts where they have the biggest impact. Furthermore, this is an important step towards meeting CSRD requirements. During 2024, we plan to explore setting an emission reduction target as part of our work with decarbonization following establishing the CO2 emission baseline. Ethics As an R&D company working within pharmaceuticals, we recognize the importance of having safeguards and controls to avoid adverse outcomes from our activities. We strive to operate according to the highest ethical standards and safeguard our business against corruption, bribery, and non-compliance. In 2023, we continued to have certified electricity at our Copenhagen facilities to ensure that 100% is sourced from sustainable energy, such as wind or hydro power. We also implemented a new policy to ensure that all new company paid cars are electric and that by 2027 all company cars will be electric. We significantly expanded our charging stations to facilitate the increasing demand from our employees. We have also included environ- mental criteria for selecting and evaluating contract manufacturing organizations as part of our Supplier Code of Conduct. Our reputation as a trusted business and scientific partner is crucial to our ability to engage successfully in existing and potentially new partnerships. Therefore, we ensure that our employees are continuously trained and kept updated with policies on good business practice and compliance, insider trading, and appropriate legal management of third-party intellectual property. We proactively engage in positive dialogue with all regula- tory and advisory authorities and with stakeholders from relevant industries in order to be inspired to make further improvements. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 43 As part of our program of maintaining a robust ethical working environment, Zealand maintains a whistle-blower program that is monitored by an external law firm to ensure that issues that need to be examined by Corporate Management and members of the Board of Directors are brought to their attention when appropriate. All employees are introduced to the whistle-blower service when they join the company to ensure that they are able to use it if the occasion arises. In 2023, we had zero whistle- blower cases. We actively promote and maintain a policy of transpar- ency and honesty with our employees. At Zealand, we do not accept bribery, corruption or fraud. Zealand’s Code of Conduct, which all employees are regularly trained in, and the Employee Handbook stipulate a set of policies speci- fying the company’s standards regarding our employees’ general and legal conduct. We set the same standards for key suppliers through our Supplier Code of Conduct. All our suppliers have confirmed that Zealand's supplier Code of Conduct correspond to their own internal Code of Conducts, thereby living up to our anti-bribery, corruption and fraud standards. At Zealand, we believe in being transparant about our global tax positions and tax policies. We are committed to always paying taxes in due time in the countries in which we operate in accordance with applicable tax laws and regulations. We aim to keep the business setup as simple as possible and therefore have a limited number of entities present in Denmark and the United States. Transactions Dino works in Alliance Management Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 44 between the Group companies are conducted on market terms in accordance with the arms' length principle. In general, we assess that the risk regarding transfer pricing is limited due to the simple business structure. We have taken every precaution to keep all employees, board members and certain stakeholders up to date and compliant with our internal rules. We distinguish carefully between those who are listed on the permanent insiders’ list and those who are exposed to what is deemed insider information. In the latter case, we take every precaution to keep an up-to-date list of employees’ knowledge of insider information. All new employees are introduced to our internal rules and are required to digitally sign off stip- ulating that they have read and understood these rules. We have strict policies regarding the proper use and transfer of intellectual property. We continuously refine our confidentiality and material transfer agreements to reflect critical changes in the industry, building on the extensive industry experience of many of our employees. At Zealand, we are committed to apply data ethics that are consistent with the appropriate privacy regulations and consistent with accepted industry practice. We currently have policies on Data Integrity and Good Documentation that apply to the integrity and quality of data for clinical trials, as well as a Data Governance Manual that governs the way that certain categories are handled and used. We believe these policies provide adequate safeguards for our data. During vendor selection, we review the capabilities of potential partners as part of the process to engage with them in supply agreements. At present, our major vendors are located in the United States, Taiwan, and Europe (with additional facilities for some elements of their work in China). We believe our vendors operate to an appropriate standard of human rights protection as far as our prod- ucts are concerned. All suppliers have confirmed that our human rights and labor requirements in our Supplier Code of Conduct are met and correspond to their own internal Code of Conducts. Animal welfare In the discovery of new therapies and to ensure the effi- cacy and safety of new pharmaceuticals as required by regulatory authorities, it is necessary to conduct in-vivo experiments using laboratory animals. Our policy on animal ethics and welfare is to use animal studies only where no available and acceptable in vitro alternative exists. All laboratory animals used under our responsibility must be treated gently and with respect, and only purpose-bred animals are used. We adhere to the principles of the 3Rs (reduce, refine, replace) and work to integrate these principles in all studies. All in-house animal studies are carried out in accord- ance with specific licenses issued by the Ministry of Environment and Food of Denmark and international guidelines, as appropriate. Danish law stipulates regular inspections of the animal facilities as well as compre- hensive reporting protocols overseeing experiments conducted during the year, processed through The Animal Experiments Inspectorate. Continuous dialogue between lab technicians, veterinarians, academic staff, and heads of departments ultimately ensures the highest animal welfare standards in all studies conducted. All employees working with laboratory animals have appropriate and documented education and training, proactively monitoring developments in the field. Veterinary checks of our animals are performed regularly. In addition, our internal ethics committee scrutinizes all proposed in-house in-vivo pharmacology, toxicology, and pharmacokinetic experiments for compliance with regulatory permissions and highest ethical standards. The necessity of animal experiments to our research and development activities cannot be overstated, which is why we constantly strive for the greatest vigilance and care in our treatment of animals. Zealand Pharma ∞ Annual Report 2023Corporate Governance Contents The big picture Our business Sustainability Corporate governance Financial statements 45 Corporate Governance Introduction Corporate governance structure Board of Directors and Corporate Management Internal controls and Risk management Risk and risk mitigation Shareholder information Annex: Recommendations on Corporate Governance 46 47 53 59 63 66 68 Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 46 Introduction This chapter on the corporate governance of Zealand Pharma A/S (“Zealand”) has been integrated into the management review of the Annual Report 2023 and covers the period January 1 – December 31, 2023. As a company incorporated under the laws of Denmark, and with its shares admitted to trading and official listing on Nasdaq Copenhagen, Zealand is subject to various applicable legislation, standards, and other regulations for publicly traded companies. These include Danish securities law and the recommendations on corporate governance issued by the Danish Committee on Corporate Governance (in the below ‘‘the Recommendations’’) updated on December 2, 2020. In addition to the reviews set out above, the Board of Directors and Corporate Management constantly seek to ensure that Zealand's management structure and control systems are efficient, function properly, and provide the right degree of control and management to the organi- zation. Several internal procedures have been developed and are continuously updated, with external assistance if required, to ensure active, secure, and efficient manage- ment of our company. Find out more about Zealand at zealandpharma.com/corporate-governance/ At Zealand, we regularly review our activities to ensure that we meet our obligations to shareholders, employees, regu- latory authorities, and other stakeholders while maximizing long-term value. Zealand also regularly reviews its rules, policies and practices within risk management and internal control to improve guidelines and policies for corporate governance, ensuring that the standards that we set are up to date with accepted practice for a company like Zealand. In addition to these, when relevant, we have corporate governance activities reviewed by a third party who carries out an evaluation of the Board and how it is governed. Jakob works in Finance Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 47 Corporate governance structure Corporate governance structure Zealand has a two-tier management structure composed of the Board of Directors (‘the Board’) and Corporate Management. The Board is responsible for the overall vision, strategies and objectives, the financial and managerial supervision of Zealand, as well as for regular evaluation of the work of 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 appli- cable law, Zealand's articles of association, and the poli- cies and procedures that are put in place to ensure sound governance. and results. The Board functions according to its Rules of Procedure. The duties include establishing Zealand’s poli- cies to achieve Zealand's objectives in accordance with its articles of association that form an important set of guard- rails for how the company should be governed. These also define the responsibilities of the Board, for example ensuring that Zealand’s bookkeeping, accounting, asset management, information technology systems, budgeting and internal control are properly organized. The Board approves the policies and procedures, and Corporate Management is responsible for the day-to-day management of Zealand in compliance with the guide- lines and directions set by the Board. The allocation of responsibilities between the Board of Directors and Corporate Management is stipulated in the Rules of Procedure that are reviewed and signed every year by the members of the Board of Directors and Corporate Management after the Annual General Meeting. Board of Directors The Board plays an active role in setting Zealand's strat- egies and goals as well as in monitoring its operations As of December 31, 2023, Zealand’s Board is comprised of seven Board members elected at the Annual General Meeting, four employee representatives elected by Zealand's employees, and two Board observers. The Annual General Meeting appoints each sharehold- er-elected member of the Board for a one-year term, whereas employee representatives are elected for a four- year term. The two Board observers appointed in 2023 will stand for election as Board members at the 2024 Annual General Meeting, whereas two current members of the Board do not stand for re-election. The other five current members of the Board and all the employee-elected members of the Board are up for re-election in 2024. Annual General Meeting Board of Directors Nomination Committee Audit Committee Remuneration Committee Scientific Committee Corporate Management Organization Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 48 Board members elected by the shareholders: • Martin Nicklasson, Chair • Kirsten A. Drejer, Vice Chair • Jeffrey Berkowitz • Bernadette Connaughton • Leonard Kruimer • Alain Munoz (not for re-election at AGM 2024) • Michael J. Owen (not for re-election at AGM 2024) Board members elected by the employees: • Jens Peter Stenvang • Frederik Barfoed Beck • Anneline Nansen • Iben Louise Gjelstrup Board observers for election as Board members at AGM 2024: • Enrique Conterno • Elaine Sullivan In line with the Recommendations, the Board reviews and determines the qualifications and experience needed on the Board with respect to: • Scientific knowledge within bioscience and innovation of pharmaceutical products • Financial experience and knowledge • Experience in leading an innovative business and insight into the biopharmaceutical market • Experience with market entry and relationship with payers • Experience in handling and managing partnering agreements • Competency in ensuring that the obligations of a listed company are fulfilled In 2023, the Board decided to carry out a full inde- pendent review of its performance. This performance was carried out independently by the Leadership Advisory Group (LAG) in compliance with article 3.5 of Danish Recommendations on Corporate Goverence 2020. They used a mixture of anonymous on-line questionnaires and one to one interviews with members of the Board and members of management. The results were presented to the Board before the 2023 annual general meeting and provided areas where the governance of the company could be the subject of annual review and further strengthened. These recommendations were instituted as part of the company’s annual review as a matter of routine. At the beginning of 2024, the Board decided to follow this evaluation to check its progress and to ensure that there was independence when the Board was evaluated. Once again, the Board decided to use the services of the LAG to follow up from its last review of the Board in 2023. The LAG used an anonymous on-line questionnaire that was sent to each member of the Board and management. LAG produced a report that was sent to the Chair and the Company Secretary. The Chair also met one to one with the members of the Board to discuss the functioning of the Board. Paola works in Medicinal and Computational Chemistry Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 49 The report that is compiled measures 11 separate catego- ries and scores them based on an average of the scores from the member of the Board and Management (11 + 6 people in total). Of these 11 categories. The scores indi- cate the following performance against benchmarks for Danish companies. The results indicate that in six of the 11 categories (indi- cated in blue font in the chart below) Zealand’s perfor- mance was regarded as exceptional across various categories. The LAG’s assessment was that in these six categories Zealand represented a role model company board. LAG report results Category Strategy Development and implementation Risk awareness, monitoring and reporting Co-operation with CEO and Management Board Composition and dynamics On and Off Boarding Meeting Structure and operation Meeting effectiveness Shareholders and stakeholder relations Committee and Vice Chair value contribution Evaluation of the Chair General Overall Score The Board should meet at least 6 times a year and when- ever the Chair decides that it is necessary. The Board of Directors met for a total of 10 times in 2023 and of these 6 meetings were virtual. functions according to its Charter that is reviewed on an annual basis. The duties include the internal controls and risk management systems related to financial reporting and evaluating the need for an internal audit. Audit Committee The Audit Committee consists of Leonard Kruimer, Martin Nicklasson, Jeffrey Berkowitz, and Bernadette Connaughton. The committee is chaired by Leonard Kruimer. The Audit Committee plays an active role in setting Zealand's strategies and goals as well as in monitoring its operations and results, including ESG. The Committee • establishing procedures for the receipt, retention and treatment of complaints received regarding accounting, internal controls, auditing and financial reporting matters (whistle-blower function); • nominating the statutory external auditor to be elected at the Annual General Meeting and preparing the recommendation to the Annual General Meeting regarding the election of our external auditor, as well as, if relevant, proposing to the Annual General Meeting that an external auditor is discharged; Score from a total of 5 4.10 Benchmark 3.53 Difference +0.57 Role Model Benchmark 4.19 • monitoring the strategy, plan, scope and approach of the external auditor’s annual audit; 3.96 4.47 4.13 3.39 4.36 4.31 4.03 4.23 4.67 4.41 4.23 3.48 3.61 3.57 3.08 3.70 3.72 3.41 3.75 4.09 3.79 3.61 +0.48 +0.86 +0.56 +0.21 +0.66 +0.59 +0.62 +0.48 +0.58 +0.62 +0.62 4.14 4.47 4.13 3.90 4.36 4.31 4.29 4.24 4.67 4.41 4.23 • monitoring and approving the terms and compensation of the external auditor; • monitoring the external auditor’s reports to the Executive Management and the Board of Directors, including management letters and long-form reports, discussing any reports with the Executive Management and the external auditor and be mainly responsible for resolving any disagreements between the external auditor and the Executive Management; Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 50 • considering (at least on an annual basis) the performance and independence of the external auditor and obtaining and reviewing of a report from the external auditor substantiating that the external auditor is independent; The Audit Committee met for a total of 7 times in 2023 and of these 5 meetings were virtual. The committee is composed of independent members. compensation or termination payments, ensuring that the contractual terms are fair to the individual and to Zealand, that failure is not rewarded, and that the duty to mitigate loss is fully recognized; • reviewing policy in relation to the provision of non-audit services by the external auditor under which the Audit Committee approves non-audit services delivered by the external auditor; • engaging independent counsel and other advisors as the Audit Committee determines necessary to carry out its duties; • obtaining available appropriate funding as the Audit Committee determines necessary for the fulfilment of its tasks and duties; and • evaluating on an annual basis: (i) the performance of the Audit Committee, including independence and financial expertise; and (ii) the adequacy of the Audit Committee’s charter and recommendation of any proposed changes to the Board of Directors. In 2023, specific topics discussed included auditor’s reports, accounting policies, internal controls, compli- ance, finance, going concern status, risk management, cybersecurity, insurance policy, year-end issues, ESG reporting, transactions not in the usual course of business and external financing. Remuneration Committee The Remuneration Committee consists of Martin Nicklasson, Alain Munoz, and Michael J. Owen. The committee is chaired by Martin Nicklasson. Alain Munoz and Michael J. Owen do not stand for re-election at the 2024 Annual General Meeting. The Remuneration Committee proposes the remuner- ation policy as well as targets for company-operated performance-related incentive programs. These policies and guidelines set out the various components of the remuneration, including fixed and variable remuneration such as pension schemes, benefits, retention bonuses, severance, and incentive schemes as well as the related bonus and evaluation criteria. The committee functions according to its Charter that is reviewed on an annual basis. The proposed remuneration policy is subject to the approval of our shareholders at the Annual General Meeting. Our Remuneration Committee has the following principal responsibilities: • preparing and presenting proposals to the Board of Directors on the framework for remuneration packages for Executive Management, including, but not limited to salary, salary increases, pension rights and any • preparing and presenting proposals to the Board of Directors on remuneration matters of material importance to Zealand, including incentive programs and payments for the Executive Management. The proposals for remuneration of Executive Management, including any incentive program, shall be in accordance with and not exceed relevant comparable market practice levels at any given time; • preparing and presenting proposals to the Board of Directors on the targets (bonus levels and performance targets) for company-operated performance-related incentive programs for Executive Management, as well as monitoring and evaluating the fulfilment of such targets; • overseeing the implementation of any pension, retirement, death or disability, or life insurance scheme and any incentive schemes for Executive Management; and • reviewing and considering the proposals from our Nomination Committee on remuneration for members of the Board of Directors and Executive Management. In 2023, specific topics discussed included long-term incentive programs for management and Board of Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 51 Directors, company goals, and the compensation policy for eligible employees. Please refer to the 2023 Remuneration Report for more details. The Remuneration Committee met for a total of 6 times in 2023 and of these 5 meetings were virtual. The committee is composed of a majority of independent members. Nomination Committee The Nomination Committee consist of Kirsten A. Drejer, Leon Kruimer and Bernadette Connaughton. The committee is chaired by Kirsten A. Drejer. The Nomination Committee makes recommendations for decisions to the Board of Directors regarding Board posi- tions, identifying and recommending candidates for the Board of Directors. The Committee functions according to its Charter that is reviewed on an annual basis. Specific topics discussed in 2023 included the compo- sition of the independent members of the Board of Directors as well as the selection and recommendation of new members of the Board of Directors. The Nomination Committee met for a total of 4 times in 2023 and of these 3 meetings were virtual. The committee is composed of independent members. Scientific Committee The Scientific Committee consists of Kirsten A. Drejer, Alain Munoz, and Michael J. Owen. The committee is chaired by Kirsten A. Drejer. Alain Munoz and Michael J. Owen do not stand for re-election at the 2024 Annual General Meeting. The Scientific Committee is a forum with the purpose of leveraging the scientific expertise of the appointed Board members, understanding and challenging the approach and assumptions of the Zealand’s Research & Development strategy, providing technical assistance to the Board on research and development-related issues, and guiding the Board on the risks of the Company’s Research & Development strategy. Specific topics discussed in 2023 included the development of the clinical pipeline, prepara- tion for potential interactions with regulatory authorities, and a review of the pre-clinical pipeline and innovation strategy. The Scientific Committee met for a total of 4 times in 2023 and of these 2 meetings were virtual. The committee is composed of a majority of independent members. Overview of meetings in 2023 Attended Absent Board Audit Committee Martin Nicklasson Kirsten A. Drejer Jeffrey Berkowitz Bernadette Connaughton Alain Munoz Leonard Kruimer Michael J Owen Jens Peter Stenvang Frederik Barfoed Beck Anneline Nansen Iben Louise Gjelstrup ••••••••••••• ••••••••••••• ••••••••••••• ••••••••••••• ••••••••••••• ••••••••••••• ••••••••••••• ••••••••••••• ••••••••••••• ••••••••••••• ••••••••••••• ••••••• N/A ••••••• ••••••• N/A ••••••• N/A N/A N/A N/A N/A Remuneration Committee •••••• N/A N/A N/A •••••• N/A •••••• N/A N/A N/A N/A Scientific Committee Nomination Committee N/A •••• N/A N/A •••• N/A •••• N/A N/A N/A N/A N/A •••• N/A •••• N/A •••• N/A N/A N/A N/A N/A On August 8 and August 23, Leon Kruimer was travelling and unable to attend the nomination committee meetings scheduled for those dates. He was able to discuss the matters discussed during those meetings with the Chair of the Nomination Committee to ensure that he was up to date with the process that was in place to select potential new board members. Zealand Pharma ∞ Annual Report 2023 Contents The big picture Our business Sustainability Corporate governance Financial statements 52 Corporate Management Corporate Management is composed of Executive Management and other members of Corporate Management: Executive Management • Adam Steensberg, President and Chief Executive Officer • Henriette Wennicke, Executive Vice President and Chief Financial Officer Other members of the Corporate Management • Ivan Møller, Executive Vice President and Chief Operating Officer • Christina Sonnenborg Bredal, Executive Vice President, Chief People Officer • David Kendell, Chief Medical Officer and Head of Research & Development • Ravinder Singh Chahil, Executive Vice President and General Counsel Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 53 Board of Directors and Corporate Management Zealand Pharma Board of Directors at February 27, 2024 Find out more about the Board of Directors at zealandpharma.com/ board-of-directors-and- nomination- committee Martin Nicklasson Kirsten A. Drejer Position Year of birth Chair 1955 Nationality Swedish Gender First elected Male 2015 Vice Chair 1956 Danish Female 2018 Jeffrey Berkowitz Board member 1966 American Male 2019 Committee AudCom and RemCom (Chair) NomCom (Chair) and SciCom (Chair) AudCom Independent Yes Yes Yes Special competencies Extensive general management and research and development experience from AstraZeneca Plc and Swedish Orphan Biovitrum AB. More than 30 years of international experience in the pharmaceutical 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 pharmaceutical, retail pharmacy, whole- sale drug distribution, specialty, payor and healthcare services leadership experience in P&L accountable roles. Current positions Board member of Basilea Pharmaceutica Ltd. and Chair of Nykode Therapeutics AS. Chair of the Board of Bioneer and ResoTher Pharma. Board member of Curasight A/S and Malin Corporation. CEO and Director of Real Endpoints. Board member of H. Lundbeck A/S, Esperion Therapeutics, Inc. and Uniphar PLC. Zealand Pharma ∞ Annual Report 2023 Contents The big picture Our business Sustainability Corporate governance Financial statements 54 Zealand Pharma Board of Directors at February 27, 2024, continued Bernadette Connaughton Leonard Kruimer Position Board member Board member Year of birth 1958 Nationality American Gender First elected Female 2019 1958 Dutch Male 2019 Alain Munoz Board member 1949 French Male 2005¹ Michael John Owen Board member 1951 British Male 2012 Committee AudCom and NomCom AudCom (Chair) and NomCom RemCom and SciCom RemCom and SciCom Independent Yes Yes No2 Yes Special competencies More than 30 years of global strategic, commer- cial and leadership expertise, and a broad perspective on the strategy, capabilities and governance required for successful execution in U.S. and international markets. More than 30 years of experience in corporate finance, planning and strategy, including 15 years in senior executive positions in private and publicly listed biotechnology companies Current positions Board member of Halozyme Therapeutics Inc. and Editas Medicine. Chair of the Board of BioInvent International AB, Board member and Chair of Audit Committee of Pharming Group NV., and Basilea Pharmaceutica Ltd. Director AI Global Investments (Netherlands). Physician qualified in cardiology and intensive care. Experience in the pharmaceutical industry at senior management level. Served as SVP for international development in the Sanofi Group and in the pharmaceutical division of Fournier Laboratories. Research experience focusing on the immune system and more than 150 publica- tions. Has held several leading positions at GlaxoSmithKline, most recently as SVP and Head of Biopharmaceuticals Research. Chair of the Board of Directors of Acticor Biotech and a Board member of Auris Medical and Amryt Pharma Plc. Chair of the Board of Ossianix Inc. and is a member of the Board of ReNeuron Group plc, and Sareum Holdings plc. 1 Resigned in 2006 and re-elected in 2007. 2 Not considered independent in accordance with the Danish Recommendations on Corporate Governance of 2 December 2020. Zealand Pharma ∞ Annual Report 2023 Contents The big picture Our business Sustainability Corporate governance Financial statements 55 Zealand Pharma Board of Directors at February 27, 2024, continued Frederik Barfoed Beck Anneline Nansen Louise Gjelstrup Jens Peter Stenvang Position Employee-elected board member Employee-elected board member Employee-elected board member Employee-elected board member Year of birth Nationality Gender First elected Committee Independent 1967 Danish Male 2020 None No 1969 Danish Female 2021 None No 1977 Danish Female 2020 None No 1954 Danish Male 2014 None No Current positions Associate Director, Contracts and Sourcing Principal Scientist Principal Laboratory Technologist Senior Application Specialist Zealand shares at December 31, 2022 Zealand warrants at December 31, 2022 Zealand RSUs at December 31, 2022 4,422 4,978 2,100 Change in ownership in 2022 -1,316 2,500 6,298 2,375 +929 1,655 1,417 1,750 -575 3,500 2,123 1,750 -4,300 Zealand Pharma ∞ Annual Report 2023 Contents The big picture Our business Sustainability Corporate governance Financial statements 56 Zealand Pharma Board Observers at February 27, 2024 Enrique Conterno Position Board Observer Year of birth 1966 Nationality Peruvian/American Gender Male Elaine Sullivan Board Observer 1961 British/Irish Female First elected Stand for election to Board at AGM 2024 Stand for election to Board at AGM 2024 Committee Independent Special competencies N/A Yes N/A Yes 27 years at Eli Lilly and Company, including SVP and Member of the Executive Committee, President of Lilly USA, and President of Lilly Diabetes, as well as roles across sales, marketing, finance, and business development. Bachelor of Science in Mechanical Engineering from Case Western Reserve University and MBA from Duke University. Served at both AstraZeneca and Eli Lilly and Company as member of senior global R&D management teams, including VP of Global External R&D at Eli Lilly and Company and VP and Head of New Opportunities at AstraZeneca. Co-founded and served as CEO of Carrick Therapeutics. PhD in Molecular Virology from the University of Edinburgh. Current positions Member of the Board of Directors of Glooko, inc. and Member of the Board of Governors of the American Red Cross. Member of the Board of Directors of Nykode Therapeutics ASA, IP Group plc, and hVIVO Ltd, as well as Member of the Supervisory Board of Evotec AG. Zealand Pharma ∞ Annual Report 2023 Contents The big picture Our business Sustainability Corporate governance Financial statements 57 Zealand Pharma Corporate Management at February 27, 2024 Position Year of birth Nationality Gender Joined Zealand Experience Adam Steensberg Henriette Wennicke David Kendall Ivan Møller Executive Management President and Chief Executive Officer Executive Management Chief Financial Officer Chief Medical Officer Chief Operating Officer 1974 Danish Male 2010 1983 Danish Female 2022 1961 American Male 2020 1972 American/Danish Male 2018 Adam has 20+ years of experience in both the private and public sectors, including: Henriette has 15+ years of experience from global, publicly listed companies, including: David has 35+ years of experience in clinical diabetes, research, and Pharma, including: Ivan has 25+ years of experience in Pharma and project management, including: • Chief Medical Officer at Zealand Pharma • Medical Director at Novo Nordisk • Clinician at Rigshospiltalet • Vice President, Head of Investor Relations & Treasury at GN Store Nord • Vice President, Head of Global Finance at GN Hearing • Chief Medical Officer at MannKind Corporation • Vice President, Medical Affairs and Distinguished Medical Fellow at Eli Lilly and Company • Executive Vice President, Technical Development & Operations at Zealand Pharma • Global Head, Operations Management at Novartis • Director, R&D Business Support at Novo • Chief Scientific and Medical Officer for the • Vice President, Global Head, External Supply Nordisk American Diabetes Association Organization at Novartis • Chief of Clinical Services and Medical Director at the International Diabetes Center • Faculty at the University of Minnesota • Project Leader at Boston Consulting Group • Head of Production, PolyPeptide Laboratories A/S Other management positions • Board Member at Cessatech ApS • Board Member of DANISH BIO - DANSK BIOTEK Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 58 Zealand Pharma Corporate Management at February 27, 2024, continued Christina Sonnenborg Bredal Ravinder Chahil Position Chief People Officer General Counsel Year of birth Nationality Gender 1985 Danish Female Joined Zealand 2020 1968 British Male 2017 Experience Christina has 10+ years of experience in various legal and advisory areas, including: Ravinder has 25+ years of international expe- rience in law including: • Senior Vice President, Head of People & Organization at Zealand Pharma • Manager at PwC Legal • Tax Manager and Senior Tax Consultant at EY People Advisory Services • Trial Lawyer at Martinelli Advokatfirma • Senior Vice President, General Counsel & Company Secretary at Zealand Pharma • Director of Intellectual Property at Polpharma • Director of Commercial Intellectual Property at Actavis Group hf • Senior Solicitor at Bird & Bird • Called to the Bar England & Wales November 1992 Corporate Management Overview of shares, warrants, PSUs, RSUs and change in 2023 Zealand shares at December 31, 2023 Zealand warrants at December 31, 2023 Zealand PSUs at December 31, 2023 Zealand RSUs at December 31, 2023 Change in ownership in 2023 Adam Steensberg 41,143 189,063 170,976 Henriette Wennicke David Kendall Ivan Møller Christina Sonnenborg Bredal Ravinder Chahil 3,432 9,299 45,428 6,734 7,327 14,038 10,490 66,137 31,761 34,261 29,184 14,191 79,663 33,469 32,344 30,246 12,026 35,254 10,647 4,260 6,470 23,532 3,432 7,763 30,079 6,192 7,327 Board of Directors Overview of shares, warrants, RSUs and change in 2023 Zealand shares at December 31, 2023 Zealand warrants at December 31, 2023 Zealand RSUs at December 31, 2023 Change in ownership in 2023 Martin Nicklasson Kirsten A, Drejer Jeffrey Berkowitz Bernadette Connaughton Leonard Kruimer Alain Munoz Michael John Owen 18,570 8,800 8,200 8,500 15,300 12,215 7,360 - - - - - - - 8,000 4,000 4,000 4,000 5,500 4,500 4,500 8,000 4,000 4,000 4,000 7,300 2,465 3,540 Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 59 Internal controls and Risk management Zealand strives to conduct its operations in accordance with the highest ethical standards. Zealand is a knowledge-intensive company, with a high focus on competency and personal development. The Management philosophy in Zealand is based on a high degree of trust in the company’s employees. However, policies and operational processes are well described, with regular reporting and controls. Operations are performed mainly within the parent company Zealand Pharma A/S in Søborg, Denmark. All main research and development operations are based at the site in Søborg. The company maintains a small workforce at Zealand Pharma US Inc, the US subsidiary, located in Boston, Massachusetts. Some of the company’s work is outsourced to various contract research, development, or manufacturing organizations. Internal controls environment Zealand has a number of internal control and risk management systems in place to ensure that its financial statements provide a true and fair view and comply IFRS Accounting Standards as adopted by the EU and additional requirements under the Danish Financial Statements Act. Zealand has several policies and procedures in key areas of financial reporting. The internal control and risk management systems are designed to mitigate, detect, and correct material misstatements rather than eliminate the risks identified in the financial reporting process. Corporate Management is responsible for implementing policies and procedures on a day-to-day basis. The Board has established an Audit Committee to advise the Board on related matters. A review and prioritization of material accounting items is performed throughout the year. Items in the financial statements that are based on estimates or that are gener- ated through complex processes carry a relatively higher risk of error. Zealand performs continual risk assessments to identify such items and assess their scope and related risks. There are inherent limitations in the effectiveness of any internal control over financial reporting, including the possibility of human error and the circumvention or overriding of internal control. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. An effective internal control environment may become inadequate in the future because of changes in conditions, or deterioration in the degree of compli- ance with the policies and procedures. As of December 31, 2023, key risks and processes iden- tified have been documented and internal controls have been designed and implemented in the organization. Internal controls have been subject to management testing and assessment to ensure that risks are addressed and managed in a responsible and efficient manner. Results have been formally reported to Management. The Board has assessed that an internal audit function is not required at Zealand in view of the Company’s legal structure and size. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 60 Audit Zealand’s external auditors are appointed for a term of one year by the shareholders at the Annual General Meeting, based on the recommendation of the Board. Before such recommendation and in consultation with the Audit Committee and Executive Management, the Board assesses the independence, competencies and other matters pertaining to the auditors. The framework for the auditors’ duties, including their remuneration, audit, and non-audit tasks, is agreed between the Audit Committee and the auditors, and endorsed by the Board. Description of management reporting systems and internal control systems Management continually works on the design and effec- tiveness of its management reporting and internal control systems in order to enable it to monitor performance, strategy, operations, business environ ment, organization, procedures, funding, risk, and internal controls. While implementation is ongoing, Corporate Management is of the opinion that the reporting and internal controls are adequate to avoid material misstatements in the financial reporting. In 2023, Zealand has implemented a new budget tool as well as a new Enterprise Resource Planning (ERP) system to further strengthen management reporting. A new elec- tronic document management system has been launched in December 2023. Ravinder is General Counsel Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 61 The management reporting and internal control systems include the following reports: • Annual budget • Quarterly reports, including budget revisions in March, June and September • Financial performance and cash position • Comparison of budgeted and actual performance • Analysis of cash flows • Project management and cost control, and regular project reporting and follow-up • Summaries of project management key performance indicators • Controls on purchase and maintenance of assets • Review of potential claims and litigation • Review and updating of contracts and collaboration agreements to ensure that all commitments and liabil- ities are recognized as well as all income to which Zealand is entitled In addition to the above-mentioned reports, the internal control system includes a number of detailed policies and procedures, including: • Treasury policy guiding investment of liquid assets • Schedule of authorization guiding the sign-off of expenses and investments • Employee manual providing guidance on policies, rules and procedures associated with employment at Zealand Zealand also undertakes controls to ensure the complete- ness and accuracy of accounting records. Such controls are prepared, reviewed, tested and documented in an online controls tool. Zealand’s Management considers that the above high- level and detailed controls contribute to more effective financial reporting procedures. The areas deemed to have a moderate to high-risk profile are: • Revenue recognition and share-based compensation, which involve a degree of judgment and estimation with a risk profile assessed to be moderate • Counterparty risk for liquid assets • Risk of fraud Control environment/accounting Incoming invoices are approved electronically. An approval hierarchy ensures that invoices are approved by the appropriate persons in accordance with Zealand's Schedule of Authorization. Payment proposals are approved through online banking and require two staff members to complete the transaction. No changes to vendors' banking details can be performed without approval. It is Management’s view that the current controls are adequately reducing the risk of significant errors in the financial statements. The end-of-period process In addition to controls of individual accounting items, it is important to maintain a high level of control over the different steps involved in transforming raw accounting data into final quarterly or annual reports. Risk assessment As part of the risk assessment process, a review and prior- itization of key risks and material accounting items has been performed. These risks have been analyzed with relevant controls described. The quarterly and year-end processes involve detailed documentation of each balance sheet item as well as documentation supporting all notes to the accounts. Management reviews the accounting policies used and assesses the need for any new accounting policies. Any items where estimates and/or judgements influence the accounts are discussed with the Audit Committee and are described in note 1.3 in the Annual Report. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 62 IT In addition to the controls performed by Management, Zealand’s IT department has policies in place covering data governance, use of IT, and information security. IT is leveraging an external Security Operation Center (SOC) provider for Monitoring Detection Response (MDR) and Incident Response (IR). An employee cyber security training program is also implemented. IT will continue investing in infrastructure and network hardening. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 63 Risk and risk mitigation We constantly monitor and assess the overall risk of doing business in the drug development industry and the particular risks associated with our current activities and corporate profile. the Board. In addition to these, each project team has a risk identification and mitigation assessment using a standard internal matrix that is used across the company. This is used by each project team to ensure that there is a consistent approach to risk and that appropriate risks are identified. This is updated during the lifetime of any project. Below we have summarized Zealand’s key risk areas and how we attempt to address and mitigate such risks. Zealand’s Corporate Management is responsible for implementing adequate systems and policies in rela- tion to risk management and internal control, and for assessing the overall and specific risks associated with Zealand’s business and operations. Furthermore, Zealand’s Corporate Management seeks to ensure that such risks are managed optimally and in a responsible and efficient manner. Doing business in the drug development industry involves major financial risks. The development period for novel medicines takes several years; costs are high, and the probability of reaching the market is relatively low due to developmental and regulatory hurdles. Risks of particular importance to Zealand are scientific and development risks, commercial risks, intellectual property risks, clinical trial risks, regulatory risks, partner interest risks, financial risks, and risks relating to finan- cial reporting. Risk and mitigation plans are monitored by Corporate Management, and the continuous risk assessment is an integral part of the yearly reporting to Dorte works in IT Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 64 Zealand risk and mitigation Product pipeline Partnerships Workforce and management Finance and macroeconomics Research and development activities for new pharmaceutical product candidates are costly and require lengthy clinical trials, which by nature are uncertain and associated with high risk of failure. Adverse events in clinical trials or failure to satisfac- torily demonstrate safety and efficacy of product candidates to regulatory authorities could lead to delays in completing clinical trials, additional costs to Zealand, or ultimately failure to progress the product candidates towards market. Our clinical project teams work closely with external expert clinicians and product development experts within the industry to design, set up, and conduct the clinical programs. Our employees have been selected due to their extensive experience within their field of expertise and receive training on a continuous basis to develop and fulfil requirements. We also engage in meetings with regulatory author- ities to ensure that there is alignment on the regula- tory strategy and trial requirements. k s i R n o i t a g i t i M Zealand has a business model that is dependent on partnerships in development, manufacturing, and commercialization. Quality or supply issues at key third-party manufacturers may lead to regulatory delays or impact clinical or commercial supply. Failure to secure or manage future commercializa- tion partnerships may result in loss of product value and negatively impact access for patients. Zealand’s ability to attract and retain highly skilled and talented employees is key to our success and future growth. Loss of key employees may lead to delays in the development of Zealand’s product candidates, loss of important know-how, and impact on the company’s culture. Exposure to macroeconomic risks relate to interest rates as well as volatility and instability in the financial markets which could potentially lead to Zealand’s inability to secure financing. Suppliers are regularly audited to ensure proper quality. To maximize the value of all partnerships, we strive to foster a close and open dialogue with our partners, thereby building strong partnerships that work effectively. Zealand strives to be an enriching, inspiring and great place to work. Throughout our 25-year history, we have built a unique company culture. Engagement surveys show high engagement (8.8/10) and a high sense of purpose for all employees. Peer and pay reviews are performed regularly and we invest in training, development, and active culture management to ensure a continued good working environment. Zealand’s current cash runway into 2027 makes us less vulnerable to financial instability. As stipulated in our treasury policy, we work diligently to secure a healthy balance sheet by managing our cash, investments, and debt while also hedging our expo- sure to, for example, exchange rate risk. Zealand Pharma ∞ Annual Report 2023 Contents The big picture Our business Sustainability Corporate governance Financial statements 65 Zealand risk and mitigation – continued IT security Climate and geopolitical environment Legal, patent and compliance risk Regulatory environment Cyberattacks may lead to theft or leakage of patient data, personal employee data, intellectual property, and confidential business data, potentially impacting Zealand’s operations and reputation, resulting in fines from authorities or financial losses. Climate or geopolitical events may impact Zealand’s or a partner’s business operations due to supply issues. Trial recruitment could be delayed due to geopolitical issues or global health crises as seen during the COVID-19 pandemic. Increased regula- tory requirements and public sentiment will require Zealand to manage our carbon footprint. Inability to do so could lead to compliance issues and investor dissatisfaction. If we or our partners were to face infringement claims or challenges by third parties, an adverse outcome could subject us or our partners to signif- icant liabilities to such third parties or lead to the withdrawal of our products or product candidates. This could lead us or our partners to curtail or cease the development of some or all of their drug product candidates or cause our partners to seek legal or contractual remedies against us, potentially involving a reduction in the royalties due to us. The regulatory approval processes of the US Food and Drug Administration (US FDA), the European Medicines Agency (EMA), and other regulatory authorities can be lengthy and inherently unpre- dictable. If we or our collaboration partners are ultimately unable to obtain regulatory approval for internal or out-licensed product candidates, our business could be substantially harmed. We employ qualified IT professionals, including dedicated specialists, who use external assistance from qualified vendors to provide advice on cyber- security and systems security where relevant. All members of staff are trained in IT security and our IT systems use multi-authentication systems as appro- priate to reduce the risk of unauthorized entry into the systems. Our company has appropriate protec- tion systems from viruses and malware. The most sensitive data is encrypted and subject to restricted internal use. Zealand’s direct environmental footprint is consid- ered relatively low, mainly due to the outsourcing of investigational medicinal product to third-party manufacturers. When selecting and evaluating contract manufacturing organizations, we have included environmental criteria as part of our Supplier Code of Conduct to ensure standards are met and climate footprint is minimized. We have launched an ESG strategy with a commitment to calculate our CO2 baseline and set proper decar- bonization targets going forward. Our 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. Our employees receive training and updates on policies regarding the correct and lawful management of internal and external intel- lectual property. Our regulatory department works closely with external consultants and regulatory agents to develop regulatory strategies. We also engage in meetings with regulatory authorities to ensure that there is alignment on the regulatory strategy and trial requirements. k s i R n o i t a g i t i M Zealand Pharma ∞ Annual Report 2023 Contents The big picture Our business Sustainability Corporate governance Financial statements 66 Shareholder information We are listed on Nasdaq Copenhagen under the ticker symbol ZEAL. Core share data Denmark Number of shares at Dec. 31, 2023 58,751,152 Listing Ticker symbol Index memberships Nasdaq Copenhagen ZEAL OMXCopenhagen25 STOXX Europe 600 Change in number of shareholders during 2023 The number of registered shareholders in Zealand Pharma increased to 36,798 at December 31, 2023, from 24,283 at December 31, 2022. Ownership The following shareholders are registered in Zealand Pharma’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 February 27, 2024: At December 31, 2023, the nominal value of our share capital was DKK 58,751,152, divided into 58,751,152 shares with a nominal value of DKK 1 each. • Van Herk Investments, Netherlands (9.97% of votes/9.97% of capital) Institutional shareholders by geography % 40 (37) 2023 1 (0) 2022 25 (18) 22 (20) 12 (25) United States Denmark United Kingdom Rest of Europe Rest of World Based on Nasdaq Corporate Solutions aggregated data per December 2023 and October 2022. In 2023, the share capital increased by a nominal value of DKK 7.0 million driven by one directed issue and private placement (DKK 6.6 million) 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 shareholder register represents one vote at the Annual General Meeting and other shareholders’ meetings. Find more and contact Investor Relations at zealandpharma.com/investor-relations • Polar Capital LLP, United Kingdom (9.62% of votes/9.62% Share price performance in 2023 Index of capital) • Avoro Capital Advisors LLC, United States (5.5% of votes/5.5% of capital) Share price performance The price of Zealand’s shares increased by 85.3% during 2023 with a market closing share price at year-end of DKK 373.2, compared to DKK 201.4 at year-end 2022. 200 150 100 50 180 102 Jan 23 Feb 23 Mar 23 Apr 23 May 23 Jun 23 Jul 23 Aug 23 Sep 23 Oct 23 Nov 23 Dec 23 Zealand Pharma Nasdaq Biotechnology Index (NBI) Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 67 Annual General Meeting The annual general meeting is scheduled to be held elec- tronically and in-person on Wednesday, March 20, 2024 at 3:00 PM CET. Additional information will become available at https://www.zealandpharma.com/annual- general- meeting no later than 3 weeks before the annual general meeting. Analyst coverage Zealand is followed by the financial institutions and analysts listed below: Institution Carnegie Analyst Jesper Ilsøe Danske Bank Thomas Bowers Financial Calendar 2024 Goldman Sachs Rajan Sharma Date March 20 May 16 August 15 November 7 Event Annual General Meeting Q1 Earnings Release / Interim Report First Quarter 2024 H1 Earnings Release / Interim Report First Half 2024 Q3 Earnings Release / Interim Report Third Quarter 2024 All dates are subject to NASDAQ deadlines and reporting requirements and are subject to change Jefferies Kempen Lucy Codrington Suzanne van Voorthuizen Morgan Stanley Charlie Mabbutt Nordea SEB Michael Novod Neshat Ahmadi Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 68 Annex: Recommendations on Corporate Governance For the financial year of 2023, Zealand is subject to the Recommendations for Good Corporate Governance from 2 December 2020, which are available on the Committee on Corporate Governance's website https:// corporategover nance.dk/. The following table indicates whether Zealand complies with the recommendations of the Committee on Corporate Governance. In line with the ‘comply or explain’ principle, Zealand has provided explanations if recom- mendations are not fully complied with. Zealand complies with the Recommendations on Corporate Governance in all material respects, with notes on those areas where it has chosen to depart from those recommendations set out below. Zealand has chosen to depart or had provided explanations in respect of the following areas of the Recommendations: 1.1.2. The Committee recommends that the company adopts policies on the company’s relationships with its shareholders. 2.1.1. The Committee recommends that the board of directors, in support of the company’s statutory objects according to its articles of association and the long-term value creation, considers the company’s purpose and ensures and promotes a good culture and sound values in the company. The company should provide an account thereof in the management commentary and/or on the company's website. 3.1.2. The Committee recommends that the board of directors on an annual basis discusses the company’s activities to ensure relevant diversity at the different management levels of the company and adopts a diversity policy, which is included in the management commentary and/or available on the company's website. This corporate governance statement has been approved by the Board of Directors on February 26, 2023 Find out more about Zealand at Complies zealandpharma.com/corporate-governance/ Not compliant Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 69 Recommendation 1. Interaction with the company’s shareholders, investors and other stakeholders 1.1. Communication with the company’s shareholders, investors and other stakeholders 1.1.1. The Committee recommends that the management through ongoing dialogue and interaction ensures that shareholders, investors and other stakeholders gain the relevant insight into the company's affairs, and that the board of directors obtains the possibility of hearing and including their views in its work. The company complies The company explains1 Why How 1.1.2. The Committee recommends that the company adopts policies on the company’s relationships with its shareholders, investors and if relevant other stakeholders in order to ensure that the various interests are included in the company’s considerations and that such policies are made available on the company’s website. Given the size of Zealand a formal policy is not felt to be required. Zealand has regular contact with its key investors and shareholder representatives to ensure alignment. As the company grows further consideration will be given to a formal policy on engagement. 1.1.3. The Committee recommends that the company publishes quarterly reports. 1.2. The general meeting 1.2.1. The Committee recommends that the board of directors organises the company’s general meeting in a manner that allows shareholders, who are unable to attend the meeting in person or are represented by proxy at the general meeting, to vote and raise questions to the management prior to or at the general meeting. The Committee recommends that the board of directors ensures that shareholders can observe the general meeting via webcast or other digital transmission. 1.2.2. The Committee recommends that proxies and postal votes to be used at the general meeting enable the shareholders to consider each individual item on the agenda. 1.3. Takeover bids 1.3.1. The Committee recommends that the company has a procedure in place in the event of takeover bids, containing a “road map” covering matters for the board of directors to consider in the event of a takeover bid, or if the board of directors obtains reasonable grounds to suspect that a takeover bid may be submitted. In addition, it is recommended that it appears from the procedure that the board of directors abstains from countering any takeover bids by taking actions that seek to prevent the shareholders from deciding on the takeover bid, without the approval of the general meeting. Zealand Pharma ∞ Annual Report 2023 Contents The big picture Our business Sustainability Corporate governance Financial statements 70 The company complies The company explains1 Why How Recommendation 1.4. Corporate Social Responsibility 1.4.1. The Committee recommends that the board of directors adopts a policy for the company’s corporate social responsibility, including social responsibility and sustainability, and that the policy is available in the management commentary and/or on the company’s website. The Committee recommends that the board of directors ensures compliance with the policy. 1.4.2. The Committee recommends that the board of directors adopts a tax policy to be made available on the company’s website. 2. The duties and responsibilities of the board of directors 2.1. Overall tasks and responsibilities 2.1.1. The Committee recommends that the board of directors in support of the company’s statutory objects according to its articles of association and the long-term value creation considers the company’s purpose and ensures and promotes a good culture and sound values in the company. The company should provide an account thereof in the management commentary and/or on the company's website. The company has a formal staff engagement survey that is provided to the Board every year. The company will work with advisors to work on additional areas to develop this new requirement. 2.1.2. The Committee recommends that the board of directors at least once a year discusses and on a regular basis follows up on the company’s overall strategic targets in order to ensure the value creation in the company. 2.1.3. The Committee recommends that the board of directors on a continuous basis takes steps to examine whether the company’s share and capital structure supports the strategy and the long-term value creation in the interest of the company as well as the shareholders. The Committee recommends that the company gives an account thereof in the management commentary. 2.1.4. The Committee recommends that the board of directors prepares and on an annual basis reviews guidelines for the executive management, including requirements in respect of the reporting to the board of directors. 2.2. Members of the board of directors 2.2.1. The Committee recommends that the board of directors, in addition to a chairperson, appoints a vice chairperson, who can step in if the chairperson is absent and who can generally act as the chairperson’s close sparring partner. Zealand Pharma ∞ Annual Report 2023 Contents The big picture Our business Sustainability Corporate governance Financial statements 71 Recommendation 2.2.2. The Committee recommends that the chairperson in cooperation with the individual members of the board of directors ensures that the members up-date and supplement their knowledge of relevant matters, and that the members’ special knowledge and qualifications are applied in the best possible manner. 2.2.3. The Committee recommends that if the board of directors, in exceptional cases, requests a member of the board of directors to take on special duties for the company, for instance, for a short period to take part in the daily management of the company, the board of directors should approve this in order to ensure that the board of directors maintains its independent overall management and control function. It is recommended that the company publishes any decision on allowing a member of the board of directors to take part in the daily management, including the expected duration thereof. 3. The composition, organisation and evaluation of the board of directors 3.1. Composition 3.1.1. The Committee recommends that the board of directors on an annual basis reviews and in the management commentary and/or on the company’s website states • which qualifications the board of directors should possess, collectively and individually, in order to perform its duties in the best possible manner, and • the composition of and diversity on the board of directors. 3.1.2. The Committee recommends that the board of directors on an annual basis discusses the company’s activities in order to ensure relevant diversity at the different management levels of the company and adopts a diversity policy, which is included in the management commentary and/or available on the company's website. 3.1.3. The Committee recommends that candidates for the board of directors are recruited based on a thorough process approved by the board of directors. The Committee recommends that in assessing candidates for the board of directors – in addition to individual competencies and qualifications – the need for continuity, renewal and diversity is also considered. The company complies The company explains1 Why How The Board is attentive to the issue of diversity and regards this as an area of focus next year In 2024, we plan to formalize and communicate our diversity and inclusion policy. Zealand Pharma ∞ Annual Report 2023 Contents The big picture Our business Sustainability Corporate governance Financial statements 72 The company complies The company explains1 Why How Recommendation 3.1.4. The Committee recommends that the notice convening general meetings, where election of members to the board of directors is on the agenda - in addition to the statutory items - also includes a description of the proposed candidates’ • qualifications, • other managerial duties in commercial undertakings, including board committees, • demanding organisational assignments and • independence. 3.1.5. The Committee recommends that members to the board of directors elected by the general meeting stand for election every year at the annual general meeting, and that the members are nominated and elected individually. 3.2. The board of director’s independence 3.2.1. The Committee recommends that at least half of the members of the board of directors elected in general meeting are independent in order for the board of directors to be able to act independently avoiding conflicts of interests. In order to be independent, the member in question may not: • be or within the past five years have been a member of the executive management or an executive employee in the company, a subsidiary or a group company, • within the past five years have received large emoluments from the company/group, a subsidiary or a group company in another capacity than as member of the board of directors, • represent or be associated with a controlling shareholder, • within the past year have had a business relationship (e.g. personally or indirectly as a partner or an employee, shareholder, customer, supplier or member of a governing body in companies with similar relations) with the company, a subsidiary or a group company, which is significant for the company and/or the business relationship, • be or within the past three years have been employed with or a partner in the same company as the company’s auditor elected in general meeting, • be a CEO in a company with cross-memberships in the company’s management, • have been a member of the board of directors for more than twelve years, or • be closely related to persons, who are not independent, cf. the above-stated criteria. Even if a member of the board of directors does not fall within the above-stated criteria, the board of directors may for other reasons decide that the member in question is not independent. 3.2.2. The Committee recommends that members of the executive management are not members of the board of directors and that members retiring from the executive management does not join the board of directors immediately thereafter. Zealand Pharma ∞ Annual Report 2023 Contents The big picture Our business Sustainability Corporate governance Financial statements 73 The company complies The company explains1 Why How Recommendation 3.3. Members of the board of directors and the number of other managerial duties 3.3.1. The Committee recommends that the board of directors and each of the members on the board of directors, in connection with the annual evaluation, cf. recommendation 3.5.1., assesses how much time is required to perform the board duties. The aim is for the individual member of the board of directors not to take on more managerial duties than the board member in question is able to perform in a satisfactory manner. 3.3.2. The Committee recommends that the management commentary, in addition to the statutory requirements, contains the following information on the individual members of the board of directors: • position, age and gender, • competencies and qualifications relevant to the company, • independence, • year of joining the board of directors, • year of expiry of the current election period, • participation in meetings of the board of directors and committee meetings, • managerial duties in other commercial undertakings, including board committees, and demanding organisational assignments, and • the number of shares, options, warrants, etc. that the member holds in the company and its group companies and any changes in such holdings during the financial year. 3.4. Board committees 3.4.1. The Committee recommends that that the management describes in the management commentary: • the board committees’ most significant activities and number of meetings in the past year, and • the members on the individual board committees, including the chairperson and the independence of the members of the committee in question. In addition, it is recommended that the board committees’ terms of reference are published on the company’s website. 3.4.2. The Committee recommends that board committees solely consist of members of the board of directors and that the majority of the members of the board committees are independent. Zealand Pharma ∞ Annual Report 2023 Contents The big picture Our business Sustainability Corporate governance Financial statements 74 The company complies The company explains1 Why How Recommendation 3.4.3. The Committee recommends that the board of directors establishes an audit committee and appoints a chairperson of the audit committee, who is not the chairperson of the board of directors. The Committee recommends that the audit committee, in addition to its statutory duties, assists the board of directors in: • supervising the correctness of the published financial information, including accounting practices in significant areas, significant accounting estimates and related party transactions, • reviewing internal control and risk areas in order to ensure management of significant risks, including in relation to the announced financial outlook, • assessing the need for internal audit, • performing the evaluation of the auditor elected by the general meeting, • reviewing the auditor fee for the auditor elected by the general meeting, • supervising the scope of the non-audit services performed by the auditor elected by the general meeting, and • ensuring regular interaction between the auditor elected by the general meeting and the board of directors, for instance, that the board of directors and the audit committee at least once a year meet with the auditor without the executive management being present. If the board of directors, based on a recommendation from the audit committee, decides to set up an internal audit function, the audit committee must: • prepare terms of reference and recommendations on the nomination, employment and dismissal of the head of the internal audit function and on the budget for the department, • ensure that the internal audit function has sufficient resources and competencies to perform its role, and • supervise the executive management’s follow-up on the conclusions and recommendations of the internal audit function. Zealand Pharma ∞ Annual Report 2023 Contents The big picture Our business Sustainability Corporate governance Financial statements 75 The company complies The company explains1 Why How Recommendation 3.4.4. The Committee recommends that the board of directors establishes a nomination committee to perform at least the following preparatory tasks: • describing the required qualifications for a given member of the board of directors and the executive management, the estimated time required for performing the duties of this member of the board of directors and the competencies, knowledge and experience that is or should be represented in the two management bodies, • on an annual basis evaluating the board of directors and the executive management’s structure, size, composition and results and preparing recommendations for the board of directors for any changes, • in cooperation with the chairperson handling the annual evaluation of the board of directors and assessing the individual management members’ competencies, knowledge, experience and succession as well as reporting on it to the board of directors, • handling the recruitment of new members to the board of directors and the executive management and nominating candidates for the board of directors' approval, • ensuring that a succession plan for the executive management is in place, • supervising executive managements’ policy for the engagement of executive employees, and • supervising the preparation of a diversity policy for the board of directors’ approval. 3.4.5. The Committee recommends that the board of directors establishes a remuneration committee to perform at least the following preparatory tasks: • preparing a draft remuneration policy for the board of directors’ approval prior to the presentation at the general meeting, • providing a proposal to the board of directors on the remuneration of the members of the executive management, • providing a proposal to the board of directors on the remuneration of the board of directors prior to the presentation at the general meeting, • ensuring that the management’s actual remuneration complies with the company’s remuneration policy and the evaluation of the individual member’s performance, and • assisting in the preparation of the annual remuneration report for the board of directors’ approval prior to the presentation for the general meeting's advisory vote. Zealand Pharma ∞ Annual Report 2023 Contents The big picture Our business Sustainability Corporate governance Financial statements 76 The company complies The company explains1 Why How Recommendation 3.5. Evaluation of the board of directors and the executive management 3.5.1. The Committee recommends that the board of directors once a year evaluates the board of directors and at least every three years engages external assistance in the evaluation. The Committee recommends that the evaluation focuses on the recommendations on the board of directors’ work, efficiency, composition and organisation, cf. recommendations 3.1.-3.4. above, and that the evaluation as a minimum always includes the following topics: • the composition of the board of directors with focus on competencies and diversity • the board of directors and the individual member’s contribution and results, • the cooperation on the board of directors and between the board of directors and the executive management, • the chairperson’s leadership of the board of directors, • the committee structure and the work in the committees, • the organisation of the work of the board of directors and the quality of the material provided to the board of directors, and • the board members’ preparation for and active participation in the meetings of the board of directors. 3.5.2. The Committee recommends that the entire board of directors discusses the result of the evaluation of the board of directors and that the procedure for the evaluation and the general conclusions of the evaluation are described in the management commentary, on the company’s website and at the company’s general meeting. 3.5.3. The Committee recommends that the board of directors at least once a year evaluates the work and results of the executive management according to pre-established criteria, and that the chairperson reviews the evaluation together with the executive management. In addition, the board of directors should on a continuous basis assess the need for changes in the structure and composition of the executive management, including in respect of diversity, succession planning and risks, in light of the company’s strategy. Zealand Pharma ∞ Annual Report 2023 Contents The big picture Our business Sustainability Corporate governance Financial statements 77 Recommendation 4. Remuneration of management 4.1. Remuneration of the board of directors and the executive management 4.1.1. The Committee recommends that the remuneration for the board of directors and the executive management and the other terms of employment/service is considered competitive and consistent with the company's long-term shareholder interests. 4.1.2. The Committee recommends that share-based incentive schemes are evolving, i.e., that they are periodically granted, and that they primarily consist of long-term schemes with a vesting or maturity period of at least three years. 4.1.3. The Committee recommends that the variable part of the remuneration has a cap at the time of grant, and that there is transparency in respect of the potential value at the time of exercise under pessimistic, expected and optimistic scenarios. 4.1.4. The Committee recommends that the overall value of the remuneration for the notice period, including severance payment, in connection with a member of the executive management’s departure, does not exceed two years’ remuneration including all remuneration elements. 4.1.5. The Committee recommends that members of the board of directors are not remunerated with share options and warrants. 4.1.6. The Committee recommends that the company has the option to reclaim, in whole or in part, variable remuneration from the board of directors and the executive management if the remuneration granted, earned or paid was based on information, which subsequently proves to be incorrect, or if the recipient acted in bad faith in respect of other matters, which implied payment of a too large variable remuneration. The company complies The company explains1 Why How This system of renumeration ensures that the members of the Board are working in the shareholders interest and increasing shareholder value. Members of the Board have chosen to forgo some of their cash based renumeration and receive restricted stock units (RSUs) rather than the cash. The cash based renumeration was therefore reduced and substituted with RSUs to a fixed amount dependent on the Board members position and committee involvement. Zealand Pharma ∞ Annual Report 2023 Contents The big picture Our business Sustainability Corporate governance Financial statements 78 Recommendation 5. Risk management 5.1. Identification of risks and openness in respect of additional information 5.1.1. The Committee recommends that the board of directors based on the company's strategy and business model considers, for instance, the most significant strategic, business, accounting and liquidity risks. The company should in the management commentary give an account of these risks and the company’s risk management. 5.1.2. The Committee recommends that the board of directors establishes a whistle-blower scheme, giving the employees and other stakeholders the opportunity to report serious violations or suspicion thereof in an expedient and confidential manner, and that a procedure is in place for handling such whistleblower cases. The company complies The company explains1 Why How Zealand Pharma ∞ Annual Report 2023 Financial Statements Contents The big picture Our business Sustainability Corporate governance Financial statements 79 Financial statements Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 80 Consolidated financial statements Statement of loss Statement of comprehensive loss Statement of financial position Statement of cash flows Statement of changes in equity Notes 81 81 82 83 83 84 Zealand Pharma ∞ Annual Report 2023Statement of loss Statement of loss Statement of comprehensive loss Statement of comprehensive loss Contents The big picture Our business Sustainability Corporate governance Financial statements 81 Consolidated financial statements Consolidated statement of loss for the years ended December 31, 2023 and 2022 Consolidated statement of comprehensive loss for the years ended December 31, 2023 and 2022 DKK thousand Revenue Royalty expenses Cost of goods sold Gross profit Research and development expenses Sales and marketing expenses General and administrative expenses Other operating income Other operating expenses Net operating expenses Operating result Financial income Financial expenses Result before tax Corporate tax Net result for the year from continuing operations Net result for the year from discontinued operations Net result for the year Loss per share from continuing operations, basic/diluted (DKK) Loss per share from discontinued operations, basic/diluted (DKK) Loss per share, basic/diluted (DKK) Note 2023 2022 DKK thousand 103,986 Net result for the year Other comprehensive income Items that will be reclassified to income statement when certain conditions are met (net of tax): Exchange differences on translation of foreign operations Total comprehensive result for the year Note 2023 2022 -703,739 -1,202,135 8,087 462 -695,652 -1,201,673 2.1 2.3 2.4 2.5 2.6 2.7 2.9 2.9 4.7 4.7 342,788 -9,138 -10,036 323,614 - - 103,986 -684,902 -614,044 -30,627 -32,298 -185,302 -237,210 15,979 -11,000 - -57,587 -895,852 -941,139 -572,238 -837,153 54,115 133,270 -190,742 -268,158 -708,865 -972,041 5.1 5,126 6,431 -703,739 -965,610 2.10 2.11 2.11 2.11 - -236,525 -703,739 -1,202,135 -12.44 - -12.44 -20.90 -5.12 -26.02 Zealand Pharma ∞ Annual Report 2023Statement of financial position Statement of financial position Contents The big picture Our business Sustainability Corporate governance Financial statements 82 Consolidated financial statements Consolidated statement of financial position as of December 31, 2023 and 2022 DKK thousand Assets Intangible assets Property, plant and equipment Right-of-use assets Other investments Deferred tax assets Other receivables Other financial assets Total non-current assets Inventory Trade and other receivables Corporate tax receivable Marketable securities Cash and cash equivalents (subject to certain conditions) Cash and cash equivalents Total current assets Total assets Note 2023 2022 DKK thousand Share capital - Share premium 3.1 3.2 3.3 3.4 5.1 3.6 3.7 3.5 3.6 5.1 4.5 4.4 4.4 12,255 47,047 102,805 14,004 925 15,794 7,375 50,528 114,960 30,943 2,017 18,105 6,901 200,205 223,454 7,935 122,359 16,437 1,183,746 - 449,311 1,286 115,622 21,599 108,611 348,608 720,626 1,779,788 1,316,352 1,979,993 1,539,806 Currency translation reserve Retained losses Total shareholders' equity Other payables Borrowings including embedded derivatives Lease liabilities Total non-current liabilities Lease liabilities Trade and other payables Total current liabilities Total liabilities Total shareholders' equity and liabilities Note 2023 2022 4.8 58,751 51,702 6,406,225 4,921,232 22,704 14,617 -4,894,841 -4,171,640 1,592,839 815,911 - - 102,575 102,575 16,655 267,924 284,579 19,058 401,346 108,000 528,404 14,729 180,762 195,491 387,154 723,895 1,979,993 1,539,806 3.8 4.6 3.3 3.3 3.8 Zealand Pharma ∞ Annual Report 2023 Statement of cash flows Statement of cash flows Statement of changes in equity Statement of changes in equity Contents The big picture Our business Sustainability Corporate governance Financial statements 83 Consolidated financial statements Consolidated statement of cash flows for the years ended December 31, 2023 and 2022 Consolidated statement of changes in shareholders' equity at December 31, 2023 and 2022 DKK thousand Note 2023 2022 DKK thousand Share capital *Share premium Currency translation reserve *Retained losses Total Net result for the year Adjustment for other non-cash items Changes in working capital Financial income received Financial expenses paid Corporate taxes received Cash flow used in operating activities Proceeds from sale of marketable securites Purchase of marketable securities Purchase of intangible assets Purchase of property, plant and equipment Divestment of activities Cash flow from/(used in) investing activities Repayment of borrowings Lease installments Proceeds from issuance of shares Purchase of treasury shares Proceeds from issuance of shares related to exercise of share- based compensation Costs related to issuance of shares Cash flow from financing activities Decrease in cash and cash equivalents Cash and cash equivalents at beginning of year Exchange rate adjustments Cash and cash equivalents at end of year 6.6 6.6 2.10 4.6 3.3 4.8 -703,739 202,033 52,103 37,887 -25,252 11,300 -425,668 -1,202,135 269,332 10,161 5,178 -34,124 9,277 -942,311 1,089,547 -2,159,831 -12,508 -11,241 - -1,094,033 -525,764 -17,664 1,500,000 -41,600 63,950 -71,908 907,014 -612,686 1,069,234 -7,237 449,311 887,060 -700,477 - -11,710 106,386 281,259 -436,088 -13,719 1,052,757 - 31,904 -47,354 587,500 -73,552 1,129,103 13,683 1,069,234 Equity at January 1, 2023 51,702 4,921,232 14,617 -4,171,640 815,911 Other comprehensive income for the year Net result for the year Purchase of treasury shares Net settlement of PSUs Net settlement of RSUs Exercise of warrants Share-based compensation expenses Capital increases Costs related to capital increases - - - - - - - - - - 470 - 63,480 - 6,579 1,493,421 - -71,908 8,087 - - - - - - - - - -703,739 -81,045 66 91 - 61,426 - - 8,087 -703,739 -81,045 66 91 63,950 61,426 1,500,000 -71,908 Equity at December 31, 2023 58,751 6,406,225 22,704 -4,894,841 1,592,839 Equity at January 1, 2022 43,634 3,891,993 14,155 -3,021,979 927,803 Other comprehensive income for the year Net result for the year Net settlement of PSUs Net settlement of RSUs Exercise of warrants Share-based compensation expenses - - - - 201 - - - - - 31,703 - Capital increases Costs related to capital increases 7,867 1,044,890 - -47,354 462 - 462 -1,202,135 -1,202,135 - - - - - - - 72 116 - 52,286 - - 72 116 31,904 52,286 1,052,757 -47,354 815,911 Equity at December 31, 2022 51,702 4,921,232 14,617 -4,171,640 * Other reserves of DKK 749.6 million from the 2022 Annual Report have been split into Share premium and Retained losses to ease read- ability of movements in shareholders’ equity. Zealand Pharma ∞ Annual Report 2023Notes overview Notes Contents The big picture Our business Sustainability Corporate governance Financial statements 84 Consolidated financial statements Notes to the consolidated financial statements 1.0 Basis of preparation 1.1 Basis of preparation, going concern assumption, nature of the business and accounting policies 1.2 New accounting policies and disclosures 1.3 Management's judgements and estimates under IFRS 85 85 89 89 2.0 Results for the year 2.1 Revenue 2.3 Royalty expenses 2.4 Cost of goods sold 2.5 Research and development expenses 2.6 Selling and marketing expenses 2.7 General and administrative expenses 2.8 Staff costs 2.9 Other operating items 2.10 Discontinued operations 2.11 Earnings per share 4.0 Capital structure, financial risk and related items 111 5.0 Tax 5.1 Corporate tax 4.1 Capital management 4.2 Financial risks 4.3 Financial assets and liabilities 4.4 Cash and cash equivalents 4.5 Marketable securities 4.6 Borrowings 4.7 Financial items 4.8 Share capital 4.9 Share-based instruments 111 112 115 117 117 118 124 125 126 91 91 95 95 96 97 97 98 98 99 101 130 130 3.0 Operating assets and liabilities 3.1 Intangible assets 3.2 Property, plant and equipment 3.3 Right-of-use assets and lease liabilities 3.4 Other investments 3.5 Inventories 3.6 Trade and other receivables 3.7 Other financial assets 3.8 Trade and other payables 6.0 Other disclosures 102 102 104 106 108 108 109 110 110 133 6.1 Remuneration of the Board of Directors and Executive Management 133 6.2 Fees to auditors appointed at the annual general meeting 135 6.3 Contingent assets and liabilities 6.4 Commitments 6.5 Related parties 6.6 Cash flow adjustments 6.7 Collaborations and technology licenses 135 135 135 136 136 Zealand Pharma ∞ Annual Report 20231 Basis of preparation Contents The big picture Our business Sustainability Corporate governance Financial statements 85 1.0 Basis of preparation 1.1 Basis of preparation, going concern assumption, nature of the business and accounting policies 1.2 New accounting policies and disclosures 1.3 Management's judgements and estimates under IFRS 85 89 89 1.1 Basis of preparation, going concern assumption, nature of the business and accounting policies Basis of preparation These consolidated financial statements include Zealand Pharma A/S (the parent company) and subsidi- aries over which the parent company has control. The Zealand consolidated Group is referenced herein as "Zealand" or the "Group". This section describes Zealand's material financial accounting policies including Management's judgements and estimates. New or revised EU endorsed accounting standards and interpretations are described, in addition to how these changes are expected to impact the financial performance and reporting of Zealand. Accounting policies The consolidated financial statements have been prepared in accordance with IFRS® Accounting Standards as adopted by the EU and additional requirements of the Danish Financial Statements Act (class D). The consolidated financial statements were approved by the Board of Directors and author- ized for issue on February 26, 2024. Except as outlined in note 1.2 New accounting policies and disclo- sures, the financial statements have been prepared using the same accounting policies as in previous years. Zealand describes material accounting policy information in conjunction with each note with the aim to provide a more understandable description of each accounting area. IAS 1 Presentation of Financial Statements - Disclosure of Accounting policies The amendments to IAS 1 replace the requirement to disclose significant accounting policies with a requirement to disclose material accounting policy information. Zealand has adapted the amended standard for the annual report for the financial year January 1 - December 31, 2023. As an effect Zealand only discloses accounting policies if: • A choice of accounting policy is permitted by the IFRS accounting standard, • It is needed to provide context for a change of accounting policy that had a material effect on the information in the financial statements, • It is needed to provide context to significant judgements and estimates, • The required accounting (recognition, measurement, presentation, disclosure) is complex and users would otherwise not understand the material transaction, event, or condition, or • There are other qualitative factors that make the accounting policy information material. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 86 Notes to the Consolidated financial statements 1.1 Basis of preparation, going concern assumption, nature of the business and accounting policies (continued) The adoption of the above mentioned amendments did not have a material impact on the financial statements as of December 31, 2023. requirements for at least 12 months from the December 31, 2023 balance sheet date. Following the capital increase in January 2024 the Group received gross proceeds of DKK 1.45 billion. Going concern assessment The Company's strategy to prioritize research and development allows the Company to focus on the research and development of innovative peptide-based medicines and leverage its peptide platform through strategic collaborations. Until such time where the Company becomes able to generate positive cash-flows from its operations, additional funding is expected to be necessary to fund future research and development activities. Therefore, the Company may raise additional funds through either public financing, debt financing, collaboration agreements, strategic alliances and licensing arrangements, or a combination of such. Management’s judgement and assessment of the Company’s ability to continue as a going concern includes evaluation of the Company's operational cash-flow requirements for the forthcoming 12 months from the balance sheet date and future sources and uses of cash. Management has assessed factors such as its product pipeline, cash position, planned research and development activities, current license and collaboration agreements, undrawn borrowing facilities and financing opportunities. Management expects that the Company's cash and cash equivalents as of December 31, 2023, will be sufficient to fund the Company's research and development activities as planned and capital On this basis, these consolidated financial statements are prepared using the going concern assumption. Nature of the Business Zealand is a biotechnology company focused on the discovery and development of innovative peptide- based medicines. More than 10 drug candidates invented by Zealand have advanced into clinical devel- opment, of which two have reached the market. The Company has development partnerships with a number of pharma companies as well as commercial partnerships for its marketed products. Zealand Pharma A/S, founded in 1998, is incorporated in Denmark and headquartered in Copenhagen, Denmark with a presence in the U.S. Materiality Zealand's Annual Report is based on the concept of materiality and the Company focuses on informa- tion that is considered material and relevant to the users of the consolidated financial statements. The consolidated financial statements consist of a large number of transactions. These transactions are aggregated into classes according to their nature or function and presented in classes of similar items in the consolidated financial statements as required by IFRS and the Danish Financial Statements Act. If Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 87 Notes to the Consolidated financial statements 1.1 Basis of preparation, nature of the business and accounting policies (continued) items are individually immaterial, they are aggregated with other items of similar nature in the financial statements or in the notes. intercompany receivables and payables, and unrealized gains and losses on transactions between the consolidated companies are eliminated. Consolidated Financial Statements The consolidated financial statements include Zealand A/S and subsidiaries over which the parent company has control. The parent controls a subsidiary when the parent is exposed to, or has rights to, variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power to direct the activities of the subsidiary. Zealand's consolidated financial statements have been prepared on the basis of the financial statements of the parent company and subsidiaries, prepared under Zealand's accounting policies by combining similar accounting items on a line-by-line basis. On consolidation, intercompany income and expenses, The recorded value of the equity interests in the consolidated subsidiaries is eliminated with the propor- tionate share of the subsidiaries' equity. Subsidiaries are consolidated from the date when control is transferred to the Group. The income statements for subsidiaries with a different functional currency than Zealand's presenta- tion currency, are translated into Zealand's presentation currency at average exchange rates, and the balance sheets are translated at the exchange rate in effect at the balance sheet date. Exchange rate differences arising from the translation of foreign subsidiaries shareholders' equity at the beginning of the year and exchange rate differences arising as a result of foreign subsidiaries' income Zealand Pharma A/S Ultimate parent Domicile: Denmark ZP SPV 3 K/S Domicile: Denmark Ownership: 100% Voting rights: 100% ZP General Partner 3 Domicile: Denmark Ownership: 100% Voting rights: 100% ZP Holding SPV K/S Domicile: Denmark Ownership: 100% Voting rights: 100% ZP General Partner 1 ApS Domicile: Denmark Ownership: 100% Voting rights: 100% Zealand Pharma U.S., Inc. Domicile: United States Ownership: 100% Voting rights: 100% ZP General Partner 2 ApS Domicile: Denmark Ownership: 100% Voting rights: 100% ZP SPV 1 K/S Domicile: Denmark Ownership: 100% Voting rights: 100% Zealand Pharma California US, LLC. Domicile: United States Ownership: 100% Voting rights: 100% Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 88 Notes to the Consolidated financial statements 1.1 Basis of preparation, nature of the business and accounting policies (continued) statements being translated at average exchange rates are recorded in translation reserves in share- holders' equity. Cash and cash equivalents are comprised of cash, bank deposits, and marketable securities with a maturity of less than ninety days on the date of acquisition. Functional and Presentation Currency The consolidated financial statements have been prepared in Danish Kroner (DKK), which is the func- tional and presentation currency of the parent company. Foreign Currency Transactions in foreign currencies are translated at the exchange rates in effect at the date of the transaction. Exchange rate gains and losses arising between the transaction date and the settlement date are recog- nized in the income statement as financial income or expense. Unsettled monetary assets and liabilities in foreign currencies are translated at the exchange rates in effect at the balance sheet date. Exchange rate gains and losses arising between the transaction date and the balance sheet date are recognized in the income statement as financial income or expense. The statements of cash flows cannot be derived solely from the consolidated financial statements. ESEF and iXBRL reporting Zealand Pharma is required to file its annual report in ESEF format, and the annual report is therefore prepared in compliance with the Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regulation) which includes requirements related to the preparation of the annual report in XHTML format. The consolidated financial statements are tagged using inline eXtensible Business Reporting Language (iXBRL). The iXBRL tags comply with the ESEF taxonomy, which is included in the ESEF Regulation and developed based on the IFRS taxonomy published by the IFRS Foundation. Where a financial statement line item is not defined in the ESEF taxonomy, an exten- sion to the taxonomy has been created. Extensions are anchored to elements in the ESEF taxonomy, except for extensions which are subtotals. The Annual Report submitted to the Danish Financial Supervisory Authority consists of the XHTML document together with certain technical files, all included in a file named 549300ITBB1ULBL4CZ12-2023-12-31-en.zip Statements of Cash Flows The cash flow statement is presented using the indirect method. Cash flows from operating activities are stated as the net result for the year adjusted for net financial items, non-cash operating items such as depreciation, amortization, impairment losses, share-based compensation expenses, provisions, and for changes in operating assets and liabilities, interest paid and received, interest elements of lease payments and corporate taxes paid or received. Operating assets and liabilities are mainly comprised of changes in receivables and other payables excluding the items included in cash and cash equivalents. Changes in non-current assets and liabilities are included in operating assets and liabilities, if related to the main revenue-producing activities of Zealand. Cash flows from investing activities consist of purchases and sales of marketable securities and other investments, as well as purchases of intangible assets and property and equipment. Cash flows from financing activities relate to the issuance of shares, purchase of treasury shares and payments of loans including installments on lease liabilities. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 89 Notes to the Consolidated financial statements 1.2 New accounting policies and disclosures 1.3 Management's judgements and estimates under IFRS Implementation of new and revised standards and interpretations Zealand has, with effect from January 1, 2023, applied and implemented the following new standards and amendments, which are relevant for Zealand: • Amendments to IAS 1 Presentation of Financial Statements and to the IFRS Practice Statement 2 (PS2) Making Materiality Judgements. • Amendment to IAS 8 Accounting Policies, Changes in Accounting Estimates and Error relating to the definition of Accounting Estimates • Amendments to IAS 12 Income taxes relating to (i) deferred tax related to assets and liabilities arising from a single transaction and (ii) the International Tax Reform – Pillar Two Model Rules The implementation of the above new and revised standards and amendments did not have any mate- rial impact on amounts recognized in current and prior periods and is not expected to have a material impact in the current or future reporting periods. Standards and interpretations not yet effective The IASB has issued a number of new standards and updated some existing standards, which are effec- tive for accounting periods beginning on January 1, 2024, or later. Therefore, they are not incorporated in these consolidated financial statements. There are no standards presently known that are not yet effective and that would be expected to have a material impact on Zealand in current or future reporting periods and on foreseeable future transactions. In preparing consolidated financial statements under IFRS, certain provisions in the standards require Management's judgements, including various accounting estimates and assumptions. These judge- ments and estimates affect the application of accounting policies, as well as reported amounts within the consolidated financial statements and disclosures. Determining the carrying amount of certain assets and liabilities requires judgements, estimates and assumptions concerning future events that are based on historical experience and other factors, which by their very nature are associated with uncertainty and unpredictability. Accounting estimates are based on historical experience and various other factors relative to the circumstances in which they are applied. Estimates are generally made based on information available at the time. An example would include Management's estimation of useful lives of intangible assets. Accounting judgements are made in the process of applying accounting policies. These judgements are typically made based on the guidance and information available at the time of application. Examples would include Management's judgements utilized in determining revenue recognition. These estimates and judgements may prove incomplete or incorrect, and unexpected events or circum- stances may arise. Zealand is also subject to risks and uncertainties which may lead actual results to differ from these estimates, both positively and negatively. Specific risks for Zealand are discussed in the relevant section of this Annual Report and in the notes to the consolidated financial statements. New accounting policy for software In 2023, Zealand has adopted a new accounting policy on capitalization of implementation costs on IT projects due to a new type of transactions. On initial recognition they are measured at cost and include configuration and customization of the underlying software, including training and testing. Refer to note 3.1 Intangible assets for additional information. The areas involving a high degree of judgement and estimation that at the end of the reporting period have a significant risk of resulting in material adjustment to the carrying amount of assets and liabilities within the next financial year are summarized below. Refer to the identified notes for further informa- tion on the key accounting estimates and judgements utilized in the preparation of these consolidated financial statements. Climate change In preparing the consolidated financial statements, Management has considered the impact of climate change, particularly in the context of the Group’s sustainability targets. Zealand Pharma targets to minimize and mitigate the climate impact by continuously evaluating and implementing initiatives that can reduce any negative impact on the environment from the Group’s operations. These considerations did not have a material impact on Management’s judgements and estimates, consistent with the assessment that climate change is not expected to have a significant impact on the Group’s future cash flows, the carrying amount of non-current assets, or going concern assessment. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 90 Notes to the Consolidated financial statements 1.3 Management's judgements and estimates under IFRS (continued) Key accounting estimates and judgements Note reference Estimation risk Accounting topic Revenue recognition Judgement in assessing the nature of combined performance obligations within contracts Judgement in assessing the probability of attainment of milestones Estimation of stand-alone selling price for each identified performance obligation Share-based compensation Judgement in determining assumptions required for valuation of warrant grants Inventory Deferred taxes Estimate of instruments expected to vest Estimate of net realizable value of Zegalogue® raw materials Judgement and estimate regarding valuation of deferred income tax assets Capitalization of research and development costs Judgement involved in determining when a development project reached technological feasibility Going concern assumption Discontinued operations Judgement in assessing operational cashflow and capital requirements for the forthcoming 12 months from the balance sheet date Judgements exercised by Management in applying IFRS 5 as a result of the divestment of the US sales activities, including the V-GO activity and the transfer of the commercial rights for Zegalogue® Accrual of costs for clinical contracts Estimate on allocation of total contract costs between start-up, patient treatment and wrap-up phases for clinical trials including estimate of value for expected change orders. Right-of-use assets Estimate in assessing the recoverable amount under the finance lease agreement for the US Boston office 2.1 4.9 3.5 5.1 3.1 1.1 2.10 2.5 3.3 Moderate Low Moderate Moderate Moderate Low Low Low Low Moderate Low Low Zealand Pharma ∞ Annual Report 20232 Results for the year Contents The big picture Our business Sustainability Corporate governance Financial statements 91 2.0 Results for the year This section includes disclosures related to the consolidated statement of loss. A detailed description of the results for the year is provided in the Financial Review section in the Management’s Review. 2.1 Revenue 2.2 Information about geographic areas 2.3 Royalty expenses 2.4 Cost of goods sold 2.5 Research and development expenses 2.6 Selling and marketing expenses 2.7 General and administrative expenses 2.8 Staff costs 2.9 Other operating items 2.10 Discontinued operations 2.11 Earnings per share 91 95 95 95 96 97 97 98 98 99 101 2.1 Revenue Accounting policies Zealand recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that Zealand determines are within the scope of IFRS 15, Zealand performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. Zealand only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of IFRS 15, Zealand assesses the goods and services promised within each contract and identifies as a performance obligation each good or service that is distinct. Revenue is recognized in the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Milestone revenue At the inception of each arrangement that includes milestone payments, Zealand evaluates whether the achievement of milestones is considered highly probable and estimates the amount to be included in the transaction price using the most likely amount method. If it is highly probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of Zealand or the license and collaboration partner, such as milestones conditioned of regulatory approvals, are not considered probable of being achieved until such regulatory approvals are received. The transaction price is then allocated to each perfor- mance obligation on a relative stand-alone selling price basis, for which Zealand recognizes revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, Zealand re-evaluates the probability of achievement of such milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjust- ments are recorded on a cumulative catch-up basis, which would affect revenue and earnings in the period of adjustment. License revenue for intellectual property If the license to Zealand's functional intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, Zealand recognizes revenues from non-refund- able upfront fees allocated to the license at the point in time the license is transferred to the licensee Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 92 Notes to the Consolidated financial statements 2.1 Revenue (continued) and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, Zealand utilizes judgement to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, upfront fees. Royalties Some of Zealand's license and collaboration agreements include sales-based royalties including commercial milestone payments based on the level of sales. The license has been deemed to be the predominant item to which the royalties relate under Zealand's license and collaboration agreements. As a result, Zealand recognizes revenue when the related sales occur. Reimbursement revenue for R&D services Zealand’s research and development collaboration agreements include the provisions for reimburse- ment or cost sharing for research and development services and payment for full-time equivalent employees (FTEs) at contractual rates. R&D services are performed over time given that the customer simultaneously receives and consumes the benefits provided by Zealand and revenue for research and development services is therefore recognized over time. Amount is recognized net of any passthrough cost incurred on behalf of the customer. The assessment of if a cost is incurred on behalf of the customer is made by evaluating the nature of its promise to the customer including whether the spec- ified good or service to be provided to the customer is controlled by the Company before that good or service is transferred to the customer. Product sales Revenue from sale of goods is recognized at a point in time when control of the goods is transferred to the customer and recorded net of adjustments for rebates and chargebacks, all of which are estimated at the time of sale. Management’s judgements and estimates Revenue recognition Evaluating the criteria for revenue recognition under license and collaboration agreements requires Management's judgement to assess and determine the following: • Identification of performance obligations within the contract and determine the nature of perfor- mance obligations and whether they are distinct or should be combined with other performance obligations to determine whether the performance obligations are satisfied over time or at a point in time. • Determine the transaction price, including an assessment of whether the achievement of milestone payments is highly probable. • Allocation of transaction price to performance obligations to determine the stand-alone selling price of each performance obligation identified in the contract using key assumptions which may include forecasted revenues, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 93 Notes to the Consolidated financial statements 2.1 Revenue (continued) Recognized revenue can be specified as follows for all agreements and product sales: DKK thousand Alexion Pharmaceuticals Inc. Boehringer Ingelheim International GmbH Novo Nordisk A/S Sanofi-Aventis Deutschland GmbH 2023 2022 4,094 223,725 34,149 70,784 69,027 - 34,959 - Total revenue from license and collaboration agreements 332,752 103,986 Gross product sales Sales rebates Returns and sales reductions - Hereof related to discontinued operations Sale of goods revenue from continuing operations Total revenue from continuing operations Total revenue recognized over time Total revenue recognized at a point in time from continuing operations Total revenue recognized at a point in time from discontinued operations Milestone revenue Royalty revenue Reimbursement revenue for R&D services Product sales 10,036 - - - 10,036 164,651 -69,526 -7,513 -87,612 - 342,788 103,986 38,244 304,544 - 76,181 27,805 87,612 294,509 27,805 841 37,402 10,036 - 76,181 - Total revenue by revenue stream from continuing operations 342,788 103,986 Product sales Total revenue by revenue stream from discontinued operations - - 87,612 87,612 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-mediated diseases. This agreement provided Zealand an immediate cash injection as well as further external validation of Zealand’s peptide platform. The agreement is described further in note 6.7 Collaborations and tech- nology licenses. Under the Alexion license, research and development agreement, Zealand has received an upfront non-refundable payment of USD 25 million for the Complement C3 program and a concurrent USD 15 million equity investment in Zealand at a premium to the market price. These payments have been received and recognized in revenue in prior years. 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 digit to low double digit royalty payments. Zealand is furthermore eligible to receive non-refundable upfront payments of USD 15 million each for up to three additional targets, with development and sales milestone and royalties. The non-refundable up-front fee was allocated to the combined license, research and development services, and is being recognized as revenue along with provision of the research and development services under the lead program. Expenses to provide the services are being recognized when incurred. Further, the premium over the market share price on the Zealand 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 services are provided. The remaining deferred revenue was recognized in December 2022. In 2023, the revenue of DKK 4.1 million under the Alexion agreement solely relates to compensation on a time and material basis for R&D services. Boehringer Ingelheim International GmbH agreement In June 2011, Zealand entered into a license, research and development collaboration agreement with Boehringer Ingelheim International GmbH (BI) to advance novel dual acting glucagon/GLP-1 peptide receptor agonists for the treatment of patients with type 2 diabetes and obesity. As part of the agree- ment, Boehringer obtained global development and commercialization rights to the lead drug candidate, survodutide. Boehringer funds all research, development, and commercialization activities under the agreement. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 94 Notes to the Consolidated financial statements 2.1 Revenue (continued) Under the agreement, Zealand is eligible to receive a EUR 30 million milestone payment on initiation of Phase 3 clinical trials for survodutide. In November 2023, Boehringer initiated the Phase 3 program with survodutide in patients living with obesity or overweight (SYNCHRONIZE™) that consists of three global clinical trials, which triggered the milestone payment. 85% of the payment was received in December 2023 with 15% withholding taxes that will be paid out upon approval of Zealand’s WHT exemption application. For further information about potential future milestone payments refer to note 6.7 Collaborations and technology licenses. Novo Nordisk A/S license and development agreement On September 7, 2022, Zealand announced a global license and development agreement with Novo Nordisk to commercialize Zegalogue® (dasiglucagon) for injection. Under the agreement Zealand received DKK 25 million in upfront payments and is eligible for up to DKK 45 million in development milestones and DKK 220 million in net sales-based milestones as well as compensation on a time and material basis. The agreement with Novo Nordisk is considered a contract with a customer as defined in IFRS 15. Thus, Zealand recognizes as revenue from research and development services under the collaboration agreement the amount of the transaction price that is allocated to the respective perfor- mance obligation when (or as) the performance obligation is satisfied. Within this Novo Agreement, Zealand identified five distinct performance obligations: 1. Delivery of license for Zegalogue® (completed in 2022) 2. Delivery of transitional services 3. Delivery of R&D services 4. Submission of EU marketing authorization application (completed in 2023) 5. Delivery of specified development activities The total transaction price under the agreement was determined to be DKK 55 million which includes the upfront payment of DKK 25 million and DKK 30 million of the future potential milestone amounts. While determining the transaction price to be allocated to performance obligations, Management has deemed milestones of DKK 30 million to be highly probable and unlikely that a significant revenue reversal would occur. As the remaining milestones are contingent of the occurrence of future events outside the control of the Company, such milestones will be recognized when their achievement is deemed to be highly probable and a significant revenue reversal would not occur. Royalties and net sales-based milestones under this agreement, will be recognized when the related sales occur. As Zealand is compensated on a time and material basis for delivery of transition services and R&D services as listed above, the total transaction price of DKK 55 million has been allocated to the three remaining performance obliga- tions, being the delivery of the license for Zegalogue®, services related to submission of EU marketing authorization application and delivery of specified development activities. The allocation has been based on Management’s estimate of relative stand-alone selling prices. For performance obligations in respect to services related to submission of EU marketing authorization application and delivery of specified develop- ment activities, the stand-alone selling prices have been based on internal budgets and the same time and material compensation schedules as agreed between Zealand and Novo Nordisk. The stand-alone selling price for the delivery of the license for Zegalogue® was estimated using the residual approach. The alloca- tion of the transaction price to the performance obligations not compensated on a time and material basis is summarized below: 1. Delivery of license for Zegalogue®: DKK 28 million (completed in 2022) 4. Submission of EU marketing authorization application: DKK 13 million (completed in 2023) 5. Delivery of specified development activities: DKK 14 million (ongoing) The performance obligations related to the delivery of the license for Zegalogue® were completed at a point in time (September 2022) and revenue of DKK 28 million was recognized in 2022. The submission of EU marketing authorization application has been recognized over a period of time (completed in June 2023). The revenue of DKK 13 million has been recognized with DKK 3 million in 2022 and DKK 10 million in 2023 respectively. The delivery of specified development activities are recognized over time as the activities progress. Revenue is measured based on Zealand’s estimate of actual expenses incurred while rendering the services during the period compared to planned service periods and budgeted expenses. As such, Zealand applies an input-based method (budget expenses) when determining the timing of satisfaction of performance obligations as the services related to delivery of specified development activities are performed by an indeterminate number of acts over the development timeline. Revenue from delivery of the specified development activities has been recognized with DKK 2 million in 2022 and DKK 6 million in 2023 respectively, resulting in a remaining obligation as of December 31, 2023, of DKK 6 million. Sanofi-Aventis Deutschland GmbH agreement In 2023, USD 10 million in milestone payments associated with lixisenatide were received from Sanofi. Out of the USD 10 million from Sanofi, Zealand will pay USD 1.3 million in royalty expenses to Alkermes in line with a termination agreement following the dissolution of a former joint venture with Elan Corporation (now Alkermes), stipulating that Alkermes is entitled to 13% of payments received by Zealand in respect to lixisenatide under the Sanofi License Agreement. As of December 31, 2023, there are no other outstanding milestone payments associated with the license agreement with Sanofi. All royalties related to lixisenatide were sold to Royalty Pharma in 2018. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 95 Notes to the Consolidated financial statements 2.2 Information about geographic areas (DKK thousand) Denmark United States Germany Total continuing operations United States Total discontinued operations Non-current assets Revenue 2023 Non-current assets Revenue 2022 44,185 4,094 294,509 342,788 - - 136,819 13,033 - 34,959 69,027 - 143,740 21,748 - 149,851 103,986 165,488 - - 87,612 87,612 - - 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 licensed products, marketed products, product candidates or geographical markets and no segment information is currently prepared for internal reporting. 2.3 Royalty expenses Accounting policies Royalty expenses comprise contractual amounts payable to third parties that are derived from milestone payments. Royalty expenses are recognized in the income statement when the related payments and milestone events in the corresponding collaboration agreements materialize. Royalty expense associated with lixisenatide under the Sanofi License Agreement 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 enti- ties - 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 connection 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 2023 royalty expenses of DKK 9.1 million relate to the mentioned inventor (2022: DKK 0 million). The development compared to the prior year is a result of the completed restructuring announced in March 2022 closing all commercial activities in the US to pursue partnerships on Zealand’s late-stage clinical portfolio, including delisting from the Nasdaq Global Select Market in the U.S. 2.4 Cost of goods sold Costs of goods sold in 2023 of DKK 10.0 million (2022: DKK 0 million) relates to inventory utilized in the production under the supply agreement with Novo Nordisk A/S. The inventory was measured at net realizable value which equals the agreed selling price with Novo Nordisk A/S. Therefore, an equivalent revenue from sale of goods of DKK 10.0 million has been recognized, thus resulting in neutral effect on gross profit. The offsetting DKK 10.0 million in product sales is included in revenue, refer to note 2.1 Revenue. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 96 Notes to the Consolidated financial statements 2.5 Research and development expenses Accounting policies Research and development expenses primarily include salaries, benefits and other employee related costs of Zealand's research and development staff, license costs, manufacturing costs, preclinical costs, clinical trials, contractors and outside service fees, amortization and impairment of licenses and rights related to intangible assets, and depreciation of property and equipment, to the extent that such costs are related to the Group's research and development activities. Management’s judgements and estimates Treatment of research and development expenses Research and development expenses are recognized in the income statement as incurred and in the period in which they relate, except for development expenses for which the capitalization criteria are met. Please see note 3.1 Intangible assets for a more detailed description on the treatment of Zealand's development expenses related to internal development projects. Accrual of costs for clinical contracts Management estimates expenses to be recognized from Contract Research Organizations (CROs) based on an estimate on allocation of total contract costs between start-up, patient treatment and wrap-up phases for clinical trials including an estimate of treatment cost per patient and value of expected change orders. Total contract costs are allocated to each phase using the below split for all Zealand’s CRO contracts based on previous experiences: • Service fee: Start-up (20%), Patient treatment (75%), Wrap-up (5%) • Pass through: Start-up (5%), Patient treatment (90%), Wrap-up (5%) CRO contracts are recognized over the contract period based on an estimate of the contract’s cost driving element which could be either i) patients or ii) time. If the primary goal of the study is to get a certain number of patients through the study, then patients is used as the cost driving element. Time is used if the study runs through a certain timeline regardless of how many patients that are enrolled. At the end of each reporting period, Management estimates any expected change orders, which are recognized up front with an amount corresponding to the completion rate of the contract (patients or time). The remaining change order amount will be recognized over the remaining contract period. DKK thousand Staff costs (note 2.8) Amortization, depreciation, impairment losses on intangible assets, property plant and equipment, and right of use assets Other external research and development expenses Total research and development expenses - Hereof related to discontinued operations 2023 2022 -256,310 -233,474 -18,717 -23,851 -409,875 -361,632 -684,902 -618,957 - 4,913 Total research and development expenses from continuing operations -684,902 -614,044 Since the capital raise completed in April 2023, Zealand has intensified its research and development activities which have been continuously increasing throughout 2023. The increase compared to 2022 comes from project expenses across all therapeutic areas along with increased hiring within Zealand’s R&D area. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 97 Notes to the Consolidated financial statements 2.6 Selling and marketing expenses 2.7 General and administrative expenses Accounting policies Accounting policies Selling and marketing expenses relate to Zealand’s commercial activities, including costs related to preparing the market for Zealand’s products and administration of commercial partnerships. This includes salaries, benefits and other headcount costs related to commercial minded departments as well as third-party costs. In addition, depreciation and impairment of property and equipment, to the extent such expenses are related to commercial functions are also included. Selling and marketing expenses are recognized in the income statement in the period to which they relate. General and administrative expenses relate to the recurring management and administration of Zealand. This includes salaries, benefits and other headcount costs related to management and support func- tions including human resources and the finance departments. In addition, depreciation and impairment of property and equipment, to the extent such expenses are related to administrative functions are also included. General and administrative expenses are recog- nized in the income statement in the period to which they relate. DKK thousand Staff costs (note 2.8) 2023 2022 DKK thousand -14,455 -75,346 Staff costs (note 2.8) Amortization, depreciation, impairment losses on intangibles assets, property, plant and equipment, and right-of-use assets Other external sales and marketing expenses Total sales and marketing expenses - Hereof related to discontinued operations Total sales and marketing expenses from continuing operations -120 -16,052 -30,627 - -30,627 -23 -88,567 -163,936 131,638 -32,298 In 2023, total sales and marketing expenses have been primarily related to preparing the market for Zealand’s remaining late-stage rare disease assets and in pursuing strong strategic partners for future commercialization. In 2022, all commercial activities in the US were discontinued following the company announcement in March 2022 on restructuring. Amortization, depreciation, impairment losses on intangibles assets, property, plant and equipment, and right-of-use assets Other external general and administrative expenses Total general and administrative expenses - Hereof related to discontinued operations Total general and administrative expenses from continuing operations -185,302 -237,210 The decrease in total general and administrative expenses compared to prior year is mainly a result of the delisting from the US stock exchange in 2022, significantly reducing insurance premiums paid by Zealand. 2023 2022 -105,256 -118,308 -6,249 -5,662 -73,797 -130,365 -185,302 -254,335 - 17,125 Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 98 Notes to the Consolidated financial statements 2.8 Staff costs Accounting policies 2.9 Other operating items Accounting policies Wages and salaries are recognized in the income statement in the period in which services for wages and salaries is rendered to the Company DKK thousand 2023 2022 Other operating items comprise non-revenue income and expenses related to Zealand’s operations that are assessed to be non-recurring and significant for the understanding of the financial performance of Zealand. Other operating items also includes expenses as result of restructuring activities, including insurance costs, impairment charges, reversal of inventory write-downs, loss on revaluation of disposal group and other significant one-time transaction expenses. DKK thousand 2023 2022 Total staff costs can be specified as follows: Wages and salaries Share-based compensation (note 4.9) Pension schemes (defined contribution plans) Government grants Other payroll and staff-related costs Total staff costs - Hereof related to discontinued operations Total staff costs from continuing operations The amount is charged as: Research and development expenses Sales and marketing expenses General and administrative expenses Other operating items - restructuring costs Discontinued operations Total staff costs Average number of employees -268,078 -369,311 -61,426 -21,189 7 -52,286 -19,672 5 Restructuring costs - continuing operations -25,335 -31,676 Insurance -376,021 -472,940 Loss on retirement of fixed assets - 110,426 Write-down of US Boston lease -376,021 -362,514 Reversal of inventory write-down (note 3.5) -256,310 -231,022 -14,455 -7,870 -105,256 -104,524 - - -19,098 -110,426 -376,021 -472,940 Total other operating items from continuing operations Restructuring costs - discontinued operations Impairment of production equipment (note 3.2) Reversal of inventory write-down (note 3.5) Loss on disposal group V-GO (note 2.10) Total other operating items from discontinued operations Presentation in income statement: 235 247 Other operating income - - - -11,000 15,979 4,979 - - - - - -19,098 -37,033 -1,456 - - -57,587 -56,738 -9,725 22,564 -40,743 -84,642 15,979 -11,000 - -57,587 For additional information refer to note 4.9 Share-based instruments and note 6.1 Remuneration of the Board of Directors and Executive Management. For further information on restructuring costs included in other operating items in 2022, refer to note 2.9 Other operating items. Other operating expenses Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 99 Notes to the Consolidated financial statements 2.9 Other operating items (continued) As of December 31, 2023 Management has estimated the net realizable value of raw materials to be DKK 7.9 million as all remaining materials are expected to be utilized in the production and sale under the supply agreement with Novo Nordisk A/S, and therefore a reversal of Zegalogue® inventory write-down of DKK 16.0 million has been made, reference is made to note 3.5 Inventories. The partial reversal of the inventory write-down of DKK 22.6 million in 2022 primarily related to Zegalogue© finished goods which were transferred to Novo Nordisk A/S as a result of the global license and development agreement as announced in September 2022. Impairment of right-of-use assets relates to an impairment of the US Boston office of DKK 11.0 million. The DKK 11.0 million comprise DKK 3.5 from impairment of furniture, fixtures & equipment (FF&E), DKK 1.3 million from impairment of right-of-use assets ("ROU"), and DKK 6.2 million from onerous contract (not recovered operating expenses and real estate taxes). The change in estimate of the recoverable amount reflects Management’s assessment of future cash flows and market conditions from subleasing the US Boston lease, where the initial feedback from the real estate agent has indicated a lower rent level than anticipated previously thereby triggering impairment, refer to note 3.3 Right-of-use assets and lease liabilities. Insurance in 2022 comprised a one-off cost to cover any claims against directors and officers that would arise following the delisting from the US stock exchange. Restructuring costs from discontinued operations in 2022 comprised severance costs (DKK 13.8 million), reversal of costs related to forfeited share-based incentive programs (DKK 2.7 million) and an allowance for loss on Zegalogue© inventories (DKK 45.6 million), while restructuring costs from continuing operations in 2022 comprised severance costs (DKK 30.3 million) and reversal of costs related to forfeited share-based incentive programs (DKK 11.2 million). All restructuring costs were incurred as a result of the March 30, 2022, company announcement. Impairment of production equipment in 2022 is related to equipment acquired to be able to upscale the production of Zegalogue©. Loss on disposal group V-GO covers the accounting loss incurred in 2022 as a result of the divestment of the V-GO activities. Please refer to note 2.10 Discontinued operations for further information. 2.10 Discontinued operations Accounting policies A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single coordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented sepa- rately in the statement of profit or loss. Comparatives in the statement of profit and loss for previous periods are restated to reflect the result of discontinued operations. Management's judgements and estimates On March 30, 2022, the group announced its intention to exit the US sales activities including the V-GO activity. The activities were successfully divested through an asset purchase agreement with MannKind Corporation dated May 29, 2022. On September 7, 2022, the group announced the transfer of the commercial rights for Zegalogue© to Novo Nordisk A/S effectually ending all efforts to commercialize the Group's products via its own sales force in 2022. Management has exercised judgement in determining that the activities around commercialization of V-GO products via Zealand's own sales force and the transfer of commercial rights for Zegalogue© met the criteria for classification as a discontinued operations and in the segregation of results from discon- tinued operation from results from continued operations for all periods presented. Accordingly, the activities, including the effect of the divestment of the V-GO disposal group, has been presented sepa- rately as a discontinued operation in the income statement. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 100 Notes to the Consolidated financial statements 2.10 Discontinued operations (continued) The results and the cash flow of the discontinued activities are presented below as discontinued opera- tions for the period ended December 31, 2023, and December 31, 2022: DKK thousand Revenue Cost of goods sold Gross profit Research and development expenses Sales and marketing expenses Administrative expenses Other operating items Net operating expenses Result before tax Corporate tax Net result for the year from discontinued operations 2023 2022 - - - - - - - - - - - 87,613 -70,688 16,925 -4,913 -133,695 -17,125 -84,642 -240,375 -223,450 -13,075 -236,525 All assets and liabilities included in the V-GO disposal group were derecognized as of May 29, 2022, with the closure of the asset purchase agreement with MannKind Corporation. As a result, no assets or liabil- ities were classified as held for sale in relation to the discontinued operation as of December 31, 2022. The derecognized assets and liabilities, recognized consideration and net impact on profit and loss from the divestment of V-GO are presented below: DKK thousand Assets included in disposal group Intangible assets Property, plant and equipment Right-of-use assets Deposits and prepayments Inventories Total assets of disposal group Liabilities directly associated with assets included in disposal group Lease liabilities Total liabilities of disposal group Net assets of disposal group May 29, 2022 52,082 20,586 8,128 1,871 79,872 162,539 8,837 8,837 153,702 111,553 -5,167 6,573 112,959 -40,743 DKK thousand 2023 2022 Consideration: Cash flows from discontinued operations Net cash outflow from operating activities Net cash inflow from investing activities Net cash outflow from financing activities Net cash decrease generated from the discontinued operation - - - - -155,238 106,380 -1,064 -49,922 Cash consideration Purchase price adjustment Other financial assets Total consideration Loss on sale of disposal group - recognized as other operating items from discontinued operations As part of the license and development agreement with Novo Nordisk A/S as described in note 2.1 Reve- nue, finished goods with a value of DKK 21.3 was transferred as part of the contract. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 101 In the calculation of the diluted loss per share for 2023, 1,970,432 potential ordinary shares related to share-based payment instruments have been excluded as they are anti-dilutive (2022: 2,190,503). On January 8, 2024, Zealand announced an issue of 3,761,470 new ordinary shares, which represent the remaining authorization, at a subscription price of DKK 386.45 per new share resulting in gross proceeds of DKK 1.45 billion. The capital increase was completed in January 2024. Please refer to note 6.8 Subsequent events for further information. Notes to the Consolidated financial statements 2.11 Earnings per share Accounting policies Basic result per share Basic result per share is calculated as the net result for the period, divided by the weighted average number of ordinary shares outstanding, excluding treasury shares held by the Company. Diluted result per share Diluted result per share is calculated as the net result for the period, divided by the weighted average number of ordinary shares outstanding, excluding the treasury shares, and adjusted for the dilutive effect of share equivalents. DKK thousand 2023 2022 Net result used in the calculation of basic and diluted earnings/ losses per share from continuing operations Net result used in the calculation of basic and diluted earnings/ losses per share from discontinued operations 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 -703,739 -965,610 - -236,525 -703,739 -1,202,135 56,881,075 46,502,969 -292,488 -302,817 Weighted average number of ordinary shares excluding treasury shares used in the calculation of basic/diluted earnings per share 56,588,587 46,200,152 Loss per share from continuing operations -basic/diluted (DKK) Loss per share from discontinued operations -basic/diluted (DKK) Total loss per share - basic/diluted (DKK) -12.44 - -12.44 -20.90 -5.12 -26.02 Zealand Pharma ∞ Annual Report 20233 Operating assets and liabilities Contents The big picture Our business Sustainability Corporate governance Financial statements 102 3.0 Operating assets and liabilities This section covers the operating assets and related liabilities that form the basis for Zealand’s activities. Assets related to Zealand’s financing activities are described in detail in section 4.0 Capital structure, financial risks and related items. 3.1 Intangible assets 3.2 Property, plant and equipment 3.3 Right-of-use assets and lease liabilities 3.4 Other investments 3.5 Inventories 3.6 Trade and other receivables 3.7 Other financial assets 3.8 Trade and other payables 102 104 106 108 108 109 110 110 3.1 Intangible assets Accounting policies Internal development programs Zealand currently has not recognized internally generated intangible assets from development, as the criteria for recognition of an asset are not met as described below. Software Software comprises capitalized implementation costs on IT projects initially measured at cost. Costs include configuration and customization of the underlying software, including training and testing. Capitalization ceases when the asset is in the condition necessary for it to be capable of operating in the manner intended by Management. The intangible assets are subsequently measured at cost less accumulated amortization and any impairment losses according to IAS 38. Amortization is calculated on a straight-line basis over the estimated useful life which is 3-5 years and is included in the income state- ment under general and administrative expenses. Acquired licenses and rights Acquired licenses, rights, and patents are initially measured at cost and include the net present value of any future payments. The net present value of any future payments is recognized as a liability. When triggered, milestone payments are accounted for as an increase in the cost to acquire licenses, rights, and patents unless such subsequent expenditures are recognized in the income statement as Research & Development expenses if they do not satisfy the conditions for recognition as an asset. Amortization Licenses, rights, and patents are amortized using the straight-line method over the estimated useful life which is determined when the asset is available for use. Amortizations, impairment losses and gain or losses on the disposal of intangible assets are recognized in the income statement as Research & Development expenses. Impairment If circumstances or changes in Zealand's operations indicate that the carrying amount of the intangible assets may not be recoverable, Management will review the intangibles for impairment. Intangible assets not ready for use are reviewed for impairment on an annual basis. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 103 Notes to the Consolidated financial statements 3.1 Intangible assets (continued) Management's judgements and estimates According to IAS 38, intangible assets arising from development projects should be recognized in the balance sheet. The criteria that must be met for capitalization are that: • the development project is clearly defined and identifiable and the attributable costs can be meas- ured reliably during the development period; and • the technological feasibility, adequate resources to complete and a market for the product or an internal use of the product can be documented; and • Management has the intent to produce and market the product or to use it internally. DKK thousand Cost at January 1, 2023 Additions Cost at December 31, 2023 Amortization and impairment at January 1, 2023 Amortization for the year Amortization and impairment at December 31, 2023 Carrying amount at December 31, 2023 Such an intangible asset should be recognized if sufficient certainty can be documented that the future income from the development project will exceed the aggregate cost of production, development and sale and administration of the product. Amortization and impairment for the financial year has been charged as: General and administrative expenses Total Software - 12,508 12,508 - -253 -253 12,255 -253 -253 A development project involves a single product candidate undergoing a high number of tests to illus- trate its safety profile and its effect on humans prior to obtaining the necessary final approval of the product from the authorities. The future economic benefit associated with the individual development projects are dependent on obtaining such approval. Considering the significant risk and duration of the development period related to the development of biological products, Management has concluded that the future economic benefits associated with the individual projects 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 there- fore all research and development costs are recognized in the income statement when incurred. In 2023, Zealand has implemented a new budget tool along with a new enterprise resource planning system (ERP) to further strengthen Management reporting. In 2023, a new quality assurance (QA) system has also been implemented with going-live date in December 2023. These investments have been made to provide Zealand with future economic benefits and are capitalized according to the new accounting policy for software. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 104 Notes to the Consolidated financial statements 3.1 Intangible assets (continued) 3.2 Property, plant and equipment DKK thousand Cost at January 1, 2022 Disposals Transferred to V-GO disposal group (note 2.10) Currency translation Cost at December 31, 2022 Amortization and impairment at January 1, 2022 Impairment for the year Amortization for the year Disposals Transferred to V-GO disposal group (note 2.10) Currency translation Amortization and impairment at December 31, 2022 Carrying amount at December 31, 2022 Amortization and impairment for the financial year has been charged as: Research and development expenses Discontinued operations Total Licenses, rights and patents 2,530 -2,530 - - - - 2,530 - -2,530 - - - - -2,530 - -2,530 Intellectual property Physician relationship 13,692 65,613 - - -13,692 -69,443 - - 3,830 - 13,692 14,353 - - - - 2,057 - -13,692 -17,361 - - - - - - 951 - - -2,057 -2,057 Assets listed under Intellectual property and Physician relationship were all disposed of as a part of the V-GO disposal group. Please refer to note 2.10 Discontinued operations for further information. Licenses, rights, and patents as of January 1, 2022, comprised the license to the lead product candidate acquired with Encycle Therapeutics in October 2019. During 2022 the development program with the lead candidate was abandoned and it was decided to move on with another product candidate from the same patent instead. As a result, the recognized asset was impaired and disposed. Accounting policies Property, plant, and equipment is mainly comprised of plant and machinery, other fixtures and fittings, leasehold improvements, and assets under construction, which are measured at cost less accumulated depreciation. and any impairment losses. The cost is comprised of the acquisition price and costs directly related to the acquisition until the asset is ready for use. Costs include direct costs and costs to subcontractors. Depreciaion Depreciation is calculated on a straight-line basis to allocate the cost of the assets, net of any residual value, over the estimated useful lives, which are as follows: Leasehold improvements 5-13 years, but never longer than the lease term Plant and machinery 5-10 years Other fixtures and fittings 3-5 years The useful lives and residual values are reviewed and adjusted if appropriate on a yearly basis. Assets under construction are not depreciated. Impairment If circumstances or changes in Zealand's operations indicate that the carrying amount of property, plant and equipment may not be recoverable, Management reviews that asset for impairment. The basis for the review is the recoverable amount of the assets, determined as the greater of the fair value less cost to sell or its value in use. Value in use is calculated as the net present value of future cash inflow or savings generated from the asset. If the carrying amount is greater than the recoverable amount, the asset is written down to the recoverable amount. An impairment loss is recognized in the income statement when the impairment is identified. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 105 Notes to the Consolidated financial statements 3.2 Property, plant and equipment (continued) DKK thousand Plant and machinery Other fixtures and fittings Leasehold improve- ments Assets under con- struction DKK thousand Plant and machinery Other fixtures and fittings Leasehold improve- ments Assets under con- struction Cost at January 1, 2023 66,828 15,997 38,193 Transfers Additions Disposals Currency translation Cost at December 31, 2023 Accumulated depreciation and impairment at January 1, 2023 Depreciation for the year Impairment for the year Disposals Currency translation Accumulated depreciation and impairment at December 31, 2023 Carrying amount at December 31, 2023 Depreciation and impairment for the financial year has been charged as: Research and development expenses Sales and marketing expenses General and administrative expenses Total - 9,043 -15,066 - 870 1,386 -427 -60 - 812 - -98 60,805 17,766 38,907 52,339 5,330 - -14,919 - 42,750 18,055 -5,320 - -10 -5,330 11,233 2,372 1,173 -427 -12 14,339 3,427 -1,775 -68 -1,702 -3,545 7,788 3,296 2,270 - -12 13,342 25,565 -2,523 -51 -2,992 -5,566 870 -870 - - - - - - - - - - - - - - - Impairment in 2023 on other fixtures and fittings of DKK 1.2 million and DKK 2.3 million on leasehold im- provements relate to the US Boston office and is included in other operating expenses, refer to note 2.9 Other operating items. For further information on the impairment assessment refer to Management’s judgements and estimates in note 3.3 Right-of-use assets and lease liabilities. Disposals on plant and machinery mainly relate to scrap of old lab equipment in May 2023. Cost at January 1, 2022 Transfers Additions Disposals Transferred to V-GO disposal group (Note 2.10) Currency translation Cost at December 31, 2022 Accumulated depreciation and impairment at January 1, 2022 Depreciation for the year Impairment for the year Disposals Transferred to V-GO disposal group (Note 2.10) Currency translation Accumulated depreciation and impairment at December 31, 2022 Carrying amount at December 31, 2022 Depreciation and impairment for the financial year has been charged as: Research and development expenses General and administrative expenses Other operating items Discontinued operations Total 90,797 268 2,985 -1,433 -25,790 1 66,828 54,216 7,903 742 -1,433 -9,090 1 52,339 14,489 -6,214 - -742 -1,689 -8,645 15,835 1,644 73 -905 -763 113 15,997 9,240 3,145 71 -905 -357 39 36,600 2,915 293 - -1,801 186 38,193 5,434 3,187 - - -884 51 11,233 4,764 7,788 30,405 -2,315 -779 -71 -28 -3,216 -2,417 -770 - - -3,187 12,112 -4,827 6,089 -10,092 -2,563 151 870 - - 10,092 -10,092 - - - 870 - -362 -9,730 -10,092 Impairment of assets under construction relates to production equipment for Zegalogue® which is not expected to be used by the Company. The amount is recognized as other operating items from discontinued operations. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 106 Notes to the Consolidated financial statements 3.3 Right-of-use assets and lease liabilities Accounting policies Zealand determines if an arrangement is a lease at inception. Zealand leases comprise various proper- ties and cars. Rental contracts are typically made for fixed periods. Lease terms are negotiated on an individual basis and contain wide range of different terms and conditions. All leases are recognized in the balance sheet as a right-of-use ("ROU") asset with a corresponding lease liability, except for short term assets in which the lease term is 12 months or less, or low value assets. ROU assets represent Zealand's right to use an underlying asset for the lease term and lease liabilities represent Zealand's obligation to make lease payments arising from the lease. Liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of fixed payments, less any lease incentives. As Zealand's leases do not provide an implicit interest rate, Zealand uses an incremental borrowing rate based on the information available at the commencement date of the lease in determining the present value of lease payments. Lease terms utilized by Zealand may include options to extend or terminate the lease when it is reasonably certain that Zealand will exercise that option. In determining the lease term, Management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). Interest expenses related to the lease liability are classified in financial items. ROU assets are measured at cost and include 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. ROU assets are depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis over the lease term. Payments associated with short-term leases and leases of low-value assets are recognized on a straight- line basis as an expense in the income statement. Short-term leases are leases with a lease term of 12 months or less and low-value assets comprise IT equipment and small items of office furniture. Impairment If circumstances or changes in Zealand's operations indicate that the carrying amount of right-of-use assets ("ROU") may not be recoverable, Management reviews that ROU for impairment. The basis for the review is the recoverable amount of the ROU, determined as the greater of the fair value less cost to sell or its value in use. Value in use is calculated as the net present value of future cash inflow or savings generated from the ROU. If the carrying amount is greater than the recoverable amount, the ROU is written down to the recoverable amount. An impairment loss is recognized in the income statement when the impairment is identified. Management's judgements and estimates Management has estimated the recoverable amount of the right-of-use asset related to the US Boston office as of December 31, 2023. The impairment in 2023 of DKK 11.0 million reflects an assessment of the ROU's carrying amount against its recoverable amount, considering factors such as future cash flows and market conditions for office rentals in Boston, Massachusetts. Zealand has entered into an irrevocable lease agreement until 2029 thereby knowing the expected cash flows many years ahead and Management is currently investigating possibilities on subleasing the US office to a third party. The initial feedback from the real estate agent has indicated a lower rent level than previously anticipated thereby triggering impairment. The recoverable amount has been calculated by applying a discount rate of 4.5% on future cash flows being the annual effective discount rate from the lease contract. Future cash flows are projected with 2% annual escalations and current projections include an estimate of the recoverable rent payments until the end of the lease term on August 31, 2029, partly offset by non-recovered operating expenses and real estate taxes. The estimated recoverable amount is subject to sensitivity if the projected level for base rent per square feet changes; however, Management has chosen a conservative approach in the calculations, and therefore the risk for a significant change in the recoverable amount is deemed immaterial. The DKK 1.3 million from impairment of right-of-use assets ("ROU") is included in other operating expenses, refer to note 2.9 Other operating items. The total provision for onerous contract of DKK 6.2 million has been recognized as an addition to lease liabilities as of December 31, 2023, out of which DKK 1.4 million is short-term and DKK 4.8 million is long-term. No impairment losses have previously been recognized for the right-of-use asset in Zealand Pharma U.S., Inc. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 107 Notes to the Consolidated financial statements 3.3 Right-of-use assets and lease liabilities (continued) Amounts recognized in the statement of financial position The statement of financial position shows the following amounts relating to right-of-use assets: Set out below are the carrying amounts of lease liabilities and the movements during the period: DKK thousand As at January 1, 2023 Additions Depreciation expense Impairment Currency translation As at December 31, 2023 As at January 1, 2022 Additions Depreciation expense Transferred to V-GO disposal group (note 2.10) Currency translation As at December 31, 2022 Office Buildings Other fixtures and fittings 113,379 1,860 -12,557 -1,266 -532 100,884 133,371 - -13,710 -8,128 1,846 113,379 1,581 1,344 -1,025 - 21 1,921 1,623 736 -778 - - 1,581 The Group leases office buildings, equipment, and vehicles. The rental contract for the HQ 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. The rental contract for the US office site has a lease expiration date of August 31, 2029 with the opportunity to sublease. Equipment and vehicles are leased over a period of 3-4 years with no extension option. DKK thousand As at January 1 Additions Accretion of interest Payments Transferred to V-GO disposal group (note 2.10) Currency translation As at December 31 Current Non-current The following amounts are recognized in the income statement: Depreciation expense of right-of-use assets Interest expense on lease liabilities Total amount recognized in profit and loss Cash flow Total cash outflow from leases Depreciation for the financial year has been charged as: Research and development expenses General and administrative expenses Total amount recognized in profit and loss 2023 2022 122,729 139,523 5,680 2,890 992 3,286 -12,711 -13,719 - 643 -8,836 1,483 119,231 122,729 16,655 102,575 14,729 108,000 -13,610 -2,892 -16,502 -17,664 -17,664 -8,951 -4,659 -13,610 -14,488 -3,286 -17,774 -13,719 -13,719 -10,375 -4,113 -14,488 Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 108 Notes to the Consolidated financial statements 3.4 Other investments Accounting policies 3.5 Inventories Accounting policies Other investments are measured at fair value on initial recognition and subsequently. Changes in fair value are recognized in the income statement under financial items. Investment in Beta Bionics Inc. The Group’s other investments consist of an 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 measured at fair value through profit and loss. This investment represents 0.6% (2022 :1.5%) ownership of Beta Bionics, Inc., and is measured at a fair value of DKK 14.0 million as of December 31, 2023 (2022: DKK 30.9 million). In determining fair value, Zealand considers the value per share from the most recent closed financing round, adjusted for valuation infliction points through the balance sheet date, including (i) discount for lack of marketability, (ii) information obtained from third party valuation reports, and (iii) company announcements. The following have been recognized as financial items: DKK thousand Other investments at January 1 Fair value adjustments Other investments at December 31 2023 2022 30,943 -16,939 14,004 26,907 4,036 30,943 The fair value adjustment of the investment in 2023 of DKK 16.9 million is a combination of a reduc- tion of the implied value per share provided by a third-party valuation expert. Also in August 2023, Beta Bionics announced the closing of $100 million series D funding. Zealand did not participate in this financing round thus having a dilutive effect on Zealand’s ownership compared to 2022. Reference is made to note 4.3 Financial assets and liabilities for fair value disclosures. Raw materials, work in progress and finished goods are measured at the lower of cost and net realiz- able value. Cost is determined on a first in, first out basis and comprises direct materials, direct labor and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Costs of purchased inventory are determined after deducting rebates and discounts. Net realizable value is the estimated selling price in the ordinary course of busi- ness less the estimated costs of completion and the estimated costs necessary to complete the sale. Inventory manufactured prior to regulatory approval (prelaunch inventory) is capitalized but immedi- ately provided for, until there is a high probability of regulatory approval for the product. A write-down is made against inventory, and the cost is recognized in the income statement as research and devel- opment costs. Once there is a high probability of regulatory approval being obtained, the write-down is reversed, up to no more than the original cost. Zealand reviews inventory for excess or obsolescence and writes down inventory that has no alternative uses to its net realizable value. Economic conditions, customer demand and changes in purchasing and distribution can affect the carrying amount of inventory. We record provisions for potentially obsolete or slow-moving inventory and lower of cost or net realizable value inventory adjustments. In some instances, these adjustments can have a material effect on the financial results of an annual or interim period. In order to determine such adjustments, we evaluate the age, inventory turns, future sales fore- casts and the estimated fair value of inventory. Management's judgements and estimates As of December 31, 2023, Zegalogue® related raw materials at cost amounted to DKK 7.9 million. Management has estimated the net realizable value to be DKK 7.9 million, and therefore a reversal of Zegalogue® inventory write-down of DKK 16.0 million has been made as the raw materials are expected to be utilized under the license and development agreement with Novo Nordisk A/S. With the March 30, 2022, restructuring announcement an allowance for loss on Zegalogue® raw mate- rials and finished goods of DKK 45.6 million was recognized in 2022 due to uncertainties around the future sales channels for the product. The allowance was included as discontinued operations under other operating expenses as a restructuring cost. As all Zegalogue® finished goods were transferred to Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 109 Notes to the Consolidated financial statements 3.5 Inventories (continued) Novo Nordisk A/S as a result of the global license and development agreement announced in Q3, 2022, a partial reversal of the inventory allowance of DKK 22.6 million was recognized under other operating income from discontinued operations in 2022. In 2023, an additional reversal of prior years’ inventory allowance of DKK 16.0 million was recognized under other operating income. As of December 31, 2022, Zegalogue® related raw materials and semi-finished goods at cost amounted to DKK 33.6 million. Due to uncertainties whether the materials would be utilized in the production under the supply agreement with Novo Nordisk A/S, Management estimated the net realizable value to be DKK 1.3 million at the end of 2022. DKK thousand Raw materials Total Write downs on inventory were comprised as follows: DKK thousand Accumulated write-downs, January 1 Write-downs in the reporting period Utilization of write-downs Reversal of write-downs Exchange differences 2023 2022 7,935 7,935 1,286 1,286 2023 2022 -32,257 - 3,635 15,979 - -25,653 -45,547 16,867 22,623 -547 Accumulated write-downs, December 31 -12,643 -32,257 The write-downs and the reversal of write-downs on inventory recognized in 2023 and 2022 are included in other operating items. Please refer to note 2.9 Other operating items. 3.6 Trade and other receivables Accounting policies Receivables are designated as financial assets measured at amortized cost and are initially measured at fair value less transaction costs and subsequently measured in the balance sheet at amortized cost, which generally corresponds to nominal value less expected credit loss provision. Zealand utilizes a simplified approach to measuring expected credit losses and uses a lifetime expected loss allowance for all receivables. To measure the expected credit losses, receivables have been grouped based on credit risk characteristics and the days past due. Expected credit losses as of December 31, 2023, and December 31, 2022, are immaterial. Deposits relate to up-front payments on rental of office buildings measured at nominal value. Other receivables include accrued interest on marketable securities and VAT receivables measured at nominal value. Prepaid expenses include expenditures related to a future financial period. Prepaid expenses are measured at historical cost. DKK thousand Deposits Trade receivables Receivables related to license and collaboration agreements Other receivables Prepaid expenses Total trade and other receivables Non-current Current 2023 2022 8,908 1,004 68,793 24,556 34,892 9,409 1,361 56,431 3,438 63,088 138,153 133,727 15,794 122,359 18,105 115,622 Non-current other receivables comprise deposits on office buildings and accrued insurance costs. Current other receivables mainly comprise accrued interest from marketable securities and VAT receivables. Receivables related to license and collaboration agreements include withholding tax receivable from the Boehringer Ingelheim (BI) milestone payment of DKK 35.7 million. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 110 Notes to the Consolidated financial statements 3.7 Other financial assets Accounting policies 3.8 Trade and other payables Accounting policies Please refer to accounting policies in note 4.3 Financial assets and liabilities. Please refer to accounting policies in note 4.3 Financial assets and liabilities. DKK thousand Other financial assets at January 1 Additions during the year Fair value adjustments Currency adjustments Other financial assets at December 31 2023 6,901 - 474 - 7,375 - 6,573 319 9 6,901 Other financial assets comprise the sales-related milestones from the divestment of V-GO. A maximum of four milestones of USD 2.5 million each can be achieved under the contract based on annual sales. The fair value has been determined using the risk-adjusted net present value method using a discount rate of 4% (2022: 10%) and an estimated probability of 50% to reach the first sales-related milestone (2022: 50% and 25% respectively to reach the first two sales-related milestones). Reference is made to note 4.3 Financial assets and liabilities for fair value disclosures. 2022 DKK thousand Trade payables Payable for treasury shares (note 4.8) Employee benefits Other payables Discount and rebate liabilities Accruals development projects Total trade and other payables Non-current Current 2023 2022 91,607 81,045 51,730 10,077 - 33,465 53,156 41,600 58,348 10,452 2,201 34,063 267,924 199,820 - 267,924 19,058 180,762 Non-current trade and other payables as of December 31, 2022, of DKK 19.1 million related to frozen holiday funds under the Danish Holiday Act (Ferieloven) effective as of September 1, 2020. In August 2023, the amount has been paid in full to Lønmodtagernes Feriemidler through a voluntary payment. Zealand Pharma ∞ Annual Report 20234 Capital structure, financial risk and related items Contents The big picture Our business Sustainability Corporate governance Financial statements 111 4.0 Capital structure, financial risk and related items This section includes disclosures related to how Zealand manages its capital structure, cash position and related risks and items. 4.1 Capital management 4.2 Financial risks 4.3 Financial assets and liabilities 4.4 Cash and cash equivalents 4.5 Marketable securities 4.6 Borrowings 4.7 Financial items 4.8 Share capital 4.9 Share-based instruments 111 112 115 117 117 118 124 125 126 4.1 Capital management Capital management Zealand’s goal is to maintain a strong capital base to maintain investor, creditor and market confidence, and a continuous advancement of Zealand’s product pipeline and business in general. Zealand is primarily financed through capital increases, long-term borrowings, and partnership collaboration income. The adequacy of our available funds will depend on various factors, including progress in our research and development programs, our commitments to existing and new clinical collaborators, our ability to establish commercial and licensing arrangements, our capital expenditures, market developments, and any future partnerships and acquisitions. Accordingly, we plan to potentially raise additional funds through equity or debt financings, collaborative agreements with partners, or from other sources. At the annual general meeting on March 31, 2023, Zealand was authorized to increase the share capital by nominally DKK 10,340,419 during the period until March 29, 2028. On December 31, 2023, nominally DKK 3,761,471 of the authorization remains. At the Zealand Annual Meeting held on April 6, 2022, the shareholders authorized the Company to issue convertible debt instruments with access to conversion to shares in the Company of up to a total of nominally DKK 10,850,136 without pre-emption rights for existing shareholders in accordance with the Company’s Articles of Association. This authorization covers the period until 15 April 2026, but has not been utilized as of December 31, 2023. On March 12 and 13, 2023 the Company provided statements on the closure of Silicon Valley Bank (SVB). At that time Zealand had DKK 162.6 million in cash deposits which were fully recovered. On March 30, 2023, Zealand announced an issue of 6,578,948 new ordinary shares at a subscription price of DKK 228 per new share resulting in gross proceeds of DKK 1.5 billion. The capital increase was completed in April 2023. On June 30, 2023, Zealand entered a new DKK 350 million Revolving Credit Facility provided by Danske Bank. The facility matures in 2 years from June 2023 where any outstanding amount must be repaid in full and carries an interest of CIBOR + fixed margin. As of December 31, 2023, Zealand has not made any draw downs on this credit facility. In the light of the SVB closure in March 2023, mentioned above and settlement of the Oberland Capital loans in May 2023, Zealand has adopted a new treasury policy in order to achieve an even higher diver- sification in the management of funds. In 2023, Zealand has invested a significant amount in marketable Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 112 Notes to the Consolidated financial statements 4.1 Capital management (continued) 4.2 Financial risks securities, primarily as a result of excess liquidity from the capital raise in April 2023, but also to minimize credit risk. As of December 31, 2023, Zealand has DKK 1,183.7 million invested in marketable securities, corresponding to 72% of total cash, cash equivalents and marketable securities (2022: DKK 108.6 million, 9%). For additional information refer to note 4.5 Marketable securities. In December 2023, Zealand signed a new loan agreement with the European Investment Bank (EIB) providing a credit of up to EUR 90 million, refer to note 4.6 Borrowings for an overview of the loan terms. Tranche A of EUR 50 million is expected to be disbursed in the beginning of 2024. The Company and the Board of Directors monitor the share and capital structure to ensure that Zealand’s capital resources support the strategic goals. There was no change in the group’s approach to capital management procedures in 2023. Neither Zealand Pharma A/S nor any of its subsidiaries are subject to externally imposed capital requirements other than the conditions related to the new revolving credit facility in Danske Bank and the new loan from the European Investment Bank (EIB), refer to note 4.6 Borrowings. Under the revolving credit facility (RCF) in Danske Bank, Zealand is required to have a minimum collateral value of 120% of the loan commitment (DKK 420 million) held in the designated custody accounts under management by Danske Asset Management and Zealand’s designated cash accounts attached to the custody accounts. Zealand must also comply with a covenant on fulfilling certain information requirements. The EIB loan contains a negative pledge clause preventing Zealand Pharma A/S or any of its subsidiaries from creating or permitting to subsist any new security over any of its assets. The pledges are described further in note 4.4 Cash and cash equivalents and a description of Zealand’s total commitments can be found in note 6.4 Commitments. On January 8, 2024, Zealand announced an issue of 3,761,470 new ordinary shares, which represent the remaining authorization, at a subscription price of DKK 386.45 per new share resulting in gross proceeds of DKK 1.45 billion. The capital increase was completed in January 2024. Please refer to note 6.8 Subsequent events for further information. Zealand is exposed to various financial risks, including foreign exchange rate risk, interest rate risk, credit risk and liquidity risk. The objective of Zealand’s treasury 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. 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 material transaction exposure or exchange rate risk regarding transactions in EUR. Research and development, and regulatory milestone payments in license and collaboration agree- ments are denominated in foreign currencies, namely USD and EUR. However, as milestone payments are unpredictable in terms of timing and materialization, the payments are not included in the basic exchange rate risk evaluation. As Zealand conducts clinical trials and toxicology studies around the world and has activities in US, Zealand is 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 manage the transaction and translation risk associated with the USD passively, by having a portion of the Group's cash and cash equivalents in a USD account to cover future payment of Zealand’s expenses denomi- nated in USD. As of December 31, 2023, Zealand holds DKK 313.9 million (2022: DKK 460.4 million) of its cash, cash equivalents and marketable securities in USD. Interest rate risk Zealand has a policy of avoiding financial instruments that expose the Group to any unintended finan- cial risks. During 2023, all cash has been held in current bank accounts in DKK, USD, and EUR. Following the closure of Silicon Valley Bank in March 2023, Zealand has made a shift towards more investments of surplus cash balances into low-risk marketable securities being fixed income instruments with an investment graded rating of AAA to BBB-. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 113 Notes to the Consolidated financial statements 4.2 Financial risks (continued) The excess liquidity from the capital increase completed in April 2023, has been placed into a new DKK portfolio and EUR portfolio held at Danske Bank. The Group’s marketable securities portfolio comprises various types of bonds and securities as described in note 4.5 Marketable securities. All bonds held as of December 31, 2023 mature within 13 months. The bonds are reinvested on the maturity date to mini- mize lost interest. As of December 31, 2023, Zealand has borrowings amounting to DKK 0 million (2022: DKK 336.8 million), embedded derivatives amounting to DKK 0 million (2022: DKK 80.6) and lease liabilities amounting to DKK 119.2 million (2022: DKK 122.7 million). Lease liabilities as of December 31, 2023, includes a provision for onerous contract of DKK 6.1 million as part of the impairment of the right- of-use asset related to the US Boston office as described in detail in note 3.3 Right-of-use assets and lease liabilities. The change in borrowings and embedded derivatives is a result of the settlement of the Oberland Capital loan as described in note 4.6 Borrowings. An increase in interest rates would be reflected in an increase in interest income from the group's cash balances. Credit risk Zealand is exposed to credit risk in respect of receivables, bank balances and bonds. The maximum 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 companies. Cash and bonds are associated with an inherent credit risk, though not considered to be very high, as the counterparties are banks with investment-grade ratings (i.e. BBB- or higher from Standard & Poor’s). On the date of Silicon Valley Bank’s closure on March 10, 2023, Zealand had DKK 162.6 million in cash deposits which were fully recovered. Following the SVB closure a new treasury policy was adopted as described in note 4.1 Capital management. Liquidity risk The purpose of Zealand’s cash management is to ensure that the Group always has sufficient and flex- ible financial resources at its disposal. Zealand’s short-term liquidity is managed and monitored by means of the Company’s annual budget process and quarterly 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. In 2023, Zealand has lifted the covenants on cash and cash equivalents from the Oberland Capital loan following the settlement in May 2023. Zealand’s total liquidity reserve has increased significantly in 2023, with the DKK 1.5 billion capital raise in March (surplus funds invested in marketable securities), the new Danske Bank credit facility, and in December 2023, the loan with the European Investment Bank. DKK thousand Cash and cash equivalents Cash and cash equivalents (subject to certain conditions) Marketable securities Danske Bank revolving credit facility (RCF) EIB loan (Tranche A) 2023 2022 449,311 - 1,183,746 350,000 372,645 720,626 348,608 108,611 - - Total liquidity reserve as of December 31 2,355,702 1,177,845 Zealand Pharma entered in December 2023 into a loan agreement with the EIB, whereby the Tranche A of this loan for DKK 373 million is expected to be received in Q1, 2024. The conditions for disbursement of the first tranche (Tranche A) have been met late 2023, i.e. Boehringer Ingelheim’s initialization of the Phase 3 program with survodutide in patients living with obesity or overweight (SYNCHRONIZE™). In January 2024, Zealand completed a capital increase thereby receiving another DKK 1.45 billion in gross proceeds as described in note 6.8 Subsequent events. Reference is made to going concern considerations in note 1.1 Basis of preparation, going concern assumption, nature of the business and accounting policies for further description of the going concern assessment. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 114 Notes to the Consolidated financial statements 4.2 Financial risks (continued) Sensitivity analysis The table shows the impact on profit/loss and equity of changes in valuation of the Company’s oper- ations in USD, i.e. cash, cash equivalents, marketable securities and lease liabilities as of December 31, 2023, and December 31, 2022, assuming a 10% fluctuation increase in the USD conversion rate. DKK thousand USD 2023 2022 Fluctuation Effect Fluctuation Effect +/-10% +/-29,187 +/-10% +/-21,209 Contractual maturity (liquidity risk) Details on the Group’s aggregate liquidity risk on financial assets and liabilities is provided 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. DKK thousand < 12 months 1-5 Years > 5 Years Total Carrying amount Lease liabilities Trade and other payables Total financial liabilities as of December 31, 2023 Borrowings including embedded derivatives Lease liabilities Trade and other payables Total financial liabilities as of December 31, 2022 15,377 267,924 61,094 47,763 - - 124,234 267,924 119,231 267,923 283,301 61,094 47,763 392,158 387,154 260,970 14,995 180,762 191,515 59,553 - 37,996 62,237 19,058 490,481 136,785 199,820 401,346 122,729 199,820 456,727 251,068 119,291 827,086 723,895 All cash flows are non-discounted, including interest. Contractual obligations related to payments under agreements for development projects, including CROs, are disclosed in note 6.4 Commitments, as their maturity dates are uncertain. Except for leasing and borrowings, 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. Cash flows denominated in USD are translated into DKK at the USD/DKK rates applicable as of December 31, 2023. On May 10, 2023, Zealand settled the Oberland Capital loan, including embedded derivatives as described in note 4.6 Borrowings. Long-term trade and other payables in 2022 of DKK 19.1 million related to frozen holiday funds paid in full in August, 2023, refer to note 3.8 Trade and other payables. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 115 Notes to the Consolidated financial statements 4.3 Financial assets and liabilities Accounting policies Classification of Categories of Financial Assets and Liabilities: Zealand classifies its financial assets held into the following measurement categories: • those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and • those to be measured at amortized cost. The classification depends on the business model for managing the financial assets and the contractual terms of the cash flows. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. Zealand uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. For financial instruments that are measured in the balance sheet at fair value, IFRS 13 for financial instruments requires disclosure of fair value measurements by level of the following fair value measurement hierarchy for: • Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities • Level 2 - Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) • Level 3 - Inputs for the asset or liability that are not based on observable market data (that is, unob- For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. servable inputs). For assets and liabilities that are recognized in the financial statements on a recurring basis, Zealand determines whether transfers have occurred between levels in the hierarchy by re-assessing categoriza- tion (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. Any transfers between the different levels are carried out at the end of the reporting period. Zealand reclassifies debt investments only when its business model for managing those assets changes. Further details about the accounting policy for each of the categories are outlined in the respective notes. Fair Value Measurement Zealand measures financial instruments, such as marketable securities, at fair value at each balance sheet date. Management assessed that the fair value of financial assets and liabilities measured at amor- tized cost such as bank deposits, receivables and other payables approximate their carrying amounts largely due to the short-term maturities of these instruments. 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. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: • In the principal market for the asset or liability, or • In the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by Zealand. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 116 Notes to the Consolidated financial statements 4.3 Financial assets and liabilities (continued) DKK thousand Note 2023 2022 DKK thousand Categories of financial instruments Trade and other receivables excluding prepaid expenses Financial assets at amortized costs Marketable securities (Level 1) Marketable securities (Level 2) Other investments (Level 3) Other financial assets (Level 3) 103,261 103,261 70,640 70,640 4.5 4.5 3.4 3.7 1,183,746 - - 108,611 14,004 7,375 30,943 6,901 Carrying amount at January 1, 2023 Fair value adjustments through profit and loss Exchange rate effect through other comprehensive income Derecognition of call option on settlement of Oberland Capital loan Carrying amount at December 31, 2023 Financial assets measured at fair value through profit and loss 1,205,125 146,455 DKK thousand Borrowings Lease liabilities Trade and other payables Financial liabilities measured at amortized cost Embedded derivatives, lender's call option (Level 3) 4.6 Financial liabilities measured at fair value through profit and loss - 167,986 267,923 435,909 - - 320,743 122,729 199,820 643,292 80,603 80,603 Carrying amount at January 1, 2022 Fair value adjustments through profit and loss Exchange rate effect through other comprehensive income Equity investment in bond portfolio V-GO milestones Bifurcation of embedded derivatives Carrying amount at December 31, 2022 No transfer between fair value levels have occurred during 2023 and 2022. Financial assets (Level 3) Financial liabilities (Level 3) 37,844 -16,465 - - 21,379 80,603 -1,161 -1,916 -77,526 - Financial assets (Level 3) Financial liabilities (Level 3) 325,949 4,355 9 -299,042 6,573 - 37,844 - 62,613 -27 - - 18,017 80,603 Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 117 Notes to the Consolidated financial statements 4.4 Cash and cash equivalents Accounting policies Cash is measured on intitial recognition at cost. DKK thousand Cash and cash equivalents Cash and cash equivalents (subject to certain conditions) Total borrowings including embedded derivatives 2023 2022 449,311 - 720,626 348,608 449,311 1,069,234 Restricted cash and cash equivalents Under the second amendment to the Oberland loan agreement signed on September 20, 2022, the outstanding principal of USD 50 million was on December 31, 2022, held in a designated deposit account subject to certain conditions. The cash and securities could be released in increments of minimum USD 10.0 million upon request from the group subject to certain conditions as described in note 4.6 Borrowings. On May 10, 2023, Zealand settled the Oberland Capital loans in a one-time payment. With the final repayment of the Oberland loan agreement on May 10, 2023, all previous restrictions have been released. Pledges provided in relation to revolving credit facility in Danske Bank As security for the undrawn revolving credit facility of DKK 350 million, as disclosed in note 4.6 Borrowings, the Group has provided pledge over Zealand’s designated custody accounts under management by Danske Asset Management and pledge over Zealand’s designated cash accounts attached to the custody accounts. As of December 31, 2023, marketable securities and cash and cash equivalents held in these pledged accounts amount to DKK 454.5 million and DKK 0.1 million, respectively. 4.5 Marketable securities Accounting policies Marketable securities consist of investments in securities with a maturity of ninety days or greater at the time of acquisition. Measurement of marketable securities depends on the business model for managing the asset and the cash flow characteristics of the asset. There are three measurement cate- gories which Zealand considers when classifying its marketable securities: • Amortized cost: Assets that are held for collection of contractual cash flows, where those cash flows represent solely payments of principal and interest, are measured at amortized cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognized directly in profit or loss and presented in other gains/(losses), together with foreign exchange rate gains/(losses). Impairment losses are presented as a separate line item in the statement of profit or loss. • Fair value through other comprehensive income (FVOCI): Assets that are held with an objective that results in collecting contractual cash flows and selling financial assets are measured at FVOCI. A gain or loss on assets that is subsequently measured at FVOCI is recognized in other comprehensive profit or loss. Impairment losses and foreign exchange rate gains/(losses) are presented as a separate line item in the statement of profit or loss. • Fair value through profit and loss (FVTPL): Assets that do not meet the criteria for amortized cost or fair value through other comprehensive income (FVOCI) are measured at FVTPL. A gain or loss on a debt investment that is subsequently measured at FVTPL is recognized in profit or loss and presented net within financial income or expenses in the period in which it arises. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 118 Notes to the Consolidated financial statements 4.5 Marketable securities (continued) Zealand's portfolio is managed and evaluated on a fair value basis in accordance with its stated invest- ment guidelines and the information provided internally to Management. This business model does not meet the criteria for amortized cost or FVOCI and as a result marketable securities are measured at fair value through profit and loss. This classification is consistent with prior year's classification. Transactions are recognized at trade date. DKK thousand DKK portfolio: DK bonds Total DKK portfolio EUR portfolio: IG Corporate bonds (investment-grade) Total EUR portfolio USD portfolio: Asset-backed securities Certificates of deposit Commercial paper Corporate bonds U.S. Treasury Debt U.S. Treasury Repurchase Agreement Total USD portfolio Total portfolio 2023 2022 509,948 509,948 454,467 454,467 2,738 125,178 69,823 - - - - 24,392 - - - 84,219 2,664 18,928 219,331 1,183,746 - - 108,611 108,611 4.6 Borrowings Accounting policies On initial recognition, borrowings are measured at fair value which is generally equal to the proceeds received. Fair value is allocated between the debt host contract and, if applicable, an embedded derivative. Transaction costs attributable to the debt host contract are deducted from the initial fair value and amortized over the term of the loan as part of the effective interest rate on the loan. Transaction costs attributable to non-closely related embedded derivatives are expensed on initial recognition. Subsequently, borrowings are measured at amortized cost. On initial recognition, borrowings are evaluated for the existence of non-closely related embedded derivatives, i.e. cash flows or potential cash flows whose economic characteristics and risks are not closely related to the economic characteristics and risks in the debt host contract such as prepayment options at amounts which are not substantially equal to the loan’s amortized cost. The cash flows attributable to such non-closely related embedded derivatives are separated and accounted for as derivative financial instruments. Loan commitments are not recognized. Lender fees and transaction costs attributable to unconditional loan commitments are treated as prepaid transaction costs if the Group expects to draw down on the facility. If the Group has no specific plans for draw down on the loan commitment, the transaction costs are amortized over the commitment period. If a loan commitment is subject to meeting certain conditions, it is considered an unconditional loan commitment if the Group considers it probable that the conditions will be met. Amendment of the terms of a loan is accounted for as an extinguishment of the original loan and recognition of a new liability reflecting the amended terms if the amended terms are substantially different from the orig- inal terms. Both quantitative and qualitive factors are considered. If the present value of the amended cash flows discounted at the original effective interest rate differs by 10% or more, the amendment is treated as an extinguishment. If the presented value of the amended cash flows differs by less than 10%, Management evaluates qualitative factors such as: • Change in collateral and restrictions of the use of proceeds • Significant change in the term of the loan • Change in loan currency and interest base In October 2023, the USD portfolio previously held at Silicon Valley Bank has been transferred to JP Morgan. The DKK and EUR portfolios are held at Danske Bank. All fees incurred in connection with a modification of the terms accounted for as an extinguishment are recognized as an expense. All marketable securities have a fixed interest rate but different maturities. As of December 31, 2023, all outstanding securities were expected to mature within 13 months (2022: within 3 months). Derecognition of financial liabilities: A financial liability is derecognized when the obligation under the liability is settled, discharged, cancelled, or expires. The difference between the carrying amount of a financial liability extinguished and the consideration paid is recognized through profit and loss. Zealand Pharma ∞ Annual Report 2023 Contents The big picture Our business Sustainability Corporate governance Financial statements 119 Notes to the Consolidated financial statements 2023 2022 the loan within the first four years of the agreement was also increased. As a result, it was Management's assessment that the value of Zealand's prepayment option as of December 31, 2022, is immaterial. 4.6 Borrowings (continued) DKK thousand Borrowings at amortized cost Embedded derivatives at fair value Total borrowings including embedded derivatives - - - 320,743 80,603 401,346 On December 31, 2021, Zealand entered into a USD 100 million loan agreement with Oberland. The following describes subsequent amendments to the loan agreement and the final settlement in May 2023. Following a change in the strategy announced on March 30, 2022, the conditions for release of the included liquidity covenant being trailing 6 months cumulative revenue of at least USD 50 million was considered unlikely to be met. Therefore, Zealand was as of this point in time effectively restricted from obtaining access to the funds, and Zealand's prepayment option, whose fair value was assessed to be immaterial upon issue of the loan, was considered to have a significant positive value as Zealand effectively would not gain access to the cash. The positive fair value was determined as the present value of future cash flows under the contract, compared with the cost of prepaying the loan. The basis for measuring fair value was determined to be an entity (market participant) which was expected not to meet the liquidity covenant, and which needed the funds. Fair value as of December 31, 2021, was determined to amount to DKK 142.1 million based on the following assumptions: Assumption Value assigned to assumption Cash flow loan Deposit income Discount rate US LIBOR rate (annual forward rates) + 6% + “catch up” payment to arrive at an IRR of 9.75% US LIBOR rate (annual forward rates) 11% Fair value was determined mainly based on unobservable data (level 3). Please refer to the movement table presented on the following pages. Following the first amendment 50% of Zealand's prepayment option was utilized (DKK 71.0 million was recognized under loss on settlement of borrowings). As a part of the amendment, all revenue-related liquidity covenants were lifted, and Zealand gained access to the cash. The premium on repayment of During 2022 the loan agreement with Oberland Capital was amended twice. Oberland amendment no. I On May 10, 2022, Zealand entered into an agreement to amend certain terms of the Oberland loan. The amendments were as follows: • Prepayment of 50% of the USD 100 million principal which included a prepayment premium of 20% amounts to USD 60 million • Removal of the liquidity covenant meaning that Zealand has no limitations in respect of utilizing the cash held by the Group • Lender option renegotiated to include additional assets • Increase in premium which Zealand is required to pay in case of repayment within the first four years of the agreement (refer to repayment amount section below) • Potential for a further $75 million incremental capital following specific events Management considers the amendments to comprise terms which are substantially different from the term applicable prior to the amendment. Consequently, the modification has been accounted for as an extinguishment of the loan subject to the original terms and recognition of a new liability. Under the amended terms, Management estimates that fair value of the Zealand prepayment option for the remaining outstanding amount is insignificant, as release from the liquidity covenant as a market partic- ipant would not benefit from prepaying the loan due to the fact that the funds are available for use for a market participant. For the prepaid notional amount of USD 50 million, DKK 131.4 million was recog- nized as loss on settlement of borrowings under financial expenses. The amount comprises utilization of the prepayment option (DKK 71.0 million) and premium on settlement of debts (DKK 60.4 million). The cash outflow from debts of DKK 436.1 million comprises the premium on settlement of debts (DKK 56.7 million), repayment of USD 51.7 million (DKK 365.4 million) and a prepayment of USD 2.0 million (DKK 14.0 million), which will be offset against future repayments. Fair value of the amended loan (USD 50 million) was measured at DKK 367.1 million of which the fair value of the lender call option accounted for DKK 18.0 million. A loss of DKK 14.6 was recognized as a consequence of the derecognition. As discussed below under the section “Fair value measurement”, the lender call option is assessed to have a significant fair value as of the modification date and has been separated from the debt host contract. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 120 Notes to the Consolidated financial statements 4.6 Borrowings (continued) Oberland amendment no. II On September 20, 2022, the Company entered into the Second Amendment to the Note Purchase Agreement to address certain non-financial events of default by Zealand, which Oberland Capital waived pursuant to the amendment. The Second Amendment introduced two conditions for the release of the USD 50 million held in a Zealand Pharma A/S account that is controlled by Oberland Capital, one of which was satisfied. Upon satisfaction of the second condition, which relates to the fulfillment of certain post-closing obligations, Zealand may transfer funds from such account in increments of USD 10 million for purposes of operating Zealand’s business in the ordinary course upon prior notice to Oberland Capital. There are currently no other outstanding events of default under the Note Purchase Agreement. Fair value of the amended loan (USD 50 million) was assessed to be DKK 398.8 million of which the fair value of the lender call option accounted for DKK 45.0 million. A gain of DKK 23.5 was recognized as a consequence of the derecognition. Please refer to the section “Fair value measurement” for further information about the measurement of the option. Loan terms following amendment 2 Loan amount, tranche 1: Maturity date: USD 50 million December 30, 2028 Repayment profile: Repayment at maturity: Base Interest: Credit spread: Revenue participation payments: Lender call option to require repayment of the debt: 3 months US Libor with a floor of 0.25% 6% p.a., fixed over the term of the contract Draw down on tranche 1: 1.33% of consolidated revenue per financial year, not exceeding 75 MUSD. Change of control event Sale of assets or licenses – proceeds from sale to be used to repay the loan, however, no more than up to 75% of the net proceeds. Zealand option to prepay the debt: Throughout the term of the loan Repayment amount: Until January 1, 2027: From January 1, 2027 until maturity: At maturity: An amount equal to the greater of 150.0% of the principal amount of the Notes issued and the amount (greater than zero) that would generate an internal rate of return to the lender equal to 12.0% on the aggregate purchase price paid for such Notes, calculated from the First Purchase Date to the fifth anniversary of the First Purchase Date. In any case less any interests and revenue participation amounts already paid. An amount equal to the greater of 150.0% of the principal amount of the Notes issued and the amount (greater than zero) that would generate an internal rate of return to the lender equal to 11.0% on the aggregate purchase price paid for such Notes, calculated from the First Purchase Date to the date of repayment. In any case less any interests and revenue participation amounts already paid. At the principal amount or if investor IRR is lower than 9.75% p.a. including interest payments, revenue participation payments and lender-required repayments, an additional amount Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 121 Notes to the Consolidated financial statements 4.6 Borrowings (continued) Settlement of Oberland Capital loan On April 20, 2023, Oberland Capital exercised an option in the loan agreement to provide an additional loan of USD 12.5 million on similar terms as the existing loan, bringing the total principal amount to USD 62.5 million. The additional loan of USD 12.5 million was not provided in cash. On May 10, 2023, Zealand settled the Oberland Capital loans, including embedded derivatives, in a one-time payment of USD 77.3 million (DKK 525.7 million). With this final repayment, the Group’s loan agreement with Oberland Capital was fully settled. As a result of the settlement Zealand in 2023 recog- nized a net loss of USD 19.9 million (DKK 135.6 million) under financial items, including derecognition of Oberland Capital’s call option with a carrying value as of May 10, 2023, of USD 11.4 million (DKK 77.5 million). For an overview of the events under the loan agreement from December 31, 2022, and until repayment on May 10, 2023, please refer to the movement table presented below. With the final repayment, Oberland has released all rights to collateral provided for under the loan agreement. Management's judgements and estimates Fair value measurement of lender's call option Fair value of the lender call option is determined as the difference between the present value of the probability weighted contractual cash flow upon the occurrence of a call option trigger event and the present value of the contractual cash flows without a call option trigger event occurring, discounted at the expected internal rate of return of 14.3%. It is assumed that any call option trigger event will result in full repayment of the loan. As of December 31, 2022, the likelihood of a lender call option trigger event within the next two years was assessed as realistic and fair value of the option was assessed to DKK 80.6 million. At the time of settlement on May 10, 2023, the fair value of the option amounted to DKK 77.5 million. The fair value change, DKK 1.2 million (2022: DKK -62.6 million), is included in financial items, while the effect of changes to the exchange rate, DKK 1.9 million (2022: DKK 0.0 million), is included in other comprehensive income. Valuation is based on unobservable data (level 3). Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 122 Notes to the Consolidated financial statements 4.6 Borrowings (continued) Changes arising from Oberland loan agreement - including changes for level 3 embedded derivatives Non-cash changes recognized in profit and loss Non-cash changes over other com- prehensive income Carrying value as of December 31, 2022 Loss on settlement Loss on debt recognition - amendment I Bifurcation of embedded derivatives Gain on debt recognition - amendment II Fair value adjustments Amortization Interests accrued Currency adjustments Cash changes Repayment of debt, Including premium Currency adjustments Carrying value as at December 31, 2023 Borrowings as amortized costs 320,743 211,938 Embedded derivatives at fair value - Lender call option Other receivables Total impact from Oberland loan agreement 80,603 -8,184 -77,526 1,176 393,162 135,588 - - - - - - - - - - - - -1,161 - -1,161 - 943 - - 15,688 -7,960 -525,664 -1,916 263 - - - - -8,943 - - 943 15,688 -9,613 -525,664 -8,943 Non-cash changes recognized in profit and loss Non-cash changes over other com- prehensive income Carrying value as of December 31, 2021 Loss on settlement Loss on debt recognition - amendment I Bifurcation of embedded derivatives Gain on debt recognition - amendment II Fair value adjustments Amortization Interests accrued Currency adjustments Cash changes Repayment of debt, Including premium Currency adjustments Borrowings as amortized costs 647,906 60,387 22,381 -18,017 -18,581 - 1,337 47,829 -422,085 Embedded derivatives at fair value - Zealand prepayment option Embedded derivatives at fair value - Lender call option Other receivables Total impact from Oberland loan agreement - - - 71,050 - - - - -7,764 647,906 131,437 14,617 - 18,017 - - - - -4,890 -71,050 62,613 - - - - - - - 54,052 - -27 -2,928 - - -14,003 -32,651 - - - -23,471 -8,437 1,337 54,052 44,460 -436,088 -32,651 393,162 - - - - Carrying value as at December 31, 2022 320,743 - 80,603 -8,184 Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 123 Notes to the Consolidated financial statements 4.6 Borrowings (continued) Refinancing with new credit facility The repayment of the Oberland Capital loan has been refinanced through a new DKK 350 million Revolving Credit Facility provided by Danske Bank and milestones from existing partners. The facility matures in 2 years from June 2023 where any outstanding amount must be repaid in full and carries an interest of CIBOR + fixed margin. The main terms of the facility are listed below. In 2023, there have been no significant transaction costs related to the facility, thus no transaction costs have been capitalized from entering the agreement. As of December 31, 2023, total amount of undrawn borrowing facilities amounts to DKK 350 million. agreement with Zealand that will entitle the EIB to receive warrants in Zealand when each tranche is drawn down. The warrants will, subject to the warrant terms, entitle the warrant holder to subscribe for ordinary shares in Zealand at market price. The conditions for disbursement of the first tranche (Tranche A) have been met and the EUR 50 million is expected to be available to Zealand in the beginning of 2024. In 2023, DKK 0.7 million was capitalized through transaction costs related to the loan facility from entering the agreement, which will be amor- tized over the loan term. Credit facility terms: Amount: Maturity date: Repayment: Maximum number of loans and minimum amount of each loan: DKK 350 million June, 2025 Each loan under the Revolving Credit Facility must be repaid on the last day of its Interest Period. All outstanding amounts under the Revolving Credit Facility must be repaid in full on the Final Maturity Date. The loan can be called with a minimum of DKK 25,000,000, or if greater, in integral multiples of DKK 5,000,000. A maximum of 5 loans can be outstanding at any given time. Upfront fee: Interest on withdrawals: Commitment fee 0.4% of the Amount. CIBOR + fixed margin. 45% of fixed margin. For a description of the pledges provided in relation to the credit facility refer to note 4.4 Cash and cash equivalents. Warrants: New loan facility from the European Investment Bank (EIB) In December 2023, Zealand has entered into a new EUR 90 million finance agreement with the European Investment Bank (EIB). The loan, which has been offered at competitive terms, is structured with part of the interest paid at recurring intervals during the term and part being deferred (non- compounding) for payment at maturity of each tranche. In addition, the EIB will enter into a warrant Loan terms: Amount: Maturity date: Repayment: Prepayment fee: Floating rate: The loan facility may be utilized in up to three tranches of EUR 50 million (Tranche A), EUR 20 million (Tranche B) and EUR 20 million (Tranche C), respectively, with disbursement of each tranche subject to pre-specified milestones being met. A floating rate and a deferred interest rate shall be paid on each tranche. 6 years from the disbursement date of the relevant tranche. Each tranche under the EIB loan must be repaid on the maturity date. 1-5% of principal amount if prepaid before maturity. EURIBOR + fixed margin (cash pay margin). Deferred interest rate: Low single digit for all tranches. Commitment fee: Low single digit on the daily undrawn and uncancelled balance of the relevant tranche. The commitment fee becomes effective from the date falling 6 months from the date of the agreement (Tranche A) or from the date falling 6 months from conditions being fulfilled (Tranches B and C). With the disbursement of each tranche, warrants are granted to EIB in accordance with the warrant agreement. The warrants granted will vest as the loan(s) are repaid. If not utilized, any warrants will expire twenty years from the signing date of the contract. Once the warrants have vested, EIB has a put option enabling them to sell the warrants back to Zealand at fair market value at any time. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 124 Notes to the Consolidated financial statements 4.7 Financial items Accounting policies Financial items include interests, as well as foreign exchange rate adjustments, fair value adjustments of other investments, embedded derivatives and marketable securities, banking fees from managing finan- cial transactions, gains and losses from sale of marketable securities and dividends from marketable securities. DKK thousand Interest income Interest expenses from financial liabilities measured at amortized costs Interest expenses from lease liabilities Fair value adjustments of embedded derivatives – Zealand prepayment option Loss on settlement of borrowings, including embedded derivatives under Oberland loan Loss on debt recognition – amendment I Gain on debt recognition – amendment II Gain from sale of marketable securities Fair value adjustment of lender's call option Fair value adjustment of marketable securities Fair value adjustment of other investments Amortization of loan costs Exchange rate adjustments (primarily on USD deposits) Other financial expenses Financial items in total Presentation in income statement: Financial income Financial expenses 2023 2022 45,324 -21,998 -2,890 6,542 -53,169 -3,286 - -62,613 -135,588 - - 1,519 1,161 6,111 -16,465 -943 -9,708 -3,150 -136,627 -131,437 -14,617 23,471 - 71,050 -1,699 4,036 -1,337 25,602 2,569 -134,888 54,115 -190,742 133,270 -268,158 Interest income comprises interest on marketable securities, including interest from the new marketable securities in Danske Bank from June 2023, which is the main reason for the increase in interest income compared to 2022. Interest expenses and banking fees have decreased significantly compared to 2022 following the settle- ment of the Oberland Capital loans in May 2023 as described in note 4.6 Borrowings. Going forward interest expenses mainly comprise interest on the newly established credit facility in Danske Bank, the finance agreement with the European Investment Bank (EIB), and banking fees. Fair value adjustments of Zealand's prepayment option in 2022, are related to the prepayment option included in the loan agreement with Oberland. Please refer to note 4.6 Borrowings for further information. In 2023, loss on settlement of borrowings relates to the settlement of the Oberland loan on May 10, 2023. In 2022, loss on settlement of borrowings relates to the utilization of the prepayment option from the loan agreement with Oberland comprised of the partial utilization of the prepayment option, the premium paid and the capitalized loan costs, which were fully expensed. Reference is made to note 4.6 Borrowings for further information. Gain on debt modifications in 2022 comprises the accounting impact of the two amendments to the Oberland agreement as described in note 4.6 Borrowings. Fair value adjustment of lender call option in 2022 relates to the value adjustments of Oberland's option to call for repayment of the loan under certain conditions. For further information please refer to note 4.6 Borrowings. Fair value adjustment on other investments comprises the accounting impact of the investment in Beta Bionics as described in note 3.4 Other investments. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 125 Notes to the Consolidated financial statements 4.8 Share capital Accounting policies The share capital comprises the nominal amount of Zealand Pharma A/S’s ordinary shares, each at a nominal value of DKK 1. All shares are fully paid. The share premium reserve is comprised of the amount received, attributable to shareholders’ equity, in excess of the nominal amount of the shares issued at the parent company’s capital increases or exercise of warrants, reduced by any external expenses directly attributable to the offerings. The total nominal amount from purchase of treasury shares is recognized in retained losses, including any amount excess of the nominal amount. Share option schemes The Group has share option schemes for warrants, performance share units (PSUs) and restricted share units (RSUs) under which options to subscribe for the Group’s shares have been granted to employees, Management and Board of Directors. Refer to note 4.9 Share-based instruments for further details. PSUs and RSUs exercised in each respective year have been settled using the treasury shares of the Group. Any excess of the cash received from exercise of warrants over the nominal amount of the shares issued is recorded in share premium. DKK thousand Share capital at January 1 Shares issued for cash Exercise of warrants Share capital at December 31 2023 2022 51,702 6,579 470 58,751 43,634 7,867 201 51,702 The share capital solely consists of one class of ordinary shares all issued at DKK 1 each and all shares rank equally. The shares are negotiable instruments with no restrictions on their transferability. All shares have been fully paid. At the annual general meeting on March 31, 2023, Zealand was author- ized to increase the share capital by nominally DKK 10,340,419 during the period until March 29, 2028. On December 31, 2023, nominally DKK 3,761,471 of the authorization remains. The Company has an unused authorization to issue convertible debt instruments with access to conversion to shares in the Company of up to a total of nominally DKK 10,850,136. This authorization covers the period until April 15, 2026. On March 30, 2023, Zealand announced an issue of 6,578,948 new ordinary shares at a subscription price of DKK 228 per new share resulting in gross proceeds of DKK 1.5 billion. The capital increase was completed in April 2023. During 2023, a total of 470,106 new shares (2022: 200,588) have been issued due to exercise of warrant programs with net proceeds of DKK 63.9 million (2022: DKK 23.8 million) corresponding to an average exercise price of DKK 136.0 (2022: DKK 118.8). As announced on January 8, 2024, the Board of Directors exercised the remaining authorization granted by Zealand's annual general meeting held on March 29, 2023, to increase the Group's share capital by issue of 3,761,470 new ordinary shares at a subscription price of DKK 386.45 per new share. The aggre- gate gross proceeds from the private placement in public equity will amount to DKK 1.45 billion and Zealand intends to use the net proceeds to further strengthen Zealand’s investment in its differentiated assets targeting obesity. The new shares were issued on January 12, 2024, and Zealand received the net proceeds of DKK 1.43 billion on January 16, 2024. The costs related to the capital increase were DKK 22.9 million. For additional information on the potential dilutive effects refer to note 2.11 Earnings per share. Treasury shares As of December 31, 2023, there were 373,134 treasury shares, equivalent to 0.6% of the share capital (2022: 230,063, 0.4%). The treasury shares are allocated to performance share units (PSUs) and restricted share units (RSUs). As of December 31, 2023, DKK 81.0 million included in trade and other payables, comprise Zealand's commitment to a bank credit relating to the acquisition of 300,000 new treasury shares in 2023. The payable amount for treasury shares as of December 31, 2022, of DKK 41.6 million as disclosed in note 3.8 Trade and other payables has been settled and paid in full during 2023, and is reflected in the cash flow statement for 2023. The DKK 41.6 million was recognized under equity in 2021 when Zealand committed to the purchase of 200,000 new treasury shares. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 126 Notes to the Consolidated financial statements 4.9 Share-based instruments To motivate and retain key employees, Management and Board of Directors and to encourage the achievement of common goals for employees, Management and shareholders, the Group has estab- lished equity-settled incentive plans based on Restricted share units (RSUs), Performance share units (PSUs) and warrants. Warrants, PSUs and RSUs are granted by the Board of Directors in accordance with authorizations given to it by Zealand Pharma A/S’s shareholders. Grants to members of the Board of Directors and members of the Executive Management are subject to the Remuneration Policy adopted at the Annual General Meeting. Share-based compensation expense The total expense recognized for the year under staff costs arising from share-based instruments was as follows: DKK thousand Recognized as staff costs: Share-based compensation expenses Total Total share-based compensation expenses split on type of award DKK thousand PSUs RSUs Warrants Total 2023 2022 61,426 61,426 52,286 52,286 2023 2022 18,209 22,481 20,736 61,426 11,510 16,789 23,987 52,286 Total share-based compensation expenses split on expense type DKK thousand The amount is presented as: Research and development expenses Selling and marketing expenses General and administrative expenses Other operating items Discontinued operations Total 2023 2022 29,758 1,732 29,936 - - 61,426 33,837 649 31,696 -11,241 -2,655 52,286 In 2022, restructuring costs from discontinued operations included a reversal of costs related to forfeited share-based incentive programs of DKK 2.7 million. Restructuring costs from continuing operations also included a reversal of costs related to forfeited share-based incentive programs as part of restructuring costs following the March 20, 2022, company announcement. This is included in other operating items with DKK 11.2 million. For further information see note 2.9 Other operating items. Accounting policies Share-based compensation expenses The value of services received as consideration for share-based compensation is measured at the fair value of the granted instrument. The fair value of equity-settled share-based compensation is determined at the grant date and is recognized in the income statement as employee benefit expense over the period in which the instruments vest. The offsetting entry is recognized under equity. At each reporting date, an estimate is made of the number of instruments expected to vest, so the total expense recognized over the vesting period is equal to fair value of the actual number of instruments which vest. The fair value of warrants granted is estimated using the Black–Scholes pricing model, whereas for RSUs and PSUs the closing share price on the day of the grant is used. In respect of performance obligations, market conditions, such as when the exercisability of an instrument depends on the achievement of a specified target that is based on the market price or value of the entity’s equity instruments, relative to an index, are taken into account when estimating the fair value of the award at the grant date, while non-market vesting conditions, such as forfeiture rates, are taken into account by adjusting the number of equity instruments included in the measurement of the transaction amount so as to reflect the number of awards that are expected to vest. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 127 Notes to the Consolidated financial statements 4.9 Share-based instruments (continued) Management's judgements and estimates Estimate of fair value of share-based compensation programs In accordance with IFRS 2, the fair value of the warrants at grant date is recognized as an expense in the income statement over the vesting period. For warrants granted after January 1, 2019, the volatility rate used is based on a historical volatility of the Zealand share price calculated as the vesting period of 3 years plus 50% of the exercise period of 7 years i.e., 6.5 years (2022: 6.5 years) The fair value of the warrants granted in 2023 and 2022 was determined using the Black-Scholes model using the following inputs: The fair value of each warrant granted during the year is calculated using the Black-Scholes pricing model. This pricing model requires the input of subjective assumptions such as: Grant year • The expected share price volatility, which is based upon the historical volatility of Zealand's share price. • The risk-free interest rate, which is determined based on the interest rate on Danish government bonds (bullet issues) with a maturity similar to the expected life of the option. • The expected life of warrants, which is based on vesting terms, expected rate of exercise, and contractual life terms in the current warrant program. Inputs in determining fair value of warrants: Life of warrant Weighted average exercise price/share price (DKK) These assumptions can vary over time and can change the fair value of future warrants granted. Estimate of forfeiture rate for share-based compensation programs The estimated number of shares expected to vest is based on a series of factors such as: Volatility (%) Risk-free interest rate (%) Exercise period to-from 2023 2022 10 years 5 and 10 years 219.4 93.6 43.0 to 50.3 48.6 to 61.2 2.68 to 2.89 0.86 to 2.14 Apr '26 to Oct '33 May '23 to Sep '32 • The historic rate of employee turnover adjusted for significant events. • Remaining time until vesting. • Expected achievement of performance goals for PSUs. Determination of fair value of the instruments granted For warrants granted after 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. Warrants granted prior to April 15, 2020, 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 granted from April 15, 2020, and going forward expire automatically after 5 or 10 years for warrants granted to Corporate Management and employees, respectively. 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. Dividends are not expected. The weighted average fair value of warrants granted in 2023 is DKK 114.7 (2022: DKK 43.4). Warrant programs A Warrant grants the beneficiary the option to purchase a new share at a fixed price upon vesting. The only vesting condition is time (service condition). Incentive programs with outstanding warrants at the end of 2023 and 2022, respectively, have been offered under different warrant programs. The number of warrants granted in 2023 consists of 290,894 granted on April 19, 2023, and 4,943 granted on October 31, 2023, totaling 295,837 warrants (2022: 896,990). The warrants granted in 2023 are valued at DKK 33.9 million (2022: DKK 38.9 million) using the Black- Scholes model. The warrants vest linearly or gradually over 3 years. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 128 Notes to the Consolidated financial statements 4.9 Share-based instruments (continued) Movement table of warrants granted: No. of warrants Warrants outstanding at January 1 Granted during the period Forfeited during the period Exercised during the period Expired during the period No. of warrants outstanding at December 31 Exercisable at the end of the period Exercisable within 1 year Exercisable within 1-2 years Exercisable within 2-3 years Warrants outstanding at the end of the period: Range of exercise prices (DKK) Weighted-average remaining contractual life Number held by Executive Management Weighted average exercise price (DKK) 124.7 219.4 124.7 136.0 155.8 141.6 176.8 97.2 93.1 219.4 2023 1,549,430 295,837 -33,884 -470,106 -6,619 1,334,658 333,302 81,277 631,110 288,969 90.7-300.4 7.00 203,101 No. of warrants Warrants outstanding at January 1 Granted during the period Forfeited during the period Exercised during the period Expired during the period No. of warrants outstanding at December 31 Exercisable at the end of the period Exercisable within 1 year Exercisable within 1-2 years Exercisable within 2-3 years Warrants outstanding at the end of the period: Range of exercise prices (DKK) Weighted-average remaining contractual life Number held by Executive Management Weighted average exercise price (DKK) 159.6 93.6 175.2 118.8 158.1 124.7 122.7 194.3 97.2 93.0 2022 1,477,194 896,990 -230,302 -200,588 -393,864 1,549,430 465,158 344,717 81,277 658,277 90-224.4 5.8 268,101 The weighted average share price for warrants exercised in 2023 is DKK 252.2 (2022: DKK 189.0). The Board of Directors has not been granted warrants. Refer to note 6.1 Remuneration of the Board of Directors and Executive Management for additional information. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 129 Notes to the Consolidated financial statements 4.9 Share-based instruments (continued) PSU programs PSUs grant the beneficiary the right to receive one already existing share upon vesting. Vesting condi- tions for PSUs consist of both a service condition (time) and a performance condition. The performance condition can be either market based (cliff vesting) or operational based (graded vesting). The PSUs have either cliff vesting after 3 years or graded vesting over 3 years. Operational based PSUs are dependent on pre-determined performance criteria (non-market perfor- mance conditions) set out to pursue the overall strategic objectives for the Company. The number of performance share units granted in 2023 consists of 67,576 granted on April 19, 2023 (2022: 286,813). The value per share unit granted is determined based on the Company's closing share price on Nasdaq Copenhagen A/S on the day of the grant. The PSUs granted in 2023 are valued at DKK 14.7 million at grant (2022: DKK 28.3 million) based on a share price of DKK 218.0 (2022: DKK 90.7 to 203.0). The weighted average fair value of PSUs granted in 2023 is DKK 218.0 (2022: DKK 98.7). Dividends are not expected and thus not incorporated into the measurement of fair value. Movement table of PSU granted shares: No. of PSUs DKK thousand No. of share units: At January 1 Adjustments due to performance targets Granted during the year Vested during the year Forfeited during the year At December 31 2023 2022 357,801 - 67,576 -65,550 271,761 35,948 286,813 -71,780 - -164,941 359,827 357,801 The adjustment made in 2022 of 35,948 units was due to reaching a performance target set out in the 2021 operational based PSU grant. RSU programs RSUs grants the beneficiary the right to receive one of the Company’s already issued shares upon vesting. There are no vesting conditions except time (service condition). The RSUs have either cliff vesting after 3 years or graded vesting over 3 years. The number of restricted share units granted in 2023 consists of 126,747 granted on April 19, 2023 (2022: 148,431). The value per share unit granted is determined based on the Company's closing share price on Nasdaq Copenhagen A/S on the day of the grant. The RSUs granted in 2023 are valued at DKK 27.6 million (2022: DKK 13.6 million) and are granted at a share price of DKK 218.0 (2022: DKK 90.7 to 100.2). The weighted average fair value of RSUs granted in 2023 is DKK 218.0 (2022: DKK 91.6). Dividends are not expected and thus not incorporated into the measurement of fair value. Movement table of RSU granted shares: No. of RSUs DKK thousand No. of share units: At January 1 Granted during the year Vested during the year Forfeited during the year At December 31 2023 2022 283,272 126,747 -91,307 -42,765 460,089 148,431 -116,563 -208,685 275,947 283,272 Sale Instruction Scheme In 2024, Zealand has decided to establish a Sale Instruction Scheme for its Corporate Management. The Scheme allows the individual member of the management to give a sales instruction for future sales at a time where the individual is not in possession of inside information. The Scheme is only to be used by the Zealand management to sell shares to pay their taxes or the cost of exercising the incen- tive schemes. Zealand has assisted the management in establishing the Scheme, however, it is at the individual management member's own risk and liability to use the Scheme and Zealand cannot be held accountable for any liability. Zealand Pharma ∞ Annual Report 20235 Tax Contents The big picture Our business Sustainability Corporate governance Financial statements 130 5.0 Tax Zealand Pharma's Tax Policy is reviewed annually and approved by the Board of Directors. Please refer to our tax policy on our website: https://www.zealandpharma.com/wp-content/ uploads/2023/08/Zealand-Pharma-Company- Tax-Policy-2023.pdf. 5.1 Corporate tax 130 5.1 Corporate tax Accounting policies Income tax on results for the year, which comprises current tax and changes in deferred tax, is recog- nized in the income statement, except to the extent that the tax is attributable to items which directly relate to shareholders' equity or other comprehensive income. Current tax liabilities and current tax receivables are measure at the amounts expected to be paid to or recovered from the tax authorities. Deferred tax is accounted for under the liability method which requires recognition of deferred tax on all temporary differences between the carrying amount of assets and liabilities and the tax base of such assets and liabilities. This includes the tax value of tax losses carried forward. Deferred tax is calculated in accordance with the tax regulations in the local countries and the tax rates expected to be in force at the time the deferred tax is utilized. Changes in deferred tax from changes in tax rates is recognized in the income statement. Deferred tax assets are recognized only to the extent that it is probable that future taxable profits will be available against which the differences can be utilized. Management's judgements and estimates Zealand recognizes deferred tax assets, including the tax base of tax losses carried forward, if Management assesses that these tax assets can be offset against positive taxable income within a foreseeable future. This judgement is made on an ongoing basis and is based on numerous factors, including actual results, budgets, and business plans for the coming years. The creation and development of therapeutic products within the biotechnology and pharmaceutical industry are subject to considerable risks and uncertainties. Zealand's future taxable income will be driven by future events that are highly susceptible to factors outside of the groups control including outcomes of clinical trials, regulatory approvals, and other matters. Due to the uncertainties described, Management has concluded that no deferred tax assets should be recognized on December 31, 2023 (none recognized in 2022), except for the US entity, which is expected to have profitable taxable income due to the Group’s transfer pricing setup. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 131 Notes to the Consolidated financial statements 5.1 Corporate tax (continued) DKK thousand Net result for the year before tax Corporate tax rate in Denmark Expected tax benefit Adjustment for foreign tax rates Adjustment for non-deductible expenses Adjustment for non-taxable income Adjustment for warrants Adjustment for R&D extra deduction Adjustment to prior year Change in tax assets (not recognized) Total income tax expense/(benefit) - hereof related to discontinued operations Total income tax expense/(benefit) from continuing operations 2023 2022 DKK thousand 2023 2022 -708,865 -1,195,491 Specification of deferred tax assets: 22.0% 22.0% Tax losses carried forward (available indefinitely) 3,898,988 3,312,022 Research and development expenses Intangible assets Non-current assets Liabilities Other Total temporary differences 800 Calculated potential deferred tax asset at local tax rate Deferred tax asset not expected to be utilized Recognized deferred tax asset -155,950 -263,008 -2,618 -6,512 - -1,690 -21,768 -28,409 211,821 -5,126 - -5,126 -806 1,052 -468 5,935 -20,960 283,493 6,644 -13,075 -6,431 1,031,011 76,129 100,444 21,981 412,116 956,816 107,231 105,323 77,168 103,278 5,540,669 4,661,838 1,219,805 1,026,257 -1,218,880 -1,024,240 925 2,017 Zealand Pharma pays corporate income tax in jurisdictions where the operations are profitable. Corporate income tax is currently only paid in the United States. We are currently in a loss-making posi- tion in Denmark with an accumulated tax loss carryforward shown in the table below, which can be offset in future taxable income. Zealand Pharma accepts government sponsored tax credits and incentives with strict adherence to the rules and in line with the economic substance of the Company’s business activities. We only accept credits and incentives which are commonly available. Under Danish tax law, Zealand Pharma is eligible to receive a DKK 5.5 million cash refund in 2023 (2022: DKK 5.5 million) on qualifying research and development expenses, which at the same time equally reduces the tax loss carried forward. Zealand is also eligible for the super deduction in Denmark on certain research and development expenditures. Unrecognized deferred tax assets relate to tax jurisdictions in Denmark and US. Adjustment for foreign tax rates Adjustment relates to difference in the corporate tax rates between Denmark and United States. Adjustment for non-deductible expenses Adjustment mainly relates to interest deduction limitation and value adjustment of tax-exempt port- folio shares in Beta Bionics Inc. In addition, from January 1, 2023, new legislation limiting deduction for high salaries has come into effect. This is more than offset by non-deductible expenses related to the Oberland Capital loan in 2023. Adjustment for warrants Adjustment relates to timing difference between deduction of warrants in the accounts and the deduc- tion for tax purposes, along with differences in accounting and tax values. In accordance with IFRS 2, the fair value of warrants at grant date is recognized as an expense in the income statement over the vesting period for accounting purposes. For tax purposes, a deduction is Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 132 Notes to the Consolidated financial statements 5.1 Corporate tax (continued) claimed at the time the warrants, which fulfill certain conditions, are exercised. The deductible amount is equal to the difference in fair value of the warrants and the exercise price for taxable warrants. The adjustment relates to Zealand Pharma's warrant incentive schemes and represents the deduct- ible amount along with an adjustment of the expected future tax deduction on incentive schemes. Deductions are calculated based on the circumstances for the individual scheme and the recipient. Zealand Pharma also provides, included in this adjustment, incentive schemes which are non-deduct- ible for tax purposes. Adjustment for R&D extra deduction Adjustment relates to an 8% extra deduction taken on qualifying research and development expenses in accordance with the government sponsored tax incentive. Adjustment to prior year In 2023, the adjustment mainly relates to an interest limitation that was not fully included until the finali- zation of the tax return for 2022. Tax assets not recognized In accordance with the Group’s accounting policies, the value of tax assets originating from Denmark is not recognized, due to uncertainty regarding when and if they will be realized as a future tax advantage within a foreseeable future. Tax assets originating from Zealand Pharma U.S., Inc. have been recognized with an amount of DKK 0.9 million, which is expected to be realized as a future tax advantage within a foreseeable future. Total tax losses carried forward for the Group amount to DKK 3,899 million. Zealand Pharma ∞ Annual Report 20236 Other disclosures Contents The big picture Our business Sustainability Corporate governance Financial statements 133 6.0 Other disclosures 6.1 Remuneration of the Board of Directors and Executive Management 6.2 Fees to auditors appointed at the annual general meeting 6.3 Contingent assets and liabilities 6.4 Commitments 6.5 Related parties 6.6 Cash flow adjustments 6.7 Collaborations and technology licenses 132 134 134 134 134 135 135 6.1 Remuneration of the Board of Directors and Executive Management DKK thousand Remuneration to the Board of Directors Martin Nicklasson Kirsten Drejer Alain Munoz Michael Owen Bernadette Mary Connaughton Jeffrey Berkowitz Leonard Kruimer Jens Peter Stenvang1 Frederik Barfoed Beck1 Louise Gjelstrup¹ Anneline Nansen1,2 Total Base board fees 2023 Share-based compensation Total fees Base board fees 2022 Share-based compensation 100 100 100 100 100 100 100 100 100 100 100 966 483 544 544 483 483 664 181 181 181 181 1,066 583 644 644 583 583 764 281 281 281 281 100 100 100 100 100 100 100 100 100 100 100 968 484 545 545 484 484 666 182 182 182 96 Total fees 1,068 584 645 645 584 584 766 282 282 282 196 1,100 4,891 5,991 1,100 4,818 5,918 1 Employee-elected board members; the table only includes remuneration for board work. 2 Anneline Nansen joined the Board in 2021. 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 accommodation. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 134 Notes to the Consolidated financial statements 6.1 Remuneration of the Board of Directors and Executive Management (continued) DKK thousand 2023 Remuneration to the Executive Management Adam Sinding Steensberg1 Henriette Wennicke2 Total Total Other Corporate Management⁵ Total 2022 Remuneration to the Executive Management Adam Sinding Steensberg1 Henriette Wennicke2 Emmanuel Dulac3 Matthew Donald Dallas4 Total Total Other Corporate Management⁵ Total 1 Former EVP, R&D and CMO Adam Sinding Steensberg was appointed CEO at March 30, 2022. 2 Henriette Wennicke was appointed as CFO at November 1, 2022. 3 Former CEO Emmanuel Dulac resigned from Zealand at March 30, 2022. 4 Former CFO Matthew Donald Dallas resigned from Zealand at August 31, 2022. 5 Other Corporate Management in 2023 comprised four members (2022: four) Base salary Bonus Pension contribution Other short term benefits Share-based compensation Severance payments Total 5,750 2,621 8,371 9,696 4,744 1,441 6,185 5,300 18,067 11,485 4,162 420 2,626 2,248 9,456 9,826 19,282 2,366 168 1,575 860 4,969 4,204 9,173 1,150 524 1,674 1,016 2,690 832 84 525 46 1,487 1,009 2,496 243 267 510 820 1,330 725 41 122 234 1,122 879 2,001 12,950 4,387 17,337 15,467 32,804 11,061 225 -3,265 -581 7,440 10,986 - - - - - - - 6,564 3,194 9,758 3,033 24,837 9,240 34,077 32,299 66,376 19,146 938 8,147 6,001 34,232 29,938 18,426 12,791 64,170 Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 135 Notes to the Consolidated financial statements 6.2 Fees to auditors appointed at the annual general meeting 6.4 Commitments DKK thousand Audit Audit-related services and other assurance engagements Other Total fees 2023 2,590 940 - 2022 7,862 1,760 389 3,530 10,011 The fee for audit-related services and other assurance engagements, and other services provided to the Group by EY Godkendt Revisionspartnerselskab in 2023 and 2022 consisted of an audit of the annual report, quarterly reviews, other audit-related services on various statements for public authorities, and other accounting advisory services. 6.3 Contingent assets and liabilities Contingent assets and liabilities Zealand is entitled to potential milestone payments and royalties on successful commercialization of products developed under license and collaboration agreements with partners. Since the size and timing of such payments are uncertain until the milestones are reached or sales are generated, future payments under these agreements qualify as contingent assets. However, it is impossible to measure the value of contingent assets, and as such, no assets have been recognized. Guarantees and collaterals The Group provided floating charge collateral covering all assets in the Company which could be collat- eralized, including shares in subsidiaries, as collateral for the debt to Oberland. On May 10, 2023, the Group settled the Oberland Capital loans in a one-time payment. With the final repayment, Oberland has released all rights to collateral provided for under the loan agreement. Under the revolving credit facility (RCF) in Danske Bank, Zealand is required to have a minimum collat- eral value of 120% of the loan commitment (DKK 420 million) held in the designated custody accounts under management by Danske Asset Management and Zealand’s designated cash accounts attached to the custody accounts. Zealand must also comply with a covenant on fulfilling certain information requirements. The pledges are described further in note 4.4 Cash and cash equivalents. The EIB loan contains a negative pledge clause preventing Zealand Pharma A/S or any of its subsidiaries from creating or permitting to subsist any new security over any of its assets. Other purchase obligations As of December 31, 2023, total contractual obligations related to agreements for development projects, including CROs, amounted to DKK 304.4 million of which DKK 219.3 million relates to 2024 and DKK 85.1 million to the years 2025 up to and including 2028 (2022: DKK 220.5 million). 6.5 Related parties Zealand has no related parties with controlling interest. As part of the license and collaboration agreements that Zealand has entered, once a product is devel- oped and commercialized, Zealand may be required to make milestone and royalty payments. It is not possible to measure the value of such future payments, but Zealand expects to generate future income from such products which will exceed any milestone and royalty payments due, and as such, no liabili- ties have been recognized. Zealand’s other related parties comprise the Company’s Board of Directors and Executive Management. Aside from the remuneration and other transactions described in note 6.1 Remuneration of the Board of Directors and Executive Management, there were no other material related party transactions during 2023 and 2022. Reference is made to note 6.7 Collaborations and technology licenses for descriptions of Zealand’s collaboration and license agreements. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 136 Notes to the Consolidated financial statements 6.6 Cash flow adjustments 6.7 Collaborations and technology licenses DKK thousand 2023 2022 Depreciation, amortization and impairment losses Deferred revenue Reversal of inventory write-down Share-based compensation expenses Financial income Financial expenses Corporate tax Fair value adjustments Exchange rate adjustments 25,086 - -15,980 61,426 -54,115 190,741 -5,125 - - 117,961 -67,584 - 52,286 -37,780 174,927 9,893 -3,590 23,219 Adjustments for non-cash items in total 202,033 269,332 DKK thousand Changes in accounts receivable Changes in prepaid expenses Changes in other receivables Changes in inventory Changes in accounts payable Changes in other liabilities Changes in rebate and discount liabilities Changes in other liabilities and provisions Changes in working capital in total 2023 2022 -6,756 28,534 -11,849 9,339 39,837 14,218 -2,162 -19,058 52,103 26,636 17,581 6,474 18,221 21,550 -26,452 -22,515 -31,334 10,161 Collaboration and license agreements Zealand enters into collaborations with biotechnology and pharmaceutical companies to advance the development and commercialization of our product candidates and to supplement our internal pipeline. Zealand seeks collaborations that will allow Zealand to retain significant future participation in product sales through either profit-sharing or royalties paid on net sales. Below is an overview of Zealand's collaboration and license agreements that have had a significant impact or are expected in the near term to have a significant impact on financial results. With reference to note 6.3 Contingent assets and liabilities, each agreement is marked with CA (contingent asset) and CL (contingent liability) if applicable. Complement C3 (collaboration with Alexion, AstraZeneca Rare Disease) (CA) Zealand and Alexion are collaborating on the discovery and development of novel peptide therapies for complement-mediated diseases. Under the terms of the agreement entered in March 2019, Alexion and Zealand entered into an exclusive collaboration for the discovery and development of subcutaneously delivered peptide therapies directed to up to four complement pathway targets. The lead program, ZP10068, is an investigational long-acting inhibitor of Complement C3 which has the potential to treat a broad range of complement mediated diseases. Zealand will lead the joint discovery and research efforts through the pre-clinical stage, and Alexion will lead development efforts beginning with Investigational New Drug (IND) filing and Phase 1 trials. Zealand has completed activities to support advancing ZP10068 into clinical studies. Subsequent regulatory, clinical, and development efforts will be led and conducted by Alexion. For the lead target, Zealand is eligible to receive up to USD 115 million in development milestone payments and up to USD 495 million in sales milestone payments, plus royalties on global sales in the high single to low double digits. In addition, Alexion has the option to select up to three additional targets with Zealand being eligible for USD 15 million upfront per target plus potential development/ regulatory milestones for each target selected similar to the lead target with slightly reduced commer- cial milestones and royalties. Zealand receives compensation on a time and material basis for certain research and development services delivered under the contract. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 137 Notes to the Consolidated financial statements 6.7 Collaborations and technology licenses (continued) Beta Bionics (Dasiglucagon for bi-hormonal artificial pancreas systems) (CA) Dasiglucagon is in clinical development for use in investigational bi-hormonal artificial pancreas (BHAP) systems containing both insulin and dasiglucagon. In 2016, Zealand entered into collaboration with Beta Bionics, Inc., a medical technology company leveraging lifelong, machine-learning, artificial intelligence to develop and commercialize the world’s first autonomous bionic pancreas. The partnership aims to combine product rights from each party to advance a new dual-hormonal artificial pancreas system. Such a system has the potential to offer people with diabetes on insulin therapy more efficacious, safer, and easier blood sugar control for better long-term disease management and outcomes. DEKA Research & Development Corp. (CHI/dasiglucacon) (CL) In November 2021, Zealand announced a collaboration agreement with DEKA to develop a continuous infusion pump, for which Zealand receives a worldwide, exclusive license, to be used in combination with dasiglucagon for treatment of CHI. DEKA is responsible for pump development and pump manufacturing activities. Zealand is responsible for clinical development around the drug-device combination and commercialization in all territories. As consideration for a global license to use the infusion pump for treatment of CHI, DEKA is eligible to receive a low to high single digit royalty rate of the global net sales of the combination product. As a part of the collaboration Zealand has made an investment in Beta Bionics. Reference is made to note 3.4 Other investments for further information. Boehringer Ingelheim (Obesity/survodutide) (CA) In June 2011, Zealand entered into a license, research, and development collaboration agreement with Boehringer Ingelheim International GmbH (BI) to advance novel dual acting glucagon/GLP-1 peptide receptor agonists for the treatment of patients with type 2 diabetes and obesity. As part of the agree- ment, Boehringer obtained global development and commercialization rights to the lead drug candidate, survodutide. Boehringer funds all research, development, and commercialization activities under the agreement. As of December 31, 2023, Zealand is eligible to receive license and milestone payments of up to EUR 315.0 million, related to the achievement of pre-specified development, regulatory and commercial milestones for the lead product. Zealand is also eligible to receive tiered royalties ranging from high single digit to low double digit percentages on global sales by Boehringer of all products stemming from this collaboration. In addition, Zealand retains co-promotion rights in Scandinavia. In November 2023, Boehringer initiated the Phase 3 program with survodutide in patients living with obesity or overweight (SYNCHRONIZE™) that consists of three global clinical trials, which triggered a EUR 30 million milestone payment (2022: 0). Encycle Therapeutics (CL) In October 2019, Zealand announced the acquisition of Encycle Therapeutics to obtain a pre-clin- ical asset that complements Zealand’s focus on developing next-generation peptide therapeutics for gastrointestinal diseases. The asset is being developed as an orally delivered peptide drug to target inte- grin alpha-4-beta-7, which is involved in the pathogenesis of inflammatory bowel disease (IBD). As compensation for the acquisition, the former owners of Encycle are eligible for up to USD 80.0 million in development and sales-based milestones as well as a potential mid-single digit royalty on global net sales. MannKind Corporation (V-GO) (CA) In May 2022, Zealand announced an Asset Purchase Agreement with MannKind Corporation to sell the V-GO Insulin Delivery Device. V-GO is a once-daily, wearable, insulin delivery device that helps provide blood sugar control for everyday lifestyles. Designed to be patient-friendly, V-GO is worn like a patch and eliminates the need for taking multiple daily shots. As of December 31, 2023, Zealand is eligible to receive up to USD 10.0 million in sales-based milestones. The fair value of milestones is recognized as other financial assets, refer to note 3.7 Other financial assets. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 138 Notes to the Consolidated financial statements 6.7 Collaborations and technology licenses (continued) 6.8 Subsequent events Novo Nordisk (Zegalogue®/dasiglucagon (CA) In September 2022, Zealand announced a global license and development agreement with Novo Nordisk to commercialize Zegalogue® (dasiglucagon) for injection. Zegalogue® is approved by the U.S. Food and Drug Administration (FDA) for the treatment of severe hypoglycemia in pediatric and adult patients with diabetes aged 6 and above. Under the agreement Novo Nordisk A/S is responsible for the global commer- cialization of Zegalogue® while Zealand is responsible for certain planned regulatory, development and manufacturing activities to support further development and approval outside of the U.S. for which Zealand is eligible to receive a mix of development milestones, and time and material compensation. Capital increase As announced on January 8, 2024, the Board of Directors exercised the remaining authorization granted by Zealand's annual general meeting held on March 29, 2023, to increase the Group's share capital by issue of 3,761,470 new ordinary shares at a subscription price of DKK 386.45 per new share. The aggregate gross proceeds from the private placement amount to DKK 1.45 billion and Zealand intends to use the net proceeds to further strengthen Zealand’s investment in its differentiated assets targeting obesity. Zealand retained all non-licensed intellectual property rights to the Company’s other dasiglucagon devel- opment programs. The new shares were issued on January 12, 2024, and Zealand received the proceeds on January 16, 2024. Besides the above mentioned, no events have occurred subsequent to the balance sheet date that could significantly affect the financial statements as of December 31, 2023. Disbursement of EIB loan (Tranche A) As announced on December 22, 2023, Zealand entered into a new EUR 90 million (DKK 671 million) finance agreement with the European Investment Bank (EIB). The conditions for disbursement of the first tranche (Tranche A) have been met. In February 2024, Zealand Pharma has accepted disbursement offer for Tranche A and the related EUR 50 million (DKK 373 million) is expected to be received in March 2024. As of December 31, 2023, Zealand is eligible to receive up to DKK 22.5 million in development milestones and DKK 220.0 million in sales-based milestones as well as tiered royalties ranging from high single digit to low double digit percentages on worldwide net sales by Novo Nordisk A/S. Zealand is also eligible for compensation on a time and material basis for certain product supply, research and development services delivered under the contract. Protagonist Therapeutics (Rusfertide) (CA) In June 2012, Zealand and Protagonist entered into a collaboration to develop disulfide-rich peptides. Protagonist has since taken over the full responsibility of the development. As of December 31, 2023, Zealand is eligible to receive up to USD 60.0 million in regulatory and commer- cial milestones, as well as a low single digit royalty rate on global net sales. Sanofi/Royalty Pharma (Soliqua/Suliqua/Lyxumia/Adlyxin) (CA) In September 2018, Zealand announced that all future royalties and all but up to USD 15.0 million of future milestone payments relating to the Sanofi License Agreement were sold to Royalty Pharma. In 2023, USD 10 million in milestone payments associated with lixisenatide were received from Sanofi. Out of the USD 10 million from Sanofi, Zealand will pay USD 1.3 million in royalty expenses to Alkermes in line with a termination agreement following the dissolution of a former joint venture with Elan Corporation (now Alkermes), stipulating that Alkermes is entitled to 13% of payments received by Zealand in respect to lixisenatide under the Sanofi License Agreement. As of December 31, 2023, there are no outstanding mile- stone payments associated with the license agreement with Sanofi (2022: USD 10 million). Zealand Pharma ∞ Annual Report 2023Financial statements of the parent company Contents The big picture Our business Sustainability Corporate governance Financial statements 139 Contents – parent company Statement of loss Statement of financial position Statement of cash flows Statement of changes in equity Notes 140 141 142 142 143 1 2 3 4 5 Significant accounting policies, and significant accounting estimates and assessments Revenue Royalty expenses Research and development expenses Sales and marketing expenses 6 General and administrative expenses 7 8 Information on staff and remuneration Financial items 9 Other operating items 10 Corporate tax 11 Discontinued operations 12 Intangible assets 13 Property, plant and equipment 14 Right-of-use assets and lease liabilities 143 143 144 144 144 144 144 146 146 147 147 149 150 151 15 Investments in subsidiaries 16 Inventories 17 Trade and other receivables 18 Trade and other payables 19 Fees to auditors appointed at the annual general meeting 20 Contingent assets, liabilities and other contractual obligations 21 Transactions with related parties 22 Adjustments for non-cash items 23 Changes in working capital 24 Significant events after the balance sheet date Alternative performance measures for the Group (non-audited) 152 152 153 153 153 153 154 154 154 154 155 Zealand Pharma ∞ Annual Report 2023 Financial statements of the parent company Statement of loss Contents The big picture Our business Sustainability Corporate governance Financial statements 140 Financial statements of the parent company Statement of loss for the years ended December 31, 2023 and 2022 Statement of comprehensive loss for the years ended December 31, 2023 and 2022 DKK thousand Revenue Royalty expenses Cost of goods sold Gross profit Research and development expenses Sales and marketing expenses General and administrative expenses Other operating income Other operating expenses Net operating expenses Operating result Dividend from subsidiaries Financial income Financial expenses Result before tax Corporate tax Net result for the year from continuing operations Net result for the year from discontinued operations Net result for the year Note 2023 2022 DKK thousand Note 2023 2022 Net result for the year Other comprehensive income/(loss) Total comprehensive result for the year -903,775 -1,019,962 - - -903,775 -1,019,962 2 3 4 5 6 9 9 8 8 278,131 -7,447 -10,036 260,648 141,741 -37,756 - 103,985 -690,260 -613,993 -29,886 -32,285 -184,058 -236,977 15,979 - - -88,188 -888,225 -971,443 -627,577 -867,458 - 48,779 -330,569 38,624 36,710 -9,268 -909,367 -801,392 10 11 5,592 5,005 -903,775 -796,387 - -223,575 -903,775 -1,019,962 Zealand Pharma ∞ Annual Report 2023Statement of financial position Statement of financial position Contents The big picture Our business Sustainability Corporate governance Financial statements 141 Financial statements of the parent company Statement of financial position as of December 31, 2023 and 2022 DKK thousand Assets Intangible assets Property, plant and equipment Right-of-use assets Other investments Investments in subsidiaries Other receivables Other financial assets Total non-current assets Inventory Trade and other receivables Corporate tax receivable Marketable securities Cash and cash equivalents (subject to certain conditions) Cash and cash equivalents Total current assets Total assets Note Group note 2023 2022 DKK thousand Note Group note 2023 2022 12 13 14 15 17 16 17 10 12,255 47,047 89,772 14,004 36,186 15,786 7,375 3.4 3.7 Share capital - Share premium 46,169 97,571 30,943 62,228 157,039 6,901 Retained losses Total shareholders' equity Other payables Lease liabilities Total non-current liabilities 222,425 400,851 Lease liabilities Trade and other payables Total current liabilities Total liabilities Total shareholders' equity and liabilities 7,935 178,249 11,000 4.5 1,183,746 4.4 4.4 - 302,157 1,683,087 1,286 134,760 5,500 - 348,608 361,496 851,650 1,905,512 1,252,501 18 14 14 18 4.8 58,751 51,702 6,406,225 4,921,232 -4,928,620 -4,005,383 1,536,356 967,551 303 83,977 84,280 12,024 272,852 305,820 19,058 91,096 110,154 11,522 163,274 174,796 284,876 284,950 1,905,512 1,252,501 Zealand Pharma ∞ Annual Report 2023Statement of cash flows Statement of changes in equity Contents The big picture Our business Sustainability Corporate governance Financial statements 142 Financial statements of the parent company Statement of cash flows for the years ended December 31, 2023 and 2022 DKK thousand Note 2023 2022 DKK thousand Statement of changes in shareholders' equity at December 31, 2023 and 2022 Share capital *Share premium *Retained losses Net result for the year Adjustment for other non-cash items Changes in working capital Financial income received Financial expenses paid Corporate taxes received 22 23 336,963 -103,446 33,816 -8,675 91 13,049 -53,814 - -999 7,698 Net result for the year Purchase of treasury shares Net settlement of PSUs Net settlement of RSUs Exercise of warrants Cash flow used in operating activities -645,026 -1,054,028 Share-based compensation expenses - - - - 470 - - - - - 63,480 - -903,775 -1,019,962 Equity at January 1, 2023 51,702 4,921,232 -4,005,383 Proceeds from sale of marketable securites 665,336 297,559 Purchase of marketable securities Purchase of intangible assets Purchase of property, plant and equipment Divestment of activities -1,843,301 -12,508 -11,241 - 11 - - -8,838 64,475 Capital increases Costs related to capital increases 6,579 1,493,421 - -71,908 Equity at December 31, 2023 58,751 6,406,225 -4,928,620 1,536,356 Equity at January 1, 2022 Net result for the year 43,634 3,891,993 -3,037,895 897,732 -1,019,962 -1,019,962 Cash flow from/(used in) investing activities -1,201,714 353,196 Net settlement of PSUs Net settlement of RSUs Exercise of warrants Share-based compensation expenses Capital increases Costs related to capital increases - - - 201 - - - - 31,703 - 7,867 1,044,890 - -47,354 Equity at December 31, 2022 51,702 4,921,232 -4,005,383 * Other reserves of DKK 915.8 million from the 2022 Annual Report have been split into Share premium and Retained losses to ease read- ability of movements in shareholders’ equity. -903,775 -81,045 66 91 - 61,426 - - 72 116 - 52,286 - - Total 967,551 -903,775 -81,045 66 91 63,950 61,426 1,500,000 -71,908 72 116 31,904 52,286 1,052,757 -47,354 967,551 Lease installments Proceeds from issuance of shares Purchase of treasury shares Proceeds from issuance of shares related to exercise of share- based compensation Costs related to issuance of shares Cash flow from financing activities (Decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of year Exchange rate adjustments Cash and cash equivalents at end of year 14 -11,649 -11,714 1,500,000 1,052,757 -41,600 - 63,950 -71,908 31,904 -47,354 1,438,793 1,025,593 -407,947 710,104 - 324,761 377,189 8,154 302,157 710,104 Zealand Pharma ∞ Annual Report 2023Notes to the Financial statements of the parent company Notes Contents The big picture Our business Sustainability Corporate governance Financial statements 143 Notes to the Financial statements of the parent company 1 Significant accounting policies, and significant accounting estimates and assessments 2 Revenue Significant accounting policies Basis of preparation The separate financial statement of the parent company has been prepared in accordance with IFRS Accounting Standards as adopted by the EU (IFRS) and additional requirements under the Danish Financial Statements Act (Class D). The accounting policies for the financial statements of the parent company are unchanged from the previous financial year. A number of new or amended standards became applicable for the current reporting period. The parent company did not change its accounting policies as a result of the adoption of these standards. The accounting policies are the same as for the consolidated financial statements with the supplementary accounting policies for the parent described below. For a description of the accounting policies of the group, please refer to section 1.0 Basis of preparation in the consolidated financial statements. Notes have only been included in the Parent Financial Statement where amounts differ from the consolidated financial statement. Supplementary accounting policies for the parent company Revenue from research and development services rendered to ZP SPV 3 K/S Revenue from research and development services are performed and satisfied over time given that ZP SPV 3 K/S simultaneously receives and consumes the benefits provided by Zealand Pharma A/S. Investments in subsidiaries Please refer to note 15 Investments in subsidiaries. Please refer to note 2.1 Revenue in the consolidated financial statements for accounting policies for the revenue streams and additional information regarding revenue. Recognized revenue can be specified as follows for all agreements: DKK thousand 2023 2022 Alexion Pharmaceuticals Inc. Boehringer Ingelheim International GmbH Novo Nordisk A/S ZP SPV 3 K/S Total revenue from license and collaboration agreements Product sales - External Product sales - Intercompany - Hereof related to discontinued operations Sale of goods revenue from continuing operations 4,093 223,725 34,150 6,127 268,095 10,036 - - 10,036 69,028 - 34,013 38,700 141,741 21,292 -10,791 -10,501 - Total revenue from continuing operations 278,131 141,741 Total revenue recognized over time Total revenue recognized at a point in time from continuing operations Total revenue recognized at a point in time from discontinued operations Milestone revenue Royalty revenue Reimbursement revenue for R&D services Product sales Revenue from research and development services rendered to ZP SPV 3 K/S Total revenue by revenue stream from continuing operations Product sales Total revenue by revenue stream from discontinued operations 44,371 233,760 - 223,725 840 37,403 10,036 6,127 278,131 - - 114,881 26,860 10,501 26,860 - 65,390 10,791 38,700 141,741 10,501 10,501 Revenue of DKK 6.1 million (2022: 38.7 million) from ZP SPV 3 K/S relates to IP rights for the Alexion Pharmaceutical Inc. agreement transferred from Zealand Pharma A/S to ZP SPV 3 K/S in 2020. ZP SPV 3 K/S reimburses ZP A/S for the R&D services carried out on behalf of ZP SPV 3 K/S. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 144 Notes to the Financial statements of the parent company 3 Royalty expenses Royalty expenses of DKK 7.4 million in 2023 (2022: 37.8 million) relate to license fees payable by Zealand Pharma A/S to ZP SPV 3 K/S for use of the IP rights under the Alexion Pharmaceuticals Inc. agreement which were internally transferred to ZP SPV 3 K/S in 2020. 4 Research and development expenses DKK thousand Staff costs (note 7) Amortization, depreciation, impairment losses on intangibles assets, property, plant and equipment, and right-of-use assets Other external research and development expenses Total research and development expenses - Hereof related to discontinued operations Total research and development expenses from continuing operations 5 Sales and marketing expenses DKK thousand Staff costs (note 7) Amortization, depreciation, impairment losses on intangibles assets, property, plant and equipment, and right-of-use assets Other external sales and marketing expenses Total sales and marketing expenses - Hereof related to discontinued operations Total sales and marketing expenses from continuing operations 2023 2022 -241,639 -233,474 -18,087 -430,534 -690,260 - -690,260 -23,851 -361,632 -618,957 4,913 -614,044 2023 2022 -10,427 -75,346 - -19,459 -29,886 - -29,886 -23 -88,567 -163,936 131,638 -32,298 6 General and administrative expenses DKK thousand Staff costs (note 7) Amortization, depreciation, impairment losses on intangibles assets, property, plant and equipment, and right-of-use assets Other external general and administrative expenses Total general and administrative expenses - Hereof related to discontinued operations Total general and administrative expenses from continuing operations 7 Information on staff and remuneration 2023 2022 -94,258 -118,308 -3,601 -86,199 -184,058 - -184,058 -5,662 -130,365 -254,335 17,125 -237,210 DKK thousand 2023 2022 Total staff costs can be specified as follows: Wages and salaries Share-based compensation Pension schemes (defined contribution plans) Government grants Other payroll and staff-related costs Total staff costs - Hereof related to discontinued operations Total staff costs from continuing operations The amount is charged as: Research and development expenses Sales and marketing expenses General and administrative expenses Other operating items Discontinued operations Total staff costs Average number of employees -247,253 -55,130 -20,945 - -22,996 -346,324 - -346,324 -241,639 -10,427 -94,258 - - -346,324 -220,310 -51,286 -17,615 5 -5,682 -294,888 7,275 -287,613 -210,971 - -62,627 -14,015 -7,275 -294,888 224 197 For remuneration to the Board of Directors please refer to note 6.1 Remuneration of the Board of Directors and Executive Management in the consolidated financial statements and for additional infor- mation regarding staff costs refer to note 2.8 Staff costs. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 145 Notes to the Financial statements of the parent company 7 Information on staff and remuneration (continued) DKK thousand 2023 Remuneration to the Executive Management Adam Sinding Steensberg1 Henriette Wennicke2 Total Total Other Corporate Management5 Total 2022 Remuneration to the Executive Management Adam Sinding Steensberg1 Henriette Wennicke2 Emmanuel Dulac3 Matthew Donald Dallas4 Total Total Other Corporate Management5 Total Base salary Bonus Pension contribution Other short term benefits Share-based compensation Severance payment 5,750 2,621 8,371 7,728 16,099 4,162 420 2,626 308 7,516 6,131 13,647 4,744 1,441 6,185 4,910 11,095 2,366 168 1,575 123 4,232 2,689 6,921 1,150 524 1,674 948 2,622 832 84 525 - 1,441 898 2,339 243 267 510 693 1,203 725 41 122 103 991 599 1,590 12,950 4,387 17,337 11,086 28,423 11,061 225 -3,265 - 8,021 10,569 18,590 - - - - - - - 6,564 - 6,564 - 6,564 Total 24,837 9,240 34,077 25,365 59,442 19,146 938 8,147 534 28,765 20,286 49,651 1 Former EVP, R&D and CMO Adam Sinding Steensberg was appointed CEO at March 30, 2022. 2 Henriette Wennicke was appointed as CFO at November 1, 2022. 3 Former CEO Emmanuel Dulac resigned from Zealand at March 30, 2022. 4 Former CFO Matthew Donald Dallas resigned from Zealand at August 31, 2022. He had tax obligations in Denmark, so part of his salary was paid out in Denmark. 5 Other Corporate Management in 2023 comprised four members (2022: four). Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 146 Notes to the Financial statements of the parent company 8 Financial items DKK thousand Interest income Interest expenses from financial liabilities measured at amortized costs Interest expenses from lease liabilities Interest income from group companies Impairment of investments in subsidiaries Impairment of intercompany receivables Gain from sale of marketable securities Fair value adjustment of marketable securities Fair value adjustment of other investments Exchange rate adjustments Other financial expenses Financial items in total Presentation in income statement: Financial income Financial expenses 9 Other operating items 2023 2022 DKK thousand 2023 2022 31,778 -6,050 -2,075 9,701 -26,042 -271,897 1,519 5,781 -16,466 -5,127 -2,912 - -1,164 4,036 24,612 - -281,790 27,442 48,779 -330,569 36,710 -9,268 380 -3,824 -2,207 7,682 Restructuring costs - continuing operations Insurance Impairment Encycle IP rights Loss on sale of fixed assets - Reversal of inventory write-down (note 3.5) -2,073 Total other operating items from continuing operations Restructuring costs - discontinued operations Impairment of production equipment (note 3.2) Reversal of inventory write-down (note 3.5) Loss on disposal group V-GO (note 2.10) Total other operating items from discontinued operations Presentation in income statement: Financial income Financial expenses - - - - 15,979 15,979 - - - - - -14,015 -37,033 -35,691 -1,449 - -88,188 -30,615 -9,730 1,284 -3,072 -42,133 15,979 - - -88,188 Impairment of investments in subsidiaries of DKK 26.0 million and impairment of intercompany receiv- ables of DKK 271.9 million (2022: 2.1 million) relates to the Oberland Capital loan which Zealand Pharma A/S settled in May 2023 on behalf of Zealand Pharma U.S., Inc. Refer to description in note 15 Investments in subsidiaries and 17 Trade and other receivables respectively. Please also refer to note 4.7 Financial items in the consolidated financial statements for additional information regarding financial items. Impairment of Encycle IP rights in 2022 is described further in note 12 Intangible assets. Please refer to note 2.9 Other operating items in the consolidated financial statements for additional information. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 147 Notes to the Financial statements of the parent company 10 Corporate tax DKK thousand Net result for the year before tax Corporate tax rate in Denmark Expected tax benefit Adjustment for non-deductible expenses Adjustment for warrants Adjustment for R&D extra deduction Adjustment to prior years Change in tax assets (not recognized) Total income tax expense/(benefit) Tax on equity Warrants shareprice development Change in tax assets (not recognized) Total income tax expense (income) Specification of unrecognized deferred tax assets: Tax losses carried forward (available indefinitely) Research and development expenses Licenses, rights and patents Non-current assets Liabilities Other Total temporary differences 11 Discontinued operations 2023 2022 Management's judgements and estimates On March 30, 2022, the group announced its intention to exit the US sales activities including the V-GO activity. The activities were successfully divested on May 29, 2022, through an asset purchase agreement with MannKind Corporation. On September 7, 2022, the group announced the transfer of the commer- cial rights for Zegalogue® to Novo Nordisk effectually ending all efforts to commercialize the group's products via own sales force. Management had determined that the activities to supply subsidiaries with products and acquired services from subsidiaries related to commercialization of products via own sales force met all the criteria for classification as a discontinued operation as of September 7, 2022. Accordingly, the activities, including the effect of the divestment of the V-GO disposal group, were presented separately as a discontinued operation in the income statement. -909,367 -1,024,967 22.0% 22.0% -200,061 -225,493 48,447 943 -21,768 -30,673 197,520 -5,592 -32,566 32,566 - 868 6,274 -20,960 1,839 232,467 -5,005 -7,362 7,362 - 3,862,273 3,299,214 1,031,011 76,129 109,930 9,855 393,640 956,816 71,540 105,961 -98,695 102,156 5,482,838 4,436,991 Please refer to note 5.0 Tax in the consolidated financial statements for additional information regarding income tax. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 148 Notes to the Financial statements of the parent company 11 Discontinued operations (continued) The results and the cash flow of the discontinued activities are presented below as discontinued opera- tions for the period ended December 31, 2023, and December 31, 2022: DKK thousand Revenue Cost of goods sold Gross profit Research and development expenses Sales and marketing expenses Administrative expenses Other operating items Net operating expenses Result before tax Net result for the year from discontinued operations 2023 2022 - - - - - - - - - - 10,546 -41,113 -30,567 -4,035 -129,827 -17,014 -42,132 -193,008 -223,575 -223,575 All assets and liabilities included in the V-GO disposal group were derecognized as of May 29, 2022, with the closure of the asset purchase agreement with MannKind Corporation. As a result, no assets or liabil- ities were classified as held for sale in relation to the discontinued operations as of December 31, 2022. The derecognized assets and liabilities, recognized consideration and net impact on profit and loss from the divestment of V-GO are presented below: DKK thousand Assets included in disposal group Property, plant and equipment Right-of-use assets Deposits and prepayments Inventories Total assets of disposal group Liabilities directly associated with assets included in disposal group Lease liabilities Total liabilities of disposal group Net assets of disposal group DKK thousand 2023 2022 Consideration: Cash flows from discontinued operations Net cash outflow from operating activities Net cash inflow from investing activities Net cash increase generated from the discontinued operation Cash consideration Purchase price adjustment Other financial assets Total consideration - - - -17,717 64,383 46,666 Loss on sale of disposal group - recognized as other operating items from discontinued operations May 29, 2022 19,380 9 665 54,085 74,139 19 19 74,120 67,828 -3,353 6,573 71,048 -3,072 Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 149 Notes to the Financial statements of the parent company 12 Intangible assets DKK thousand Cost at January 1, 2023 Additions Cost at December 31, 2023 Amortization and impairment at January 1, 2023 Amortization for the year Amortization and impairment at December 31, 2023 Carrying amount at December 31, 2023 Amortization and impairment for the financial year has been charged as: General and administrative expenses Total Software DKK thousand Licenses rights and patents - Cost at January 1, 2022 12,508 12,508 - -253 -253 Disposals Transferred to V-GO disposal group (note 2.10) Cost at December 31, 2022 Amortization and impairment at January 1, 2022 Impairment for the year 12,255 Disposals Transferred to V-GO disposal group (note 2.10) Amortization and impairment at December 31, 2022 Carrying amount at December 31, 2022 -253 253 Amortization and impairment for the financial year has been charged as: Other operating items Total 41,167 -35,691 -5,476 - 5,476 35,691 -35,691 -5,476 - - 35,691 35,691 Licenses, rights, and patents on January 1, 2022, comprised the license to the lead product candidate acquired with Encycle Therapeutics in October 2019. During 2022 the development program with the lead candidate was abandoned and it was decided to move on with another product candidate from the same patent instead. As a result, the recognized asset was impaired and disposed. Please refer to note 3.1 Intangible assets in the consolidated financial statements for additional information. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 150 Notes to the Financial statements of the parent company 13 Property, plant and equipment DKK thousand Plant and machinery Other fixtures and fittings Leasehold improve- ments Assets under con- struction Cost at January 1, 2023 66,828 14,153 35,190 Transfers Additions Disposals Cost at December 31, 2023 Accumulated depreciation and impairment at January 1, 2023 Depreciation for the year Disposals Accumulated depreciation and impairment at December 31, 2023 Carrying amount at December 31, 2023 Depreciation and impairment for the financial year has been charged as: Research and development expenses General and administrative expenses Total - 9,043 -15,066 60,805 52,339 5,330 -14,919 42,750 18,055 870 1,386 -427 - 812 - 15,982 36,002 10,987 1,995 -427 12,555 3,427 7,546 2,891 - 10,437 25,565 -5,320 -10 -5,330 -1,651 -344 -1,995 -2,380 -511 -2,891 870 -870 - - - - - - - - - - - DKK thousand Cost at January 1, 2022 Transfers Additions Transferred to V-GO disposal group (note 2.10) Retirements Cost at December 31, 2022 Accumulated depreciation and impairment at January 1, 2022 Depreciation for the year Impairment for the year Transferred to V-GO disposal group (note 2.10) Retirements Accumulated depreciation and impairment at December 31, 2022 Carrying amount at December 31, 2022 Depreciation and impairment for the financial year has been charged as: Research and development expenses General and administrative expenses Other operating items Discontinued operations Total Plant and machinery Other fixtures and fittings Building improve- ments Assets under con- struction 90,778 268 2,985 -25,770 -1,433 66,828 54,201 7,901 742 -9,072 -1,433 52,339 14,489 6,214 - 742 1,687 8,643 14,349 34,897 - 72 -268 - - 293 - - 14,153 35,190 8,388 2,749 - - -150 4,703 2,843 - - - 10,987 3,166 7,546 27,644 2,315 406 - 28 2,417 426 - - 2,749 2,843 7,343 -268 6,088 -2,563 -9,730 870 - - 9,730 -9,730 - - 870 - - - 9,730 9,730 Please refer to note 3.2 Property, plant, and equipment in the consolidated financial statements for additional information. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 151 Notes to the Financial statements of the parent company 14 Right-of-use assets and lease liabilities Amounts recognized in the statement of financial position The statement of financial position shows the following amounts relating to lease assets: Set out below are the carrying amounts of lease liabilities and the movements during the period: DKK thousand As at January 1, 2023 Additions Depreciation expense As at December 31, 2023 As at January 1, 2022 Additions Depreciation expense Transferred to V-GO disposal group (note 2.10) As at December 31, 2022 Office buildings Other fixtures and fittings 95,990 1,860 -9,999 87,851 106,158 - -10,159 -9 95,990 1,581 1,344 -1,004 1,921 1,623 736 -778 - 1,581 DKK thousand As at January 1 Additions Disposals Accretion of interest Payments Transferred to V-GO disposal group (note 2.10) As at December 31 Current Non-current The following amounts are recognized in the income statement: Depreciation expense of right-of-use assets Interest expense on lease liabilities Total amount recognized in profit and loss Cash flow Total cash outflow from leases 2023 2022 102,618 111,455 3,588 -393 2,075 689 - 2,207 -11,887 -11,714 - -19 96,001 102,618 12,024 83,977 11,522 91,096 -11,002 -2,075 -13,077 -10,937 -2,207 -13,144 -11,649 -11,649 -11,714 -11,714 Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 152 Notes to the Financial statements of the parent company 15 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 written down to recoverable amount. Impairment losses are recognized under financial items. DKK thousand Cost at January 1 Divestment Cost at December 31 Value adjustments at January 1 Impairment Value adjustments at December 31 2023 2022 62,228 -1,911 60,317 - -24,131 -24,131 62,228 - 62,228 - - - Investments in subsidiaries at December 31 36,186 62,228 In 2023, an impairment of DKK 24.1 million has been recognized on the investment in Zealand Pharma U.S. Inc. as a result of lost equity following the settlement of the Oberland Capital loan in May 2023, which Zealand Pharma A/S settled on behalf of Zealand Pharma U.S., Inc. Refer also to note 8 Financial items. DKK thousand Domicile Ownership 16 Inventories Inventories were comprised as follows: DKK thousand Raw materials Total 2023 2022 7,935 7,935 1,286 1,286 Write-downs recognized on inventories were reflected in the cost of goods sold. They were comprised as follows: DKK thousand Accumulated write-downs, January 1 Write-downs in the reporting period Utilization of write-downs Reversal of write-downs Accumulated write-downs, December 31 2023 2022 -32,257 - 3,635 15,979 -12,813 -30,615 9,887 1,284 -12,643 -32,257 Please refer to note 3.5 Inventories in the consolidated financial statements for additional information regarding inventory. Zealand Pharma A/S's subsidiaries: ZP Holding SPV K/S ZP General Partner 1 ApS Zealand Pharma US, Inc. ZP SPV 3 K/S ZP General Partner 3 ApS ZP Holding SPV K/S's subsidiaries: ZP SPV 1 K/S ZP General Partner 2 ApS Zealand Pharma US Inc. subsidiary Zealand Pharma California US, LLC. Denmark Denmark United States Denmark Denmark Denmark Denmark 100% 100% 100% 100% 100% 100% 100% Voting rights 100% 100% 100% 100% 100% 100% 100% United States 100% 100% Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 153 Notes to the Financial statements of the parent company 17 Trade and other receivables 19 Fees to auditors appointed at the annual general meeting DKK thousand Deposits Trade receivables Intercompany receivables Receivables related to license and collaboration agreements Other receivables Prepaid expenses Total trade and other receivables Non-current Current 2023 2022 DKK thousand 8,900 987 57,509 68,793 24,349 33,497 194,035 291,799 15,786 178,249 157,039 134,760 Total fees 56,431 1,454 54,083 8,900 - Audit Audit-related services and other assurance engagements 170,931 Other 2023 2022 2,475 940 - 3,415 4,880 1,310 389 6,579 In 2023 an impairment of DKK 271.9 million has been recognized on intercompany receivables from Zealand Pharma U.S., Inc. In May 2023, as mentioned in note 4.6 Borrowings, Zealand Pharma A/S settled the Oberland Capital loan with a one-time payment of USD 77.3 million (DKK 525.7 million) on behalf of Zealand Pharma U.S., Inc. As a result, equity was lost in Zealand Pharma U.S. Inc. which has triggered the impairment in 2023, refer to note 8 Financial items. 18 Trade and other payables DKK thousand Trade payables Intercompany payables Payable treasury shares Employee benefits Other payables Accruals development projects Total trade and other payables Non-current Current 2023 2022 90,352 12,521 81,045 48,009 7,764 33,464 51,803 1,425 41,600 50,275 3,166 34,063 273,155 182,332 303 272,852 19,058 163,274 20 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 compa- nies and Zealand Pharma A/S is likewise liable for any obligations to withhold tax at source on interest, royalties and returns for the jointly taxed companies. The parent company had provided floating charge collateral covering all assets in the company which could be collateralized, including shares in subsidiaries, as collateral for the debt to Oberland. On May 10, 2023, the Group settled the Oberland Capital loans in a one-time payment. With the final repay- ment, Oberland has released all rights to collateral provided for under the loan agreement. Under the revolving credit facility (RCF) in Danske Bank, Zealand is required to have a minimum collat- eral value of 120% of the loan commitment (DKK 420 million) held in the designated custody accounts under management by Danske Asset Management and Zealand’s designated cash accounts attached to the custody accounts. Zealand must also comply with a covenant on fulfilling certain information requirements. The pledges are described further in note 4.4 Cash and cash equivalents. The EIB loan contains a negative pledge clause preventing Zealand Pharma A/S or any of its subsidiaries from creating or permitting to subsist any new security over any of its assets. Please refer to note 6.4 Commitments in the consolidated financial statements for information on commitments. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 154 Notes to the Financial statements of the parent company 21 Transactions with related parties 22 Adjustments for non-cash items Zealand Pharma A/S's related parties are the Board of Directors, Executive Management, and close members of the family of these persons. Refer to note 6.1 Remuneration of the Board of Directors and Executive Management in the consolidated financial statements. Refer to note 7 Information on staff and remuneration in these parent company financial statements for remuneration of the Executive Management. The parent company had the following transactions with subsidiaries: DKK thousand Depreciation, amortization and impairment losses Deferred revenue Reversal of inventory write-down Share-based compensation expenses Financial income Financial expenses Corporate tax Exchange rate adjustments Adjustments for non-cash items in total 23 Changes in working capital 2023 2022 6,127 -23,323 -5,615 -20,468 9,701 38,700 -26,336 -32,285 -69,995 5,609 - -156,638 DKK thousand -113,422 11,096 -157,958 26,027 -57,653 - -293,862 -272,571 Changes in accounts receivable Changes in prepaid expenses Changes in other receivables Changes in inventory Changes in intercompany receivables Changes in accounts payable Changes in other liabilities Changes in other liabilities and provisions Changes in working capital in total 2023 2022 21,688 - -15,980 55,130 -52,417 334,133 -5,591 - 336,963 70,572 -67,584 - 51,286 -106,592 79,149 -5,005 -8,777 13,049 2023 2022 -4,304 20,583 -13,594 9,330 -157,958 40,832 20,723 -19,058 -106,679 - - 23,396 - 29,469 - - -103,446 -53,814 24 Significant events after the balance sheet date Please refer to note 6.8 Subsequent events in the consolidated financial statements. DKK thousand Revenue Research and development expenses Sales and marketing expenses General and administrative expenses Financial items Discontinued operations Receivables Payables Cash flows Total Zealand Pharma ∞ Annual Report 2023Alternative performance measures for the Group (non-audited) Alternative performance measures for the Group (non-audited) Contents The big picture Our business Sustainability Corporate governance Financial statements 155 Alternative performance measures for the Group (non-audited) Free cash flow Free cash flow is calculated as the sum of cash flows from operating activities less purchase of prop- erty, 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 infor- mation to investors in addition to the most directly comparable IFRS financial measure “Net cash flow from operating activities.” The table below shows a reconciliation of free cash flow for 2023 and 2022: DKK thousand Cash outflow from operating activities Less purchase of property, plant and equipment Free cash flow 2023 2022 -425,668 -942,311 -11,241 -11,710 -436,909 -954,021 Liquidity reserve Zealand’s liquidity reserve, classified as a non-IFRS liquidity measure includes assets held in cash, cash equivalents, marketable securities, and undrawn borrowing facilities. Management believes that this APM can provide stakeholders with valuable information regarding Zealand's ability to meet short-term obligations, navigating uncertain economic conditions and adding information about potential capital requirements (runway). Equity ratio Equity ratio is calculated as equity at the balance sheet date divided by total assets at the balance sheet date. Market capitalization Market capitalization is calculated as weighted outstanding shares at the balance sheet date times the share price at the balance sheet date. Equity per share Equity per share is calculated as shareholders' equity divided by weighted average total number of shares less weighted average total number of treasury shares. Zealand Pharma ∞ Annual Report 2023Reports Contents The big picture Our business Sustainability Corporate governance Financial statements 156 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, 2023. The consolidated financial statements and parent company financial statements have been prepared in accordance with IFRS Accounting 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 consolidated financial statements and parent company financial statements give a true and fair view of the Group’s and the parent company’s financial position as of December 31, 2023, and of the results of the Group’s and the parent company’s operations and cash flows for the financial year January 1 – December 31, 2023. In our opinion, the Management’s review includes a fair review of the development of the Group’s and the parent company’s oper- ations 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. In our opinion, the Annual Report of Zealand Pharma A/S for the financial year January 1 - December 31, 2023 identified as 549300ITBB1ULBL4CZ12-2023-12-31-en.zip has in all material respects been prepared in compliance with the ESEF Regulation. We recommend that the Annual Report be approved at the Annual General Meeting. Søborg, February 27, 2024 Executive Management Adam Sinding Steensberg President and Chief Executive Officer Henriette Wennicke Executive Vice President and Chief Financial 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 Iben Louise Gjelstrup Board member Employee elected Jens Peter Stenvang Board member Employee elected Frederik Barfoed Beck Board member Employee elected Anneline Nansen Board member Employee elected Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 157 Independent auditor’s report To the shareholders of Zealand Pharma A/S Report on the audit of the Consolidated Financial Statements and Parent Company Financial Statements Opinion We have audited the consolidated financial statements and the parent company financial statements of Zealand Pharma A/S for the financial year 1 January – 31 December 2023, which comprise statement of loss, statement of comprehensive loss, statement of financial position, statement of cash flows statement of sharehold- er’s equity and notes, including material accounting policy infor- mation, for the Group and the Parent Company. The consolidated financial statements and the parent company financial statements are prepared in accordance with IFRS Accounting Standards as adopted by the EU and additional requirements of the Danish Financial Statements Act. In our opinion, the consolidated financial statements and the parent company financial statements give a true and fair view of the finan- cial position of the Group and the Parent Company at 31 December 2023 and of the results of the Group's and the Parent Company's operations and cash flows for the financial year 1 January – 31 December 2023 in accordance with IFRS Accounting Standards as adopted by the EU and additional requirements of the Danish Financial Statements Act. Our opinion is consistent with our long-form audit report to the Audit Committee and the Board of Directors. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs) and additional requirements applicable in Denmark. Our responsibilities under those standards and require- ments are further described in the "Auditor's responsibilities for the audit of the consolidated financial statements and the parent company financial statements" (hereinafter collectively referred to as "the financial statements") section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group in accordance with the International Ethics Standards Board for Accountants' International Code of Ethics for Professional Accountants (IESBA Code) and the additional ethical requirements applicable in Denmark, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. To the best of our knowledge, we have not provided any prohibited non-audit services as described in article 5(1) of Regulation (EU) no. 537/2014. Appointment of auditor We were initially appointed as auditor of Zealand Pharma A/S on April 2, 2020 for the financial year 2020. We have been reappointed annually by resolution of the general meeting for a total consecutive period of four years up until the financial year 2023. Key audit matters Key audit matters are those matters that, in our professional judge- ment, were of most significance in our audit of the financial state- ments for the financial year 2023. These matters were addressed during our audit of the financial statements as a whole and in forming our opinion thereon. We do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled our responsibilities described in the "Auditor's responsibilities for the audit of the financial statements" section, including in relation to the key audit matters below. Accordingly, our audit included the design and performance of procedures to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the financial statements. Accounting for research and development expenses and accruals related to Clinical Research Organisations Zealand Pharma A/S engages with third-party clinical research organisations (CROs) for certain clinical development activities, including clinical trials. The diverse nature of these activities, along with varied contract terms, compensation arrangements, and impact from potential scope changes and the consequential impact on cost per patient and timelines, requires significant estimates and judgments by management in recognizing expenses and accruals for clinical development activities. Management has established CRO accrual models used to recognize the expenses for clinical development activities over the periods over which services are provided to the Group and the Parent Company and estimate clin- ical trial accruals at the balance sheet date. Refer to note 2.5 and 3.8 in the consolidated financial statements. Given the significance of clinical trial expenses and the complexity associated with management's estimates and judgment in recog- nizing accruals for clinical development activities, including alloca- tion of contract costs to clinical development phases, determination of clinical trial service periods, and the effect from changes to clinical trial scope, we considered the accounting for research and development expenses and accruals related to Clinical Research Organisations a key audit matter. Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 158 How our audit addressed the key audit matter Our audit procedures related to research and development expenses and accruals related to Clinical Research Organisations included the following: • Obtaining an understanding of Management’s process for accounting for clinical development activities and controls related to monitoring services provided. • Obtaining an understanding of terms and conditions of contrac- tual arrangements with CROs along with ongoing development phases and their timelines through inspection of contracts, evidence supporting their execution and corroborative inquiries of management. • Evaluation of the appropriateness of the methodology and accounting policies applied to comply with applicable accounting standards. • Evaluation of CRO accrual models and test of key input data applied, including contract cost, patient enrolment data and treat- ment timelines by tracing to supporting evidence. • Evaluation of key assumptions applied in the CRO models, including determination of variable costs, allocation of contract costs to development phases and timelines. • Checking the arithmetical accuracy of the computations within the CRO accrual models and reconciling the models’ output to the Group and Parent Company’s financial records. • Performing test of details, including analytical procedures, over research and development expenses to verify occurrence and appropriateness of recorded expenses. • Examining transactions after balance sheet date to assess completeness and accuracy of the recorded transactions. • Evaluation of appropriateness of the disclosures pertaining to accounting for research and development expenses and related accruals for compliance with applicable accounting standards. Statement on the Management's review Management is responsible for the Management's review. Our opinion on the financial statements does not cover the Management's review, and we do not express any assurance conclu- sion thereon. In connection with our audit of the financial statements, our responsibility is to read the Management's review and, in doing so, consider whether the Management's review is materially incon- sistent with the financial statements, or our knowledge obtained during the audit, or otherwise appears to be materially misstated. Moreover, it is our responsibility to consider whether the Management's review provides the information required by relevant law and regulations. Based on our procedures, we conclude that the Management's review is in accordance with the financial statements and has been prepared in accordance with the requirements of relevant law and regulations. We did not identify any material misstatement of the Management's review. Management's responsibilities for the financial statements Management is responsible for the preparation of consolidated financial statements and parent company financial statements that give a true and fair view in accordance with IFRS Accounting Standards as adopted by the EU and additional requirements of the Danish Financial Statements Act and for such internal control as Management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, Management is responsible for assessing the Group's and the Parent Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting in preparing the financial statements unless Management either intends to liquidate the Group or the Parent Company or to cease operations, or has no realistic alternative but to do so. Auditor's responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance as to whether the 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 assur- ance, but is not a guarantee that an audit conducted in accordance with ISAs and 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, indi- vidually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. As part of an audit conducted in accordance with ISAs and addi- tional requirements applicable in Denmark, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the 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, misrepresentations or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures 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 Company's internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management. • Conclude on the appropriateness of Management's use of the going concern basis of accounting in preparing the finan- cial statements and, based on the audit evidence obtained, Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 159 whether a material uncertainty exists related to events or condi- tions that may cast significant doubt on the Group's and the Parent Company'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 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 conditions may cause the Group and the Parent Company to cease to continue as a going concern. • Evaluate the overall presentation, structure and contents of the financial statements, including the note disclosures, and whether the financial statements represent the underlying transactions and events in a manner that gives a true and fair view. • Obtain sufficient appropriate audit evidence regarding 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 governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal 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 inde- pendence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with those charged with govern- ance, we determine those matters that were of most significance in the audit of the consolidated financial statements and the parent company financial statements of the current period and are there- fore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter. from the requirements set out in the ESEF Regulation, whether due to fraud or error. The procedures include: Report on compliance with the ESEF Regulation As part of our audit of the Consolidated Financial Statements and Parent Company Financial Statements of Zealand Pharma A/S, we performed procedures to express an opinion on whether the annual report of Zealand Pharma A/S for the financial year 1 January – 31 December 2023 with the file name 549300ITBB1ULBL4CZ12-2023- 12-31-en.zip is prepared, in all material respects, in compliance with the Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regulation) which includes requirements related to the preparation of the annual report in XHTML format and iXBRL tagging of the Consolidated Financial Statements including notes. Management is responsible for preparing an annual report that complies with the ESEF Regulation. This responsibility includes: • The preparing of the annual report in XHTML format; • The selection and application of appropriate iXBRL tags, including extensions to the ESEF taxonomy and the anchoring thereof to elements in the taxonomy, for all financial information required to be tagged using judgement where necessary; • Ensuring consistency between iXBRL tagged data and the Consolidated Financial Statements presented in human readable format; and • For such internal control as Management determines necessary to enable the preparation of an annual report that is compliant with the ESEF Regulation. Our responsibility is to obtain reasonable assurance on whether the annual report is prepared, in all material respects, in compliance with the ESEF Regulation based on the evidence we have obtained, and to issue a report that includes our opinion. The nature, timing and extent of procedures selected depend on the auditor’s judge- ment, including the assessment of the risks of material departures • Testing whether the annual report is prepared in XHTML format; • Obtaining an understanding of the company’s iXBRL tagging process and of internal control over the tagging process; • Evaluating the completeness of the iXBRL tagging of the Consolidated Financial Statements including notes; • Evaluating the appropriateness of the company’s use of iXBRL elements selected from the ESEF taxonomy and the creation of extension elements where no suitable element in the ESEF taxonomy has been identified; • Evaluating the use of anchoring of extension elements to elements in the ESEF taxonomy; and • Reconciling the iXBRL tagged data with the audited Consolidated Financial Statements. In our opinion, the annual report of Zealand Pharma A/S for the financial year 1 January – 31 December 2023 with the file name 549300ITBB1ULBL4CZ12-2023-12-31-en.zip is prepared, in all mate- rial respects, in compliance with the ESEF Regulation. Copenhagen, February 27, 2024 EY Godkendt Revisionspartnerselskab Christian Schwenn Johansen State Authorised Public Accountant mne33234 Rasmus Bloch Jespersen State Authorised Public Accountant mne35503 Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 160 Other information Zealand Pharma ∞ Annual Report 2023Contents The big picture Our business Sustainability Corporate governance Financial statements 161 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. 44 Farnsworth Street 4th Floor Boston, MA 02210 info@zealandpharma.com www.zealandpharma.com Established 1998 Registered office Gladsaxe Auditors EY Godkendt Revisionspartnerselskab CVR no.: 30 70 02 28 Zealand Pharma ∞ Annual Report 2023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 zealandpharma.com d e t o N : n o i t k u d o r p g o n g i s e D 

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