LEIDEN, Netherlands,
July 27, 2017 /PRNewswire/ --
Record revenue from product sales
up 617% on 2016 marks
Pharming's first half year of
operational profitability
Investment in
commercial infrastructure to drive long-term sales
growth
Pharming Group N.V. ("Pharming" or "the Company") (Euronext
Amsterdam: PHARM) presents its (unaudited) financial report for the
six months ended 30 June 2017.
The Company will hold a conference call at 13:00 CEDT/
07:00 EDT today: dial-in details can
be found on page 7.
Operational Highlights
- Accelerated the delivery of operating profitability as a result
of strategic decision to reacquire commercial rights to RUCONEST®
in North America
- Positive EMA amendment to the marketing authorization in
Europe to allow
self-administration of RUCONEST® for HAE attacks with a new
custom-designed RUCONEST® Administration Kit
- Integration of the Ruconest North America business acquired
from Valeant Pharmaceuticals International, inc. in December 2016 into Pharming is on track, with
full transition of services from Valeant completed
- Completed investment in expanding US commercialization
team
- Successfully refinanced company debt on more favourable
commercial terms in order to recover dilutive share capital and
release short and medium term cash to invest in accelerating
commercialization
Financial Highlights
- Revenues from product sales for the half year increased by 617%
to €30.1 million (HY 2016: €4.2 million), as a result of the
combined effect of receiving all of the revenue from US product
sales (instead of the previous 30% supply share of net sales) and
increasing patient numbers and product sales
- Total revenues increased by 477% to €30.6 million (including
€0.5 million of license revenue) from €5.3 million (including €1.1
million in license revenue) in HY 2016
- Operating results improved to a profit of €4.2 million from a
loss of €6.2 million in HY 2016, despite a considerable increase in
commercialization activities, especially in the US
- The net result was a loss of €30.2 million (HY 2016: loss of
€6.7 million), mainly as a result of non-cash financing expenses
required to be shown under IFRS associated with the extinction of
the Amortising Convertible Bonds 2017/2018 and replacement of the
previous debt facility
- The company's cash position decreased from €32.1 million at
year-end 2016 to €25.2 million at 30 June
2017 (up from €21.7 million at 30
June 2016), largely due to late payments by debtors of
revenues relating to US sales.
Sijmen de Vries, CEO, said:
"We are delighted with a second quarter of
profitable operations, even after increased costs as
we finish our integration and infrastructure investments. Now that
our capital position is properly secured following the refinancing
in May/July 2017, we can look forward
to more stable growth as the big one-off accounting costs have been
taken in this quarter."
Chief Executive Officer's Comment
Our strategic decision to re-acquire the commercial rights to
sell RUCONEST® in North America
has significantly increased revenue and profit generation for the
first half of the year compared to the first half of 2016.
Product sales for the half year increased by 617% to €30.1
million (HY 2016: €4.2 million). The positive sales momentum in the
US continued in Q2, following higher than expected sales in Q1,
with net sales of $15.3 million in Q2
($15.5 million in Q1) despite stock
level adjustments.
Combined with ongoing growth in the number of US patients
entering our full patient care plan, RUCONEST® SOLUTIONS, and new
European patients starting RUCONEST® therapy with our recently
introduced EU home use kit, we expect sales to increase in H2.
Our strategy of increasing market access in the US with our
sales, market access, nursing and patient management teams, and in
the EU with continued expansion of our direct commercialization
efforts, is driving the growth in new patients using RUCONEST®. As
previously announced, marketing costs have increased as a direct
result of hiring additional US personnel and start-up investments
in marketing activities.
Underlying sales volumes somewhat increased in Q2. On a reported
basis, however, Q2 sales were slightly reduced to €14.9 million,
from €15.2 million in Q1, reflecting the adverse movement in
exchange rates (the dollar weakened against the euro). This was
offset by a better performance in the EU and the Rest of the World
(RoW) sales, which were up from €0.7 million in Q1 to €0.9 million
in Q2.
Gross profits reduced in line with the reduction in sales
expressed in euros from €13.8 million in Q1 to €13.2 million in Q2,
also reflecting slightly higher costs of goods and the higher mix
of lower-margin RoW sales. We remain focused on increasing
efficiency and controlling costs.
Operating profit for the first half of the year was €4.2
million, of which €3.9 million was recorded in Q1. As previously
guided, we have invested in expanding the US sales and marketing
team and making further significant investments in our market
presence especially in the USA,
the costs of which are reflected in a lower operating profit for
Q2. We expect to see the benefits of this investment in subsequent
periods.
In March, the European Commission adopted the Commission
Implementing Decision to amend the marketing authorisation for
RUCONEST® to include self-administration using the RUCONEST®
Administration Kit. This decision allows for self-administration of
RUCONEST® for acute hereditary angioedema (HAE) attacks by
adolescents and adults with a new custom-designed RUCONEST®
Administration Kit in the comfort and privacy of their own homes or
at any other place they choose, without the necessity of a
healthcare professional (HCP) being present. The Administration Kit
is now available for use in various EU markets, following approval
of the Educational Materials by the local authorities in those
markets.
In May, we announced a major refinancing of most of the
financial instruments taken out in order to complete the
acquisition of the commercialization rights to RUCONEST® from
Valeant Pharmaceuticals International, Inc. ("Valeant") (NYSE/TSX:
VRX). Pharming completed a new US$100
million finance agreement with Orbimed Advisors. The new
facility has been used to redeem the Amortizing Convertible Bonds
due 2017/2018 and to refinance the Company's senior debt facility
with Silicon Valley Bank and Kreos Capital, together with the
associated prepayment fees, legal fees and other costs of the
transaction. The loan, initially structured as a bridge facility,
was replaced last week by a full loan agreement with a maturity
date of July 2021 under the same
terms and conditions. This refinance enabled the company to recover
115 million shares, which had been set aside to meet conversions of
the Amortizing Convertible Bonds, thereby removing the risk of 24%
dilution from conversion of these Bonds from existing shareholders.
At the same time, we were able to lower the cash cost of the debt
overall and to reduce significantly the non-cash accounting effects
of the Amortizing Bonds, which amounted to almost €8 million in Q1
2017 alone.
As expected, net profit was impacted by the one-off legal,
accounting and other professional services costs resulting from the
refinancing in May, which amounted to €16.1 million before non-cash
financing expenses required to be shown under IFRS associated with
the extinction of the Amortising Convertible Bonds 2017/2018 and
replacement of the old debt facility.
Based on the increased momentum in sales volumes, underlying
improving trends in identifying and diagnosing patients, combined
with better patient care and management practices, and a focus on
specialty pharmacy customers, we expect to further increase sales.
We will continue to control costs and investments to improve
profitability and drive sustainable long-term growth. We continue
to expect additional positive operating results for the remainder
of the year. No further financial guidance is provided.
Sijmen de Vries
Chief Executive Officer
Financial Summary
Amounts in EURm, except per share
data HY 2017 HY 2016 % Change
Income Statement
Product sales 30.1 4.2 617%
License fees 0.5 1.1 (55%)
Revenue 30.6 5.3 477%
Gross Profit 27.0 3.3 718%
Costs 22.9 9.7 136%
Operating Result 4.2 (6.2) 168%
Balance Sheet
Cash & marketable securities 25.2 21.7 16%
Share Information
Earnings per share (0.063) (0.016)
Revenues
Revenues from product sales reduced slightly from €15.2 million
in Q1 to €14.9 million in Q2, (although overall sales increased to
€30.1 million in Q2 2017 from €4.2 million in 2016), as a result of
stock level adjustments. Part of the reason for the higher than
expected sales in Q1 was that some specialty pharmacies ordered
precautionary replacement supplies after the stock-out of a rival
product. Underlying patient numbers continue to increase steadily,
which we anticipate will be further enhanced as the effects of the
new sales and marketing teams become more visible later in the
year, and the benefits of these increasing patient numbers should
also be seen then. Direct sales in the EU improved to €0.3 million
in Q2 from €0.1 million in Q1.
Other license fee income amounted to €0.3 million in Q2, which
was in line with Q1. This license fee income reflects the release
of accrued deferred license fees following receipt of €21.0 million
upfront and milestone payments in 2010 and 2013 from SOBI, Salix
and CSIPI.
Gross profit
Gross profit decreased from €13.8 million Q1 to €13.2 million in
Q2, reflecting the exchange differences and the slightly greater
proportion of lower margin RoW sales.
Direct commercialisation by Pharming in Western Europe increased by over 150% between
the first and second quarters and sales to our EU partner, SOBI,
also showed a slight increase in the first half year of 2017. Gross
profit was up from €3.3 million in the first half of 2016 to €27.0
million in the first half of 2017.
Operating Costs
Operating costs increased to €22.9 million in the first half
year of 2017 from €9.7 million in the same period of 2016. Research
and development (R&D) costs and General and Administrative
costs remained flat across the second quarter, whilst marketing and
sales costs increased as expected from €3.9 million in the first
quarter of 2017 to €7.2 million in the second quarter. These costs
are due to increased direct commercialisation activities by
Pharming in the US and in Western
Europe.
Operating Result
As a result of the combination of the reduction in gross profit
and the increase of operating costs due to increased investment in
sales and marketing activities, the operating profit in the first
half increased slightly from €3.9 million in the first quarter to
€4.2 million overall for the half year.
Financial Income and Expenses
The net loss on financial income and expenses was €34.5 million
(2016: loss of €0.5 million). The loss is almost entirely the
result of the refinancing, and is largely composed of non-cash
elements. The one-off (amortised) costs of the extinguished
financial instruments were €23.8 million, of which €16.1 million
was in cash and paid out of the proceeds of the new loan facility,
with €7.7 million in non-cash adjustments. The regular costs of
repayments and effective interest under IFRS and were €12.2
million, of which cash items were €1.9 million and non-cash items
amounted to €10.3 million. The revaluation on the warrants resulted
in a loss of €1.2 million in the first half year (2016: gain of
€0.5 million) mainly due to the effect of the increase in the share
price on early warrant series. The foreign currency exchange
result, from revaluation of bank accounts and debt denominated in
foreign currency, was a gain of €2.7 million (2016: €nil).
Net Result
As a result of the above items, the accounting net loss
increased from €5.7 million in the first quarter of 2016 to €30.2
million in the first half of 2017. The increase of the net loss was
related to the financial expenses associated with the refinance,
and was entirely covered by the loan taken out in that refinance,
so that operational cash was essentially unaffected.
Cash and Cash Equivalents
The total cash and cash equivalent position (including
restricted cash) decreased by €6.9 million from €32.1 million at
year-end 2016 to €25.2 million at the end of June 2017. The decrease in cash is temporary and
was due to late payment by debtors of revenues relating to US
sales. From Q3 onwards, all US distribution will be directly
managed by Pharming and cash receipts from sales are expected to be
better timed as result.
Equity
The company's equity position amounted to €6.8 million at the
end of June 2017 (31 December 2016: €27.5 million), with the
reduction due to one-off mainly non-cash financing expenses leading
to a net loss.
Since the reporting date, the company has issued a total of
21,692,213 shares in connection with a number of exercises of
warrants. The exercises resulted in total cash receipts of €5.6
million with an additional exercise of €1.6 million worth of
warrants exercised cashlessly, resulting in 3,509,929 shares saved
relative to the number of shares in the exercised warrants.
The number of issued shares as at 26 July
2017 is 505,620,758.
Performance of Pharming Shares
During the first half year, the Pharming stock price fluctuated
around an average price of €0.29 per share. The half year-end price
was €0.31 (30JUN2016: €0.19), with a high of €0.366 in January and
a low of €0.21 in the same month. Since the end of the period, the
price has increased further.
Outlook
For the remainder of 2017, the company expects:
- Increasing sales and continued positive operating results
- Investment in the production of RUCONEST® in order to ensure
continuity of supply.
- Assessment of the clinical trial results for RUCONEST® in
prophylaxis of HAE by the US FDA and the development of other
versions of RUCONEST®
- Increasing marketing activity where this can be profitable for
Pharming, in addition to our current territories of Austria, France, Germany, United
Kingdom and the
Netherlands.
- We will continue to support all our marketing partners
everywhere in order to enable the maximisation of the sales and
distribution potential of RUCONEST® for patients in all
territories, as we continue to believe that RUCONEST® represents a
fast, effective, reliable and safe therapy option for HAE
patients
- We will also continue to invest in new pipeline programs in
Pompe Disease and Fabry Disease.
No further financial guidance for 2017 is provided.
The Board of Management
Sijmen de Vries, CEO
Bruno Giannetti, COO
Robin Wright, CFO
About Pharming Group N.V.
Pharming is a specialty pharmaceutical company developing
innovative products for the safe, effective treatment of rare
diseases and unmet medical needs. Pharming's lead product,
RUCONEST® (conestat alfa) is a recombinant human C1 esterase
inhibitor approved for the treatment of acute Hereditary Angioedema
("HAE") attacks in patients in Europe, the US, Israel and South
Korea. The product is available on a named-patient basis in
other territories where it has not yet obtained marketing
authorization.
RUCONEST® is commercialized by Pharming in Algeria, Andorra, Austria, Bahrain, Belgium, France, Germany, Ireland, Jordan, Kuwait, Lebanon, Luxembourg, Morocco, the
Netherlands, Oman,
Portugal, Qatar, Syria,
Spain, Switzerland, Tunisia, the United
Arab Emirates, the United
Kingdom, the United States of
America and Yemen.
RUCONEST® is distributed by Swedish Orphan Biovitrum AB (publ)
(SS: SOBI) in the other EU countries, and in Azerbaijan, Belarus, Georgia, Iceland, Kazakhstan, Liechtenstein, Norway, Russia, Serbia and Ukraine. RUCONEST® is distributed in
Argentina, Colombia, Costa
Rica, the Dominican
Republic, Panama, and
Venezuela by Cytobioteck, in
South Korea by HyupJin Corporation
and in Israel by Megapharm.
RUCONEST® is also being investigated in a Phase II clinical
trial for the treatment of HAE in young children (2-13 years of
age) and evaluated for various additional follow-on
indications.
Pharming's technology platform includes a unique, GMP-compliant,
validated process for the production of pure recombinant human
proteins that has proven capable of producing industrial quantities
of high quality recombinant human proteins in a more economical and
less immunogenetic way compared with current cell-line based
methods. Leads for enzyme replacement therapy ("ERT") for Pompe and
Fabry's diseases are being optimized at present, with additional
programs not involving ERT also being explored at an early stage at
present.
Pharming has a long-term partnership with the China State
Institute of Pharmaceutical Industry ("CSIPI"), a Sinopharm
company, for joint global development of new products, starting
with recombinant human Factor VIII for the treatment of Haemophilia
A. Pre-clinical development and manufacturing will take place to
global standards at CSIPI and are funded by CSIPI. Clinical
development will be shared between the partners with each partner
taking the costs for their territories under the partnership.
Pharming has declared that the
Netherlands is its "Home Member State" pursuant to the
amended article 5:25a paragraph 2 of the Dutch Financial
Supervision Act.
Additional information is available on the Pharming website:
http://www.pharming.com
Forward-looking Statements
Conference call information
Today, Chief Executive Officer, Sijmen de Vries, and Chief
Financial Officer, Robin Wright,
will discuss the half year 2017 financial results with investors in
a conference call at 13:00 CET. To
participate, please call one of the following numbers 10 minutes
prior to the call:
From the Netherlands: +31(0)20
709 5189
From the UK: +44 (0)33 3300 0804
From Belgium: +32 (0)2 403
5814
From France: +33 (0)1 70 75 07
11
From Switzerland: +41 (0)22 580
9034
From the USA: toll: +1
6319131422 / toll free: +1 855 85 70686
For further international dial in
numbers: http://events.arkadin.com/ev/docs/NE_W2_TF_Events_International_Access_List.pdf
Conference Call PIN: 73525858#
Slides can be found
at: https://arkadin-event.webex.com/arkadin-event/onstage/g.php?MTID=ec313beab11666c48f575fea6a991433f
Presentation Password: 301196457
Pharming Group N.V.
Consolidated Interim Financial Statements (Unaudited)
For the first six months ended 30 June
2017
Consolidated statement of income
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of cash flows
Consolidated statement of changes in equity
Notes to the consolidated interim financial statements
Consolidated Statement of Income
For the first six months ended 30 June
Amounts in EUR'000, except per share data Notes HY 2017 HY 2016
Product sales 30,109 4,170
Release of deferred license fee income 536 1,104
Revenues 6 30,645 5,274
Costs of product sales (3,745) (1,795)
Inventory impairments 88 (209)
Costs of sales 7 (3,657) (2,004)
Gross profit 26,988 3,270
Other income 167 195
Research and development (9,154) (7,029)
General and administrative (2,628) (2,049)
Marketing and sales (11,140) (598)
Costs 7 (22,922) (9,676)
Operating result 4,233 (6,211)
Fair value gain/(loss) on revaluation
derivatives (1,225) 455
Other financial income and expenses 8 (33,226) (978)
Financial income and expenses (34,451) (523)
Result before income tax (30,218) (6,734)
Income tax expense - -
Net result for the period (30,218) (6,734)
Attributable to:
Owners of the parent (30,218) (6,734)
Total net result (30,218) (6,734)
Basic earnings per share (EUR) (0.063) (0.016)
Consolidated Statement of Comprehensive Income
For the first six months ended 30 June
Amounts in EUR'000 HY 2017 HY 2016
Net result for the period (30,218) (6,734)
Currency translation differences (672) (1)
Items that may be subsequently reclassified to
profit or loss (672) (1)
Other comprehensive income, net of tax (672) (1)
Total comprehensive income for the period (30,890) (6,735)
Attributable to:
Owners of the parent (30,890) (6,735)
Consolidated Balance Sheet
As at date shown
Amounts in EUR'000 Notes 30 June 31 December
2017 2016
Intangible assets 55,855 56,680
Property, plant and equipment 7,104 6,043
Long term prepayment 2,644 1,622
Restricted cash 248 248
Non-current assets 65,851 64,593
Inventories 9 17,473 17,941
Trade and other receivables 18,645 12,630
Cash and cash equivalents 24,997 31,889
Current assets 61,115 62,190
Total assets 126,966 126.783
Share capital 4,839 4,556
Share premium 310,907 301,876
Legal reserves (612) 60
Accumulated deficit (308,370) (279,025)
Shareholders' equity 10 6,764 27,467
Loans and borrowings (more than one
year) 11 78,628 40,395
Deferred license fees income 1,867 2,270
Finance lease liabilities 572 599
Other provisions 4,674 4,674
Non-current liabilities 85,741 47,938
Loans and borrowings (less than one
year) 11 11,028 26,136
Deferred license fees income 811 943
Derivative financial liabilities 12 7,354 9,982
Trade and other payables 15,002 14,054
Finance lease liabilities 266 263
Current liabilities 34,461 51,378
Total equity and liabilities 126,966 126.783
Consolidated Statement of Cash Flows
For the first six months ended 30 June
Amounts in EUR'000 HY 2017 HY 2016
Operating result 4,233 (6,211)
Non-cash adjustments:
Depreciation, amortization 1,689 316
Accrued employee benefits 872 914
Deferred license fees (536) (1,104)
Operating cash flows before changes in working
capital 6,258 (6,084)
Changes in working capital:
Inventories 468 (3,132)
Trade and other receivables (6,015) (2,330)
Payables and other current liabilities (1,792) 3,214
Total changes in working capital
(7,339) (2,247)
Changes in non-current assets, liabilities and
equity (3,109) (258)
Net cash flows used in operating activities (4,190) (8,590)
Capital expenditure for property, plant and
equipment (1,457) (752)
Investment intangible assets (598) -
Net cash flows used in investing activities (2,055) (752)
Proceeds of debt loans and borrowings 89,139 -
Payments of transaction fees (16,051) -
Repayments and interest on loans (73,399) (536)
Proceeds of equity and warrants 284 -
Net cash flows from financing activities (27) (536)
Increase (decrease) of cash (6,272) (9,878)
Exchange rate effects (620) (293)
Cash and cash equivalents at 1 January 32,137 31,843
Total cash at 30 June 25,245 21,672
Of which restricted cash 248 270
Cash and cash equivalents at 30 June 24,997 21,402
Consolidated Statement of Changes in Equity
For the first six months ended 30 June
Attributable to owners of the parent
Number of Share Share
Amounts in EUR'000 Notes shares capital Premium
Balance at 1 January 2016 411,971,790 4,120 283,396
Result for the period - -
Other comprehensive income - -
Total comprehensive income - -
Share-based compensation - - -
Bonuses settled in shares 533,584 5 121
Shares issued for cash - - -
Warrants exercised/ issued 50,000 1 11
Options exercised - - -
Total transactions with owners
recognized directly in equity 583,584 6 132
Balance at 30 June 2016 412,555,374 4,126 283,528
Balance at 1 January 2017 455,587,312 4,556 301,876
Result for the period - -
Other comprehensive income - -
Total comprehensive income - -
Share-based compensation - - -
Bonuses settled in shares 908,437 9 246
Shares issued in connection with
Bonds 26,432,796 264 7,306
Warrants exercised 1,000,000 10 188
Warrants issued - - 1,291
Options exercised - - -
Total transactions with owners,
recognized directly in equity 28,341,233 283 9,031
Balance at 30 June 2017 483,928,545 4,839 310,907
Attributable to owners of the parent
Legal Accumulated
Amounts in EUR'000 Notes reserves Deficit Total Equity
Balance at 1 January 2016 66 (263,743) 23,839
Result for the period - (6,734) (6,734)
Other comprehensive income - - -
Total comprehensive income - (6,734) (6,734)
Share-based compensation - 914 914
Bonuses settled in shares - - 126
Shares issued in connection
with Bonds - - -
Warrants exercised/ issued - - 12
Options exercised - - -
Total transactions with
owners,
recognized directly in equity - 914 1,052
Balance at 30 June 2016 66 (269,563) 18,157
Balance at 1 January 2017 60 (279,025) 27,467
Result for the period - (30,218) (30,218)
Other comprehensive income (672) - (672)
Total comprehensive income (672) (30,218) (30,890)
Share-based compensation - 873 873
Bonuses settled in shares - - 255
Shares issued for cash - - 7,570
Warrants exercised - - 198
Warrants issued 1,291
Options exercised - - -
Total transactions with
owners,
recognized directly in equity - 873 10,187
Balance at 30 June 2017 (612) (308,370) 6,764
Notes to the Consolidated Interim Financial
Statements
For the first six months ended 30 June
1. Company information
Pharming Group N.V. is a limited liability public company which is
listed on Euronext Amsterdam (PHARM), with its headquarters and
registered office located at:
Darwinweg 24
2333 CR Leiden
The Netherlands
2. Basis of preparation
These consolidated interim financial statements for the
six-month ended 30 June 2017 have
been prepared in accordance with IAS 34, 'Interim financial
reporting'. The condensed interim financial statements should be
read in conjunction with the annual financial statements for the
year ended 31 December 2016, which
have been prepared in accordance with International Financial
Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRS
IC) interpretations applicable to companies reporting under IFRS as
adopted by the European Union and valid as of the balance sheet
date.
3. Accounting policies
The accounting policies adopted are consistent with those of the
financial statements for the year ended 31
December 2016.
4. Estimates and judgements
The preparation of interim financial statements in conformity
with IFRS requires the use of certain critical accounting
estimates. It also requires management to exercise its judgement in
the process of applying the Company's accounting policies. In
preparing these condensed interim financial statements, the
significant judgements made by management in applying the Company's
accounting policies were the same as those applied to the
consolidated financial statements for the ended 31 December 2016.
5. Seasonality of operations
Seasonality has no material impact on Company's interim
financial statements.
6. Segment information
The Board of Management is the chief operating decision-maker.
The Board of Management considers the business from both a
geographic and product perspective. From a product perspective, the
Company's business is almost exclusively related to the recombinant
human C1 esterase inhibitor business. From a geographic
perspective, the Company is operating in the areas: the US,
Europe and Rest of the world
(RoW). The Board of Management primarily measures revenues to
assess the performance of the operating areas. Costs and assets are
not allocated to the geographic areas.
Total revenues per geographic segment for the first half year:
Amounts in EUR '000 HY 2017 HY 2016
US 28,582 4,072
Europe 1,600 948
RoW 463 254
Total revenues 30,645 5,274
7. Expenses by nature
Cost of product sales in the first half year of 2017 amounted to
€3.7 million (HY 2016: €1.8 million). Inventory impairments
amounted to an addition of €0.1 million in the first half of 2017
(2016: addition of €0.2 million). The impairment stems from the
valuation of the inventories against lower net realisable value,
related to reallocation of inventories to the different markets
with different prices, based on sales forecasts by management and
commercial partners, and clinical programmes. Actual sales can
differ from these forecasts.
Operating costs increased to €22.9 million from €9.7 million in
the first half year of 2016. The increase is a result of the
start-up of the new sales organization in the US and the increased
costs of R&D activities related to further improvements to
administrate the product.
Employee benefits
Employee benefits are charged to Research and development costs
or General and administrative costs or Marketing and Sales costs
based on the nature of the services provided.
Depreciation and amortisation charges
Amounts in EUR '000 HY 2017 HY 2016
Property, plant and equipment (266) (290)
Intangible assets (1,423) (26)
Total (1,689) (316)
The decrease of depreciation charges of property, plant and
equipment in the first half year of 2017 compared to 2016 stems
from fully depreciated items. In the first half year of 2017 an
amount of €240k was charged to research and development costs (HY
2016: €230k) and €25k to general and administrative expenses (HY
2016: €60k).
Amortisation charges of intangible assets have been mainly
allocated to marketing & sales costs in the statement of
income.
8. Financial expenses
Amounts in EUR '000 HY 2017 HY 2016
Interest income - 5
Interest expenses (44) (54)
Foreign currency results 2,761 11
Interest loans and borrowings (12,157) (940)
Settlement fees and expenses Amortizing Bonds (14,665) -
Settlement fees and expenses loans (9,121) -
Total (33,226) (978)
The increase of the financial expenses is mainly related to the
refinancing of the old loans and the Amortizing bonds by the new
loan from Orbimed. The total cash paid, for redemption fees of the
Amortizing bonds, prepayment fees of the loans and paid interest,
was €17.6 million and €15.6 million was non-cash. From the proceeds
of the new loan of Orbimed a total of €16.1 million was paid for
the redemption and prepayment fees.
9. Inventories
Inventories include batches RUCONEST® and skimmed milk available
for production of RUCONEST®.
30 June 31 December
Amounts in EUR '000 2017 2016
Finished goods 8,108 9,731
Work in progress 6,336 5,103
Raw materials 3,029 3,107
Balance at end of period 17,473 17,941
The inventory valuation at 30 June
2017 is stated net of a provision of €0.7 million
(2016: €0.5 million) to write inventories down to their net
realisable value.
Changes in the adjustment to net realisable value:
30 June 31 December
Amounts in EUR '000 2017 2016
Balance at 1 January (642) (462)
Reversal of (addition to) impairment for the year (190) (547)
Related to costs of product sales 143 362
Related to operating costs 9 5
Balance at end of period (680) (642)
In 2017, the addition of €0.2 million was based on adjusted
sales forecasts. The impaired amount related to operating costs
used for investigational medicinal product drugs in clinical
studies.
Cost of inventories included in the cost of product sales in the
first half year 2017 amounted €3.7 million (2016:
€1.8 million). The main portion of inventories at 30 June 2017 has expiration dates starting beyond
2018 and is expected to be sold or used before expiration.
10. Equity
The Company's authorised share capital amounts to €8.0 million
and is divided into 800,000,000 ordinary shares with a nominal
value of €0.01 each. All 483,928,545 shares outstanding at
30 June 2017 have been fully paid-up.
Other reserves include those reserves related to currency
translation, share-based compensation expenses and other
equity-settled transactions. Please refer to the Consolidated
statement of changes in equity.
11. Loans and borrowings
On 15 May 2017, the Company
entered into a new debt facility with Orbimed Royalty Opportunities
II, LP to raise $100 million (€91.3
million). The new debt facility has been used to redeem the
Amortizing Convertible Bonds due 2017/2018 and to refinance the
Company's senior debt facility with Silicon Valley Bank and Kreos
Capital, together with the associated prepayment fees and the legal
and other costs of the transaction. The loan, initially structured
as a bridge facility 15 May 2017, was
replaced on 20 July 2017 by a full
loan agreement with a maturity date of 20
July 2021 under the same terms and conditions. The fees for
the early repayment of $80.5 million
(€73.5 million) for the old loans and the Amortizing Bond before
maturity amounted to $13.9 million
(€12.7 million) and were recognised as financial expenses. The
expenses associated with the new facility itself, including bridge
loan interest, legal and other advisory fees, comprised the balance
of €4.8 million.
Under the terms and conditions of the new debt facility, the
Lenders provided an amount of US$100
million (€91.3 million) secured senior debt funding against
48 months promissory notes with interest of the sum of (i) the
Applicable Margin of 11% plus (ii) the greater of (x) One-Month
LIBOR and (y) 1.00%. Repayment of the loan and starts in
September 2018 in quarterly
instalments. The Company has the option to prepay the loan before
its maturity date. As further consideration for the facility, the
Lenders received a 4% warrant coverage (9,174,372 warrants) with a
strike price of €0.455 representing the closing price of Pharming
shares immediately prior to the closing date, plus a 2.5%
commitment fee of the principal sum and an assignment fee on the
maturity date of $3.7 million. The
warrant strike price was increased from the maximum originally
announced because of the increasing price of Pharming shares prior
to closing of the loan. Other facility fees of €0.6 million have
been deferred from the original loans. The warrants have been
separated from the loan and recognised in Equity.
The Company, and its subsidiaries, have pledged all receivables,
movable assets and intellectual property rights as security to the
new lenders, in the same way as those assets were pledged to the
original lenders.
Initial recognition and movements of the loans were as
follows:
Amounts in EUR '000 Orbimed KREOS SVB
Principal amount 91,333 21,147 16,346
Fair value of warrants issued (1,309) (941) (732)
Transaction fees and expenses (3,336) (1,439) (1,175)
Carrying value initial recognition 86,688 18,767 14,439
Amortised costs - 184 144
Carrying value at 31 December 2016 - 18,951 14,583
Amortised costs 1,569 1,087 849
Interest paid - (726) (678)
Prepayment - (24,401) (18,898)
Release of remaining amortised costs - 5,089 4,144
Revaluation loan (3,511) - -
Carrying value at 30 June 2017 84,746 - -
Amortizing bonds
On 7 December 2016, the Company
issued amortizing bonds for a principal amount of €45.0 million (or
US$47.7 million), which after costs
of €7.3 million, including investors fees of €5.0 million, has
produced proceeds of approximately €37.7 million. In connection to
the issue of the amortizing bonds the Company also incurred
transaction fees and expenses of €2.3 million in total which has
been allocated to the amortizing bonds, the derivative financial
liabilities and the financial expenses based on their relative
weight in the €40.0 million as received and accordingly an amount
of €1.6 million was charged to the carrying value of the amortizing
bonds, €0.2 million to financial expenses and €0.5 million to
equity. The amortizing bonds had been repaid with the proceeds of
the new debt facility of Orbimed on 15 May
2017.
The investors received a total of 63,380,282 warrants in
connection with this financing. The warrants have been separated
from the bonds and recognised in equity. The transaction was
approved at the Extraordinary General Meeting of shareholders that
was held on 25 October 2016.
For accounting purposes, the amortizing bonds were initially
recognized at amortised cost (i.e. the aggregate value of the value
received minus the fair value of the derivative financial
liabilities and the portion of transaction fees and expenses
allocated to the bond). Payments of the monthly instalment could
take place either in cash or shares.
Initial recognition and movements of the amortizing bonds were as
follows: EUR'000
Received in cash 40,000
Fair value of warrants issued (8,009)
Fair value of conversion right (3,866)
Transaction fees and expenses (1,611)
Carrying value initial recognition 26,514
Effective interest convertible bonds 1,150
Carrying value at 31 December 2016 27,664
Effective interest convertible bonds 7,806
Release of remaining amortised costs 9,530
Payments of instalments bonds (9,104)
Redemption bonds (35,896)
Carrying value at 30 June 2017 -
Ordinary Convertible Bonds
Following an announcement in November
2016, the Company issued €12.5 million private ordinary
convertible bonds ('Ordinary Bonds') carrying 8.5% annual interest
In December 2016. The Ordinary Bonds
are redeemable at the Company's option at par after 3 years, if in
a period of 30 consecutive trading days the volume weighted average
price of the Shares is 30% above the conversion price, unless the
holders elect to convert their Ordinary Bonds instead of being
redeemed.
The holders may request redemption at par of any unredeemed or
unconverted Bonds on maturity. The investors received a total of
8,830,982 warrants in connection with this financing. The warrants
have been separated from the Bonds and recognised in equity.
In connection to the issue of the Ordinary Bonds, the Company
also incurred transaction fees and expenses of €1.3 million in
total of which have been allocated to the Ordinary Bonds, the
derivative financial liabilities and the financial expenses based
on their relative weight in the €12.5 million as received and
accordingly an amount of €0.6 million was charged to the carrying
value of the Ordinary Bonds, €0.6 million to financial expenses and
€0.1 million to equity.
For accounting purposes, the convertible bond portion was
initially recognized at amortised cost. Payments of the bi-yearly
interest takes place in cash.
Initial recognition and movements of the convertible bonds
were as follows:
Period to 30 Year to 31
Amounts in EUR '000 June 2017 December 2016
Balance at 1 January 5,333 -
Initial recognition - 5,230
Amortised costs 847 103
Interest paid (500) -
Redemption (770) -
Balance at end of period 4,910 5,333
Non-current portion (4,025) (4,448)
Current portion 885 885
The Loans and borrowings for 2017 and 2016 can
be summarised as follows:
30 June 31 December
Amounts in EUR '000 2017 2016
Loans from banks 84,746 33,534
Amortizing bonds - 27,664
Convertible bonds 4,910 5,333
Total balance end of the period 89,656 66,531
Current portion of the long-term loans due within one
year (11,028) (26,136)
Non-current portion of long-term loans 78,628 40,395
The remaining lifetimes of the loans and borrowings are no
longer than 5 years.
12. Derivative financial liabilities
Derivative financial liabilities include conversion options
embedded in borrowings and warrants issued in relation to the issue
of equity and the loans in 2013 and 2015.
In 2016, the Company issued bonds which consist of a conversion
option related to the repayment in shares. For more information,
please refer to note 11 Loans and Borrowings. The conversion option
is recognised as liability and separated from the bonds.
Derivative financial liabilities include the initial fair value
of warrants as well as changes in the fair value of the warrants
resulting from adjustments of their exercise prices.
Movement of derivative financial liabilities can be
summarised as follows:
Year to
Period to 30 31 December
Amounts in EUR '000 June 2017 2016
Balance at 1 January 9,982 953
Initial recognition upon issue - 9,439
Release conversion right Amortizing Bond (3,939)
Fair value losses (gains) derivatives 1,311 (404)
Exercise of warrants - (6)
Balance at end of period 7,354 9,982
Fair value gains and losses on derivatives have been presented
within financial income and expenses.
13. Commitments and contingencies
Beside the new loan agreement with Orbimed Advisors, there were
no other material changes to the commitments and contingent
liabilities from those disclosed in Note 28 of the 2016 Annual
Report.
14. Fully-diluted shares
The total number of outstanding shares at 30 June 2017 was 483,928,545.
Since the reporting date, the company has issued a total of
21,692,213 shares in connection with a number of exercises of
warrants. The exercises resulted in total cash receipts of €5.6
million with an additional exercise of €1.6 million worth of
warrants exercised cashlessly, resulting in 3,509,929 shares saved
relative to the number of shares in the exercised warrants.
The number of issued shares as at 26 July
2017 is 505,620,758.
The composition of the number of shares and share rights
outstanding as well as authorised share capital as per the date of
these financial statements is provided in the following tables.
27 July 2017
Shares 505,620,758
Warrants 77,513,140
Options 50,304,588
LTIP 7,742,937
Issued 641,181,423
Available for issue 158,818,577
Authorised share capital 800,000,000
15. Events since the end of the reporting
period
On 20 July 2017, Pharming
completed its refinancing with a single permanent US$100 million debt facility on improved
commercial terms, as described in Note 11.
Since the reporting date, the company has also issued shares in
connection with exercises of warrants, as described in Note 14.
Contact
Sijmen de Vries, CEO: T: +31 71 524 7400
Robin Wright, CFO: T: +31 71 524
7432
FTI Consulting
Julia Phillips/ Victoria Foster Mitchell, T: +44 203 727
1136
LifeSpring Life Sciences Communication, Amsterdam, The Netherlands
Leon Melens, Tel: +31 6 53 81 64
27
PRN NLD