•Delivered revenue for the full year of €169.0 million (US$189.3 million) – an increase of 25% on 2018
•Full year net profits were €36.2 million ($40.5 million), an increase of 45% on 2018
•Fourth quarter net revenue of €45.6 million (US$50.8 million) – just above Q3 2019
•2019 sales growth triggered the second $20 million milestone payment to Bausch Health Companies Inc. (formerly Valeant Pharmaceuticals International, Inc.)
•Full year operating profit of €60.9 million (US$68.2 million), an increase of 60% on 2018
•Cash at year end was €68.6 million ($76.8 million), an increase of €4.2 million from 30 September 2019
•Cash position at 28 February 2020 after convertible bond issue, initial €5.5 million payment due to Sobi and milestone payment to Bausch Health was €149.2 million ($166.0 million)

Leiden, The Netherlands, 5 March 2020

Pharming Group N.V. (“Pharming” or “the Company”) (Euronext Amsterdam: PHARM) presents its preliminary (unaudited) financial report for the full year ended 31 December 2019.

The Company will hold a conference call at 13.00 CET/07.00 EST today. Dial in details can be found on page 12 of this report.

Chief Executive Officer Sijmen de Vries said:

“As with 2017 and 2018, we continued to see consistent growth in the numbers of patients benefiting from RUCONEST® in 2019. As a result of the increase in sales from this growing patient base, we have been able to implement ambitious development plans. These include new expanded indications for RUCONEST® as well as enriching our pipeline and leveraging our commercial infrastructure with our first in-license of a late-stage product: leniolisib, for the treatment of APDS, a rare and severe form of primary immune deficiency. The net profitability we saw in 2018 has also continued and grown in 2019, despite fierce competitive pressure and increased operational costs.

As we look ahead, the proceeds of our highly successful convertible bond refinancing completed in January 2020 has replaced our existing debt, providing extra cash resources and further strengthening our balance sheet. This bond issue will dramatically lower our financing costs and significantly improve the free cash flows for the coming five years. The refinancing will also enable us to invest in the accelerated expansion of our production capacity and of our commercialisation business following the termination of the Swedish Orphan Biovitrum AB (publ.) (“Sobi”) license. We continue to seek additional in-licensing or acquisition opportunities for products to launch over the coming years to increase our near-term pipeline. We therefore remain confident that we will continue to deliver significant value to all our stakeholders in 2020 and beyond.”

Chief Executive Officer’s Commentary

During the year, we built on the strong foundations of the commercial performance of RUCONEST® in 2018 and continued to develop the product in all key markets, growing revenues to €169.0 million in 2019 from €135.1 million in 2018, an increase of 25% and above market consensus. The US remains our largest market, with strong performance in the region demonstrating the success of our commercial operations there despite competitive pressure. We also increased our marketing efforts in the major markets of Western Europe, making good gains in France and more recently in the UK and continued penetration in Germany, Austria and the Netherlands. With European direct sales reaching levels in key markets during the year which impact growth by eliminating revenue through clawbacks by national governments, the termination of the license with Sobi provides a strong opportunity to grow direct sales in additional European and Middle Eastern markets starting in 2020.

Net profits generated throughout the year

As result of the continuing sales growth, the Company achieved net profits in every quarter, ending the year at €36.2 million, up 45% compared with 2018. Operating profit for the year was also strong: up 60% to €60.9 million (2018: €38.0 million), representing a further improvement in operating margin to 36% (2018: 31%).

In the fourth quarter, we achieved the sales level which triggered the second US$20 million milestone payment to Bausch Health Companies Inc. (formerly Valeant Pharmaceuticals International, Inc.), which was paid in February this year. If sales growth continues at or near the current level, there is an increasing likelihood that the final US$25 million will be triggered in a future quarter and paid in 2021 or beyond. Payment of the remaining milestones in the future will not affect profits, because a provision is taken gradually as the likelihood of the milestones being achieved increases. On the balance sheet, this provision is shown under Other Financial Liabilities.

Investing in sustainable long-term growth

In 2018, we set out our three pillar strategy: the first pillar is development and acquisition for sales growth in HAE; the second pillar is for development to create future sales in new large indications for recombinant C1 esterase inhibitor (RUCONEST® or rhC1INH), ; and the third pillar for additional new late-stage rare disease or specialty products which make use of our existing and growing commercial infrastructure. During 2019 we have been able to deliver meaningful progress along this strategy.

We have re-acquired all license territories from Sobi, which allows us to sell directly in all 27 countries of the EU plus the UK and many other eastern European and Middle East countries previously licensed to Sobi. We have initiated clinical studies of rhC1INH in new larger indications. We announced the start of our Phase I/II clinical study in pre-eclampsia (with sites in the Netherlands and Australia) and expect to announce the first patient treated in our Phase IIb study in acute kidney injury in the next couple of months (with sites in Switzerland and later Germany). We also continued the development program for ?-glucosidase for Pompe disease, manufacturing material for preclinical studies enabling an Investigational New Drug (IND) application and developing a scale-up process to enable faster manufacture. Finally, we acquired a novel late-stage program from Novartis, leniolisib for Activated Phosphoinositide 3 Delta Syndrome (“APDS”), which is expected to complete its clinical development over the next year with approval and launch anticipated in 2022.

To meet future needs for rhC1INH, which may become many times greater than current capacity, we are redeveloping C1 esterase inhibitor from cattle, which allows much larger volumes of source material. We have also initiated work on a new downstream processing plant in the Netherlands, which will double the current processing capacity available to Pharming. Together, these measures will enable us to start to supply the larger indications if approval is obtained.

To continue to meet the increasing demand of RUCONEST® for HAE in the meantime, we have already increased our production facilities for source material, with the first of up to three facilities approved by the European Medicines Agency (“EMA”) in Europe and currently under review with the US Food & Drug Administration (“FDA”).

Successful €125 million issue of convertible bonds

In January 2020, we issued €125 million ($140 million) of convertible bonds due 2025, with a coupon of 3.00% p.a.. The bonds were oversubscribed in a book-building exercise and the offer closed in a few hours. These bonds have the potential to be converted, if the price reaches €2.00 per share, into 62.4 million shares or 9.9% of the issued share capital. These bonds were issued at a time when the share price was near Pharming’s ten year high, in order to refinance the balance of the loan facility from Orbimed. The Orbimed facility, while essential at the time of exercise, carried an effective interest rate under IFRS rules of over 13% (and which was further tied to the London Interbank Offering Rate (“LIBOR”)). The bond issue allowed us to repay the Orbimed facility in full eighteen months early. By issuing these bonds and repaying the Orbimed loan, we have added over €75 million net to our cash resources and reduced the total finance cost of our borrowing by over €3 million per year, as well as ensuring that our borrowing is no longer dependent on the variable LIBOR rates.

At the same time, mechanisms exist which would allow us to replace the bonds before the conversion price was reached, and replace them with new bonds which would lock in the accumulated profit for bondholders represented by the share price gain in exchange for better terms and a reset of the conversion price to a higher amount. This would result in a lower number of shares backing the bonds, reducing potential dilution for shareholders. In addition, these bonds can only be repaid or converted into a fixed number of shares. This means that there will be no recurrence of the large non-cash adjustments required by IFRS for bonds which can be converted into a variable number of shares, which made such a difference to our 2017 accounts.

In summary, this financing has been an outstanding success for Pharming and its shareholders. It gives us the additional resources to expand our capacity, while still reducing the cost of finance to much less than the current level on the year end debt balance. As a result of these actions, the balance at the end of February 2020 was €149.2 million ($166.0 million).

Teamwork
None of these achievements, results and developments would be possible without the continued support, expertise and hard work of all our employees. I would like to take this opportunity once again to thank all Pharming employees as well as all of our investors, partners, and debt providers for their support and commitment throughout 2019, which enabled us to execute on the strategic development of Pharming to create a strong, sustainable platform for significant long-term growth.

I look forward with confidence to continuing the growth trajectory of Pharming in 2020 with increased sales, progress on our exciting pipeline projects and new opportunities for enhancing shareholder value.

Leiden, 5 March 2020
Sijmen de Vries
Chief Executive Officer and Chairman of the Board of Management

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Pharming EUR 1,1705 -3,1ct vol. 23,4 milj.