Pharming Group Reports On Financial Results For The First Six Months Of 2016

Leiden, The Netherlands, 28 July 2016: Pharming Group N.V. (“Pharming” or “the Company”) (Euronext Amsterdam: PHARM) announces its (unaudited) financial report for the six months ended 30 June 2016.

The Company will hold a conference call at 10:00 CET today, dial-in details can be found on page 7.

Highlights

• Sales of RUCONEST® up 63% overall in second quarter relative to first quarter, so that sales in the first half of 2016 sales were slightly ahead of the first half of 2015
• Sales in the USA up by approximately 33% in the second quarter compared with the first quarter
• Gross Profit increased by 14% for the half year compared with the first half of 2015
• Strongly Positive Results from Phase II study of RUCONEST® for prophylaxis of HAE
• Pharming agrees to market RUCONEST directly in 21 more EU and Middle East countries in amendment with SOBI

CEO’s Commentary

After a relatively modest start to sales of RUCONEST® (recombinant C1 esterase inhibitor, 50 IU/kg) in 2016, sales trends during the second quarter improved again. More consistent sales efforts in the US, recovering from the impact of a significant reorganization of the Valeant sales force in Q4 2015, and a modest expansion in our EU direct commercialization efforts drove these improvements. Pharming is continually looking for ways to improve sales performance in the USA and the rest of the world in cooperation with our partners.

Income from sales increased 63% from €1.6 million in the first quarter to €2.6 million in the second quarter, with sales in the USA up from €1.5 million in the first quarter to €2.0 million in the second quarter. This represents a good half year, and exceeds the first half of 2015 when the major wholesalers in the USA were ramping up their stocking levels of RUCONEST® to meet increasing demand. Gross profits from sales continue to increase as well; from €1.6 million in the first quarter to €1.7 million in the second quarter of 2016 as result of the changing mix between US sales and sales in the EU by Swedish Orphan Biovitrum (“SOBI”) and by Pharming. We continued to keep pressure on cash expenditure despite the improvement, resulting in resource management improvement in the first half of 2016 compared with the first half of 2015.

During March, the European Commission adopted the CHMP recommendation to include the treatment of hereditary angioedema (“HAE”) attacks in adolescents and to remove the requirements for rabbit IgE testing that previously formed part of the EU label for RUCONEST®. The CHMP also noted that the importance of favorable effects of RUCONEST® is further supported by the continued availability of supply of RUCONEST® (produced by recombinant technology) in comparison to supply from blood donor plasma that may vary, and that as it is not a blood derived product RUCONEST® carries no potential risk of exposure to blood-borne pathogens.

We continue to make good progress in developing our pipeline to produce the next generation of therapies from our platform. Our first program lead for Pompe disease is now entering its next stage of pre-clinical testing and process development with the second program for Fabry Disease following by approximately six months. We will be announcing details of these programs and the timetable of their clinical development later this year.

After the end of the period we updated our distribution agreement with SOBI. As of 1 October this year, Pharming will commercialize RUCONEST® directly in a further 21 countries. SOBI had not yet begun significant sales efforts in most of these countries. The countries include the major EU markets of the UK, France and Spain, and a number of countries across Europe and the Middle East which do not yet have optimal access to therapies for HAE. In some of these countries we will continue to act in partnership with the HAEi Global Access Program.

Earlier this month we also announced positive results from a Phase 2 clinical study of RUCONEST® for prophylaxis in patients with HAE. In the study, RUCONEST® showed a clinically relevant and statistically significant reduction in attack frequency for both the twice-weekly (p-value <0.0001) and once-weekly (p-value = 0.0004) treatment regimens as compared with placebo. The secondary endpoint showed a response rate of up to 96% in the twice weekly treated per protocol group of patients, corroborating reports from day-to-day use of RUCONEST. At present, there is only one product formally approved for treatment of prophylaxis of HAE in the USA, and the market is expected to be around $800 million in 2017. This represents a huge potential market for RUCONEST®, which if approved would be the only product approved for both acute attacks and prophylactic therapy. More detail is given below.

Based on our financial results for the first half of 2016, we expect that both sales and gross profits will continue to improve during the remainder of the year and that investments in R&D will continue to increase gradually, following the sales trends.

No further financial guidance is provided

Sijmen de Vries
Chief Executive Officer

Operational Review

• Pharming announced positive results from a Phase 2 clinical study of RUCONEST® (recombinant C1 esterase inhibitor, 50 IU/kg) for prophylaxis in patients with hereditary angioedema (HAE). In the study, RUCONEST® showed a clinically relevant and statistically significant reduction in attack frequency for both the twice-weekly and once-weekly treatment regimens as compared with placebo.

• Pharming and SOBI agreed an amendment to their distribution agreement which resulted in Pharming taking over responsibility for marketing RUCONEST® in Algeria, Andorra, Bahrain, Belgium, France, Ireland, Jordan, Kuwait, Lebanon, Luxembourg, Morocco, Oman, Portugal, Qatar, Syria, Spain, Switzerland, Tunisia, United Arab Emirates, United Kingdom and Yemen, effective October 1st, 2016.
• In March 2016, the European Commission adopted the CHMP recommendation to include the treatment of HAE attacks in adolescents with HAE and to remove the requirements for rabbit IgE testing that formed part of the EU label for RUCONEST®.
• In February, Pharming and Cytobioteck announced an extension of their distribution agreement for RUCONEST® to cover additional Central and Latin American countries.

Financial Review

Financial Highlights

Revenues

Revenues from product sales slightly increased in the first half year of 2016 to €4.2 million from €4.1 million in 2015, as a result of increased US product sales. RUCONEST® sales in the US amounted to €3.5 million compared to €3.0 million in 2015, sales in the EU and ROW amounted to €0.7 million compared to €1.1 million in 2015, as a result of SOBI adjusting inventory levels in Q1. Compared with the first quarter of 2016, the second quarter was up approximately 33% in the USA, with sales of approximately €2.0 million compared to €1.5 million in the first quarter, and 63% overall, to €2.6 million from €1.6 million in the first quarter.

Other license fee income amounted to €1.1 million, which was in line with 2015. 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 SIPI.

Gross Profit

Gross profit increased by €0.4 million to €3.3 million in the first half year of 2016, mainly as a result of an improving mix between US product sales, direct sales and sales by EU partner SOBI. Compared with the first quarter of 2016, gross profit was up from €1.6m to €1.7m in the second quarter.

Operating Costs

Operating costs increased to €9.7 million in the first half year of 2016 from €9.0 million in 2015. Research and development (R&D) costs increased by €0.5 million to €7.0 million in the first half year of 2016, mainly due to costs for the expansion of our R&D site in France and increased R&D activities in the Netherlands.

General and administrative costs increased by €0.2 million to €2.0 million in the first half year of 2016 as a result of new hires and increased consultancy costs.

Marketing and sales costs remained the same in 2016 at €0.6 million. These costs are for direct commercialization activities by Pharming in Germany, Austria, the Netherlands and support to other countries (outside US and EU).

Operating Result

As a result of the combination of the increase in gross profit and the increase of operating costs due to increased investment in new programs, the operating loss of €6.2 million in the first six months of 2016 was only slightly increased relative to last year’s loss for the first half year (€6.1 million), despite the significant increase in R&D activity since then.

Financial Income and Expenses

The 2016 (mainly non-cash) net loss on financial income and expenses was €0.5 million, compared with a net gain of €2.6 million in 2015. This is mainly due to the gain on revaluation of warrants of €0.5 million, the interest expense of the loans of €0.9 million and the interest expense on finance lease liabilities of €0.1 million. The gains or losses on revaluation of warrants which represented the bulk of last year’s gain and part of this year’s loss are non-cash gains accounted for in accordance with IFRS which cannot actually be realized.

Net Result

As a result of the above items, the (mainly non-cash) accounting net loss increased from €3.5 million in the first half of 2015 to €6.7 million in the first half of 2016. The increase of the net loss was mainly related to the decrease in financial income and expenses as a result of expenses from interest on the loans, and reduced non-cash income from revaluation of derivatives.

Cash and Cash Equivalents

The total cash and cash equivalent position (including restricted cash) decreased by €10.1 million from €31.8 million at year-end 2015 to €21.7 million at the end of June 2016. The decrease in cash is equal to change during the first half of 2015 and mainly relates to increased R&D spend offset by an increase in trade and current liabilities. In 2015, the decrease of cash was mainly related to the build up of inventories. Cash at the end of Q1 2016 was €27.7 million, and the decrease since then is mainly attributable to inventory costs for the most recent batches of RUCONEST®.

Equity

The Company’s equity position amounted to €18.2 million at the end of June 2016 (31 December 2015: €23.8 million), mainly due to the net loss and the share-based compensation. In addition, it should be noted that the Company has a significant amount of deferred license fee income (June 2016: €8.9 million) regarding non-refundable license fees received in 2010 and 2013 which will be recognised in the statement of income over the term of the license agreements involved.

The number of outstanding shares at 30 June 2016 and at July 28, 2016 was 412,555,374.

Performance of Pharming Shares

During the first half year, the Pharming stock price fluctuated around an average price of €0.21 per share. The half year-end price was €0.19 (30JUN2015: €0.30), with a high of €0.24 in April and a low of €0.17 occurring in June.

Outlook

For the remainder of 2016, the Company expects:

• Investment in the production of RUCONEST® in order to ensure continuity of supply to the growing markets in the USA, Europe and the rest of the world.
• Assessment of the clinical trial results for RUCONEST® in prophylaxis of HAE with the US FDA and EMA and the development of this product and other versions of RUCONEST®.
• We will also continue to invest carefully in the new pipeline programs in Pompe Disease and Fabry Disease, and other new development opportunities and assets as these occur.
• Increasing marketing activity where this can be profitable for Pharming, in addition to our current territories of Austria, Germany and the Netherlands. From October, we will begin operations in the UK, France and Spain as well as other countries which have been obtained from SOBI under the agreement amendment.
• We will continue to support all our marketing partners everywhere in order to enable the maximization of the sales and distribution potential of RUCONEST® for patients in all territories, as we continue to believe that RUCONEST® represents a fast acting, effective, reliable and safe therapy option available to HAE patients.

No further financial guidance for 2016 is provided.

Statement of the Board of Management

The Board of Management declares that to the best of its knowledge and in accordance with applicable reporting principles, the half-year consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of Pharming, and the half-year report incorporated in this press release includes a fair review of the development and performance of the business and the position of the Company, together with a description of certain risks associated with the expected development of the Company.

The Board of Management

Sijmen de Vries, CEO

Bruno Giannetti, COO

Robin Wright, CFO