Biotech company Pharming Group NV ("Pharming" or "the Company") (Euronext: PHARM) announced today its financial first half year (HY1) results for the period ended June 30, 2009.
Key financial developments first half year 2009
* EUR 20.0 million Standby Equity Distribution Agreement ("SEDA") signed with YA Global Master SPV LTD ("YA Global");
* SEDA (equity) financing of EUR 2.8 million implemented in June;
* EUR 70.0 million convertible bonds (issued in 2007) reduced to EUR 35.8 million at June 30, 2009 from EUR 49.9 million at year end 2008;
* Operational costs from EUR 12.8 million in the first six months of 2008 to EUR 14.6 million in the same period of 2009 driven by preparation of submitting an EU Marketing Authorization Application for Rhucin(R) in September 2009 as well as intensified efforts for the Rhucin(R) program in North America and preparation for continued clinical activities of Prodarsan(R);
* Net loss in the first half year 2009 of EUR 15.1 million as compared to EUR 12.1 million in the first half of 2008 as a result of increased operational costs (EUR 1.8 million), decreased interest income (EUR 0.9 million) and the effect of non-cash items (EUR 0.3 million).
Discussion of financial transactions and financial position
The first half of 2009, the Company successfully negotiated several financial agreements in order to maintain the cash position and improve the equity position, while at the same time decreasing its liabilities and future interest payments.
Standby Equity Distribution Agreement with YA Global
In April 2009, Pharming signed into a EUR 20 million Standby Equity Distribution Agreement with YA Global. Under the terms of the agreement, YA Global can invest a total of up to EUR 20.0 million in a three year period. Pharming has the right, but not the obligation, to call the funds in regular tranches. In June, Pharming started using the SEDA and called a total amount of EUR 2.8 million in cash in exchange for the issuance of approximately 4.6 million Pharming shares. At closing of the agreement in April, Pharming issued a one-off payment of 0.8 million commitment shares.
In early July 2009, Pharming called EUR 0.4 million in cash for a consideration of 800,000 shares, resulting in a total amount of EUR 16.8 million still available under the agreement as at today.
Settlement of convertible bonds
In the first half of 2009, Pharming entered into various agreements with several holders of bonds issued in 2007. Under these agreements, the Company successfully cancelled a total outstanding amount of EUR 14.1 million nominal bonds in exchange for EUR 1.0 million cash and issuance of 9.5 million shares. Following these transactions, the outstanding nominal value of bonds was reduced from EUR 49.9 million at year end 2008 to EUR 35.8 million at June 30, 2009 so that approximately 50% of the original EUR 70.0 nominal value of the bonds issued in 2007 has now been cleared. Based on this reduction, annual interest payments of EUR 4.8 million in 2008 are expected to be reduced by EUR 2.0 million to EUR 2.8 million in 2009, of which EUR 1.5 million has already been paid in the second quarter with the payment of the remaining EUR 1.3 million scheduled for the fourth quarter.
In compliance with International Financial Reporting Standards, upon issuance of the EUR 70.0 million convertible bonds, a derivative portion of EUR 21.7 million and transaction fees of EUR 3.0 million were carved out to arrive at a net liability of EUR 45.3 million. This initial liability increases in subsequent periods through charging an effective interest rate in order to, ultimately, fully equal the total amounts of semi-annual interest nominal interest payments of 6.875% and the redemption payment over the total five year period. As a result, the carrying value of the bonds at the end of each reporting period is lower than the nominal value of the outstanding bonds. At June 30, 2009, the total carrying value including the short-term portion of nominal interest due is EUR 26.7 million as compared to nominal bonds of EUR 35.8 million outstanding.
Discussion of results
In the first half year of 2009, the Company's income increased from EUR 0.2 million to EUR 0.3 million as a result of grants received based on increased costs eligible for grants and increased facilities on certain grant programs by the Dutch government.
Operational costs increased from EUR 12.8 million in the first six months of 2008 to EUR 14.6 million in the same period of 2009. The EUR 1.8 million increase primarily results from increased costs of research and development (from EUR 10.3 million to EUR 12.4 million), reflecting Pharming's efforts to complete the previously announced submission of an EU Marketing Authorization Application for Rhucin in September 2009. At the same time, the Company is intensifying its efforts for the Rhucin development program in North America and to prepare for clinical trials of Prodarsan. Operational costs for the first half of 2009 included EUR 1.0 million for non-cash items compared to EUR 1.2 million in the comparative period in 2008; costs of share based compensation programs and deprecation and amortization charges remained fairly constant but contrary to the first half year 2008 no operating asset impairment charges were incurred.
Financial and other income and expenses in the first half of both 2008 and 2009 were highly affected with non-cash valuation adjustments in relation to convertible bonds, marketable securities and deferred tax items as well as interest derived from cash and marketable securities. In total, net losses from these items in the first half of 2009 were EUR 0.8 million compared to net profits of EUR 0.5 million in the six months ended June 30, 2008; these effects are primarily related to lower interest income from cash and marketable securities.
Dr. Sijmen de Vries, Chief Executive Officer, commented: "With the planned regulatory submission for Rhucin in September and the development of our products on track, we can look back on a quarter that has progressed in line with expectations. An important achievement is that we decreased our financial risk profile with the conclusion of the EUR 20 million SEDA with YA Global, which is illustrated by the EUR 2.8 million we raised from this facility in June. Notwithstanding the above, further improvement of our financial position remains the top priority for management during the second half of the year. Several types of transactions including (convertible) debt, project-specific financing and licensing deals for our assets such as Rhucin and Lactoferrin are currently under consideration and discussion. In addition, we still anticipate receiving milestone payments from our partnering agreements this year. These transactions should keep the Company securely financed well into 2010. I look forward to reporting further on this as well as on progress with our clinical programmes."
Conference call information
Today, Chief Executive Officer Sijmen de Vries will present the HY1 2009 results in a conference call for analysts at 9:00 am and for press at 10:30 am CET. To participate, please call one of the following numbers 10 minutes prior to the call:
Following a presentation of the results, the lines will be opened for a question and answer session. An audio cast of the conference calls will be available on Pharming's website shortly thereafter.
The full half year report for the period ended June 30, 2009 can be found on Pharming's website.
About Pharming Group NV
Pharming Group NV is developing innovative products for the treatment of genetic disorders, ageing diseases, specialty products for surgical indications, intermediates for various applications and nutritional products. Pharming has two products in late stage development - Rhucin(R) for Hereditary Angioedema and human lactoferrin for use in food products. The advanced technologies of the Company include innovative platforms for the production of protein therapeutics, technology and processes for the purification and formulation of these products, as well as technology in the field of DNA repair (via DNage). 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.
Sijmen de Vries, Pharming Group NV, T: +31 (0)71 52 47 400
The full report including tables can be downloaded from the following link:
Q2 Results 2009: http://hugin.info/132866/R/1329421/313843.pdf