Pharming Reports On Financial Results For The First Nine Months Of 2014

Leiden, The Netherlands, 30 October 2014. Biotech company Pharming Group NV ("Pharming" or "the Company") (NYSE Euronext: PHARM) today published its financial report for the nine months ended 30 September 2014.

 FINANCIAL HIGHLIGHTS

  • Revenues from product sales increased to €2.2 million, as a result of underlying demand in the EU markets (9M 2013: €0.6 million).
  • Revenues from license fees decreased to €1.6 million (9M 2013: €5.4 million) due to the receipt of a US$5 million milestone in 2013.
  • Operating costs increased by €1.6 million to €10.9 million (9M 2013: €9.3 million) mainly as a result of increasing activities, including the start of a Phase II clinical study of Ruconest® for prophylaxis for HAE, and the expenses of the (non-cash) share-based compensation
  • Net financial expenses amounted to €9.2 million (9M 2013: €7.4 million). The increase is due to the (non-cash) revaluation of our warrants resulting from the strong increase in our share price during 9M 2014.
  • Loss from operating activities increased by €6.0 million to €9.7 million, as a result of the receipt of a US$5 million milestone payment in 2013, the increase of operating costs of €1.6 million and a €0.5 million impairment on inventory, reflecting the current low yield on EU sales.
  • Total net loss increased by €7.8 million to €18.9 million (9M 2013: €11.1 million), as a result of the €6.0 million increase of loss of operating activities and the €1.8 million increase in the (non- cash) financial expenses.
  • Cash outflows from operations increased by €6.6 million to €13.7 million during 9M 2014 (9M 2013: €7.1 million), mainly as a result of the €7.3 million increase in manufacturing activities for Ruconest®, ahead of the anticipated US launch in 4Q 2014.
  • Cash at the end of the first nine months of 2014 increased to €23.8 million (2013 FY: €19.2 million).
  • The equity position increased from €5.0 million at year end 2013 to €15.9 million, mainly as a result of the private equity placement of net €14.0 million in April 2014 and the exercise of warrants.
  • The net profit in third quarter was €1.3 million. The net loss from operating activities in the third quarter of €4.2 million was more than compensated by the (non-cash) gain in financial income and expenses of €5.2 million during the third quarter. This (non- cash) gain stems from a correction of €2.4 million in the accounting of the fair value of warrants at 30 June 2014 and the decrease of the fair value of the same warrants of €2.8 million in 3Q 2014. The operating costs of €4.7 million in 3Q included the (non-cash) costs for the share-based compensation of €1.3 million and costs for the start of a Phase II clinical study of Ruconest® as prophylaxis for HAE of €0.3 million.

OPERATIONAL HIGHLIGHTS

  • US partner Salix Pharmaceuticals Inc. is preparing to launch Ruconest® during 4Q 2014 having received approval from the FDA for Ruconest® on 16 July 2014.
  • A US$20 million milestone payment from Salix will become payable within 30 days after the first commercial sale of Ruconest® in the US or within 90 days since FDA approval.
  • New product leads for enzyme replacement therapy products in Pompe's, Fabry's and Gaucher's diseases, as well as Factor VIII and Factor IX for Haemophilia A and B were acquired through the acquisition of certain assets of TRM SASU for €0.5 million in cash.
  • A Phase II clinical study of Ruconest® for prophylaxis of Hereditary Angioedema was announced. Salix and Pharming will equally share the costs of the study. On FDA approval for prophylaxis of HAE an undisclosed milestone will become payable by Salix to Pharming.

POST-PERIOD  HIGHLIGHT

  • Pharming and Swedish Orphan Biovitrum amended and extended the Ruconest® Distribution Agreement. Pharming is in the process of initiating directly commercialization of Ruconest® in Austria, Germany and the Sales through such direct commercialization are anticipated to increase the yield of EU sales.

Sijmen de Vries, Chief Executive Officer of Pharming, commented: "During this first nine months of 2014 we prepared for US market entry by investing in building inventories of Ruconest®.  At the same time, we strengthen the balance sheet with a  "sub-10%" private placement to institutional investors that yielded €14.7 million, which ensured that we were able to co- invest to develop our main asset Ruconest®  for additional indications, such as the start of the Phase II clinical study in prophylaxis of HAE. In addition, we announced our involvement in direct commercialization activities in Austria, Germany and Netherlands.

We have executed on the next step of our strategic plan to leverage our unique production platform through the acquisition of product leads for additional enzyme replacement therapies in orphan diseases such as Pompe, Fabry and Gaucher's disease and additional leads to Factor VIII for Haemophilia A, to further support the collaboration with Sinopharm's SIPI. Following the FDA approval of Ruconest® in the USA, we are looking forward to the launch of Ruconest® during Q4 and the receipt of the US$20 million milestone from Salix. In addition we will receive 30 % of US net sales, up to $100 million annual sales. For annual US net sales in excess of US$100 million this will stepwise increase up to 40 % of net sales. These proceeds, together with the start of direct commercialization of Ruconest® in Austria, Germany and Netherlands, should begin to drive profitable sales revenues from 2015 onwards and should help us meet our aim of future financial sustainability."

FINANCIAL RESULTS

In the first nine months of 2014, the Company generated revenue from sales of Ruconest® of €2.2 million (9M 2013: €0.6 million). The increase in revenue from sales reflects the underlying increased demands for Ruconest® in the EU markets, compared to 9M 2013. Costs of revenues amounted to €2.6 million (2013: €0.4) including impairments of inventories amounting to €0.5 million. Licensing fees decreased to €1.6 million (9M 2013: €5.4 million) as a result of last year's receipt of a US$5 million payment by our US partner Santarus (now Salix Pharmaceuticals: NASDAQ: SLXP "Salix").

Loss from operating activities increased to €9.7 million (9M 2013 €3.7 million), predominantly as a result of the receipt of the one- off milestone payment of US$5 million in 2013, the increase of operating costs and a €0.5 million impairment on inventory, reflecting the current low yield on EU sales.

Financial income and expenses increased to €9.2 million (9M 2013: €7.4 million), as a result of the (non-cash) increase of the fair value of our outstanding warrants, reflecting the increase of our share price in 9M 2014; while the 9M 2013 costs were related to the January 2013 €16.35 million convertible bond.

As a result of the above items, the net loss for the first nine months of 2014 increased to €18.9 million from €11.1 million in the same period of 2013.

Cash outflows from operations increased by €6.6 million to €13.7 million in 3Q 2014 (9M 2013: €7.1 million), mainly as a result of the increase in manufacturing activities for Ruconest®, ahead of the anticipated US launch in 4Q 2014.

FINANCIAL POSITION

Total cash and cash equivalents (including restricted cash) increased to €23.8 million at 30 September 2014 from €19.2 million at year end 2013. The increase is a result of net cash outflows from operations of €13.7 million and €0.5 million used in investing activities, with net cash inflows from financing activities amounting to €19.4 million and net cash outflows from financing activities amounting to €0.6 million.

Financing cash inflows mainly result from the proceeds of the private equity placement of €14.7 million in April 2014 and the exercise of (2012 and 2013) warrants during 9M 2014, which yielded €4.7 million in cash.

EQUITY POSITION

The equity position increased by €10.9 million versus year-end 2013 (€5.0 million) to €15.9 million (9M 2013: €1.6 million negative).

Pharming continues to monitor the development of its equity standing under International Financial Reporting Standards (IFRS). Notably, the Company reports that the negative equity position at the end of 2011 was mainly caused by the inability to recognize the €19.7 million upfront payments and milestones received from Sobi and Santarus as equity (at 30 September 2014 the deferred license fees income amounted to €12.8 million).

The number of outstanding shares as of 30 October 2014 is 407,686,599 and the fully diluted number of shares is 475.9 million

FINANCIAL GUIDANCE 2014

As result of the continuing regulatory review process in Turkey, the prevailing unrest in Israel and the announcement of direct commercialization by Pharming in Austria, Germany and Netherlands, revenues from Ruconest®  sales for 2014 (not including US sales) are now expected to increase from €1.0 million in 2013 to €2.8 million, instead of the previously expected €3.0 million.

No additional financial guidance is provided.
About Pharming Group NV

Pharming Group NV is developing innovative products for the treatment of unmet medical needs. Ruconest® (conestat alfa) is a recombinant human C1 esterase inhibitor approved for the treatment of angioedema attacks in patients with HAE in the USA, Israel, all 27 EU countries plus Norway, Iceland and Liechtenstein. Ruconest® is commercialized by Pharming in Austria, Germany and Netherlands. 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 partnered with Salix Pharmaceuticals Inc. (NASDAQ: SLXP) in North America.

Ruconest® is also being investigated in a randomized Phase II clinical trial for prophylaxis of HAE and evaluated for various additional follow-on indications. Pharming has a unique GMP compliant, validated platform for the production of recombinant human proteins that has proven capable of producing industrial volumes of high quality recombinant human protein in a more economical way compared to current cell based technologies. Leads for enzyme replacement therapy in Pompe's, Fabry's and Gaucher's diseases are under early evaluation.The platform is partnered with Shanghai Institute for Pharmaceutical Industry (SIPI), a Sinopharm Company, for joint global development of new products. Pre- clinical development and manufacturing will take place at SIPI and are funded by SIPI. Pharming and SIPI initially plan to utilize this platform for the development of rh-FVIII for the treatment of Haemophilia-A. Additional information is available on the Pharming website; www.pharming.com.

This press release contains forward looking statements that involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company to be materially different from the results, performance or achievements expressed or implied by these forward looking statements.

Contact

Sijmen de Vries, CEO: T: +31 71 524 7400

FTI Consulting

Julia Phillips/ Victoria Foster Mitchell, T: +44 203 727 1136

The full press release can be downloaded here.

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