annual report science-to-life

Transcription

1 annual report science-to-life

2 Company Information Zealand Pharma A/S Smedeland 36 DK-2600 Glostrup Denmark Tel: Fax: CVR no.: Established 1. April 1997 Registered office: Albertslund Financial year: 1 January 31 December Board of Directors Daan J. Ellens, Chairman of the Board Peter Benson Alain Munoz Jean-Christophe Renondin Christian Herskind Thomas Tscherning Christian Thorkildsen Helle Størum Executive Management Board David H. Solomon Mogens Vang Rasmussen Auditors Grant Thornton Incorporated State Authorised Public Accountants Stockholmsgade 45 DK-2100 Copenhagen Ø

3 3 table of contents Company Profile Financial Review Product Pipeline Mission and Vision Zealand s success of the last 10 years Management Letter Press Releases 2008 Key Figures Lead Development AVE0010/ZP10 (Type 2 Diabetes) Financial Review 2008 Corporate Governance Share Ownership Financial Policy Statement by the Management Independent Auditor s Report Accounting Policies Income Statement 2008 Balance Sheet at 31 December 2008 Cash Flow Statement Statement of Changes in Equity Notes 13 ZP1609/ GAP-134 (Cardiac Arrhythmias) 14 GLP-2 story 16 ZP1848 (Inflammatory Bowel Disease) 17 ZP1846 (Chemotherapy-Induced Diarrhea) Executive Management Board Board of Directors

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5 5 product pipeline Early Drug Late Drug Pre-Clinical Phase I Phase II Phase III Discovery Discovery Development AVE0010/ZP10 Type 2 Diabetes (Partnered with Sanofi-Aventis) AP214/ZP1480 Post-surgical Organ Failure (Partnered with Action Pharma) ZP1846 Chemotherapy-Induced Diarrhea (Partnered with Helsinn Healthcare) ZP1609 /GAP134 Atrial Fibrillation (Partnered with Wyeth Pharmaceuticals) ZP1848 Inflammatory Bowel Disease ZP2307 Osteoporosis ZP2435 Obesity, Diabetes Gap Junction Modulation, Arrhythmias, Diabetes, Obesity Zealand s overall focus is to create maximum value by bringing innovative peptide drugs with significant therapeutic and commercial potential rapidly and efficiently to the market to meet patients unmet clinical needs. Zealand s vision To be the European technology leader in research and development of peptide drugs. To have a strong and risk diverse product pipeline with products close to the market. To provide a sustainable platform for efficient development of peptide drugs, using our proprietary technologies. To form alliances whenever they serve our business purpose. To keep certain marketing rights to our products that allow us to establish our own marketing organizations in certain territories. To be a preferred employer through our standards, our values and a nurturing workplace environment.

6 6 Zealand s success of the last 10 years building a strong pipeline validated by major global commercial partnerships, has positioned Zealand for future success as a leading peptide development company. Zealand s strength is based on a strong financial position and a focused strategy. Zealand Pharma was founded in 1998 and has achieved a significant position for a company of our size and age. In 10 years Zealand s scientists have built a unique peptide pipeline of proprietary programs, seven of which have entered into clinical development. Our current development portfolio consists of: In addition, Zealand has a number of early stage lead development programs targeting a variety of disease areas and indications which represent unmet clinical need and significant market potentials, for example, obesity, type 2 diabetes, dyslipidemia, cardiac arrhythmias, acute kidney injury and osteoporosis. One Phase III compound AVE0010/ZP10 for Type 2 Diabetes One Phase II compound AP214/ZP1480 for Post-surgical Organ Failure Three compounds in Phase I ZP1609/GAP-134 for Atrial Fibrillation ZP1846 for Chemotherapy-Induced Diarrhea ZP1848 for Inflammatory Bowel Disease All of Zealand s drugs have emerged from our own drug development process. Our technology is commercially validated through global partnerships with major pharmaceutical companies, including Sanofi-Aventis (ZP10), Wyeth (ZP1609), Helsinn Healthcare (ZP1846) and Action Pharma (ZP1480). In 2003 Zealand was honoured as Entrepreneur of the Year within the biotech category by Ernest & Young and in 2008 Zealand was awarded The European R&D Company of the Year by Frost & Sullivan. During the 10 years in operation, Zealand has: Synthesized more than 2000 peptide compounds Filed 226 patent applications in 24 patent families Published more than 100 articles, posters and abstracts Received revenue from upfront payment, development milestones and research contractual work Signed four partnering deals with some of the biggest global pharmaceutical companies

7 7 No. of Synthesized Peptide Compounds Employees year end No. of synthesized peptide compounds Employees year end Accumulated no. of synthesized peptide compounds Revenue DKK No. of Patent Families No. of Patent Families Revenues 10 5 Accumulated no. of Patent Families per year Accumulated Revenues

8 8 Management letter New Milestones reached in 2008 We are pleased to report that 10 years after establishment of Zealand Pharma A/S in 1998, Zealand has reached new significant milestones in The recent global financial crisis has impacted all biotechnology and pharmaceutical companies. Through this crisis, despite a strong financial position, Zealand Pharma has developed a care and a discipline regarding our cash management, and the clinical and drug development programs we support. We believe that this discipline together with our strong pipeline and ongoing Global Partnerships will allow us to achieve significant success in the coming year. In May, worldwide Phase III clinical development was initiated for Zealand s GLP-1 Agonist AVE0010/ ZP10 licensed to Sanofi-Aventis. In November, Zealand and Helsinn Healthcare announced the signing of a partnering agreement, for the development and worldwide commercialization of Zealand s ZP1846, a Glucagon-like Peptide-2 (GLP-2) receptor agonist, which provides a novel way to treat Chemotherapy-Induced Diarrhea (CID), a debilitating condition affecting patients undergoing cancer treatment with a range of chemotherapies. Partnering ZP1846 with Helsinn Healthcare once again demonstrates Zealand s ability to bring innovative peptide projects from idea to clinical development and partnering. This agreement is the third major agreement concluded within the 10 year period of Zealand s existence and these important deals highlight the exciting compounds that our unique approach to drug discovery and development delivers. This approach which combines a creative drug development culture with a strong focus on commercialization, has enabled us to successfully progress ZP1846 from discovery through to clinical trials in just four years, creating significant value for our shareholders. AVE0010/ZP10 In May 2008, Sanofi-Aventis initiated Phase III clinical programs for the GLP-1 agonist AVE0010/ ZP10 licensed from Zealand. The program includes over 3,000 diabetic patients and will evaluate a once-a-day injection of AVE0010/ZP10 in combination with the principal existing treatments (metformin, sulfonylurea, insulin), as well as a comparison with exenatide and a monotherapy study. Submission for registration in the EU/US is expected in ZP120 In the absence of clinically available vasodilatory drugs that preferentially reduce systolic blood pressure, Zealand has during 2008, after consultation with cardio vascular experts, evaluated the opportunity to use ZP120 effectively in the treatment of Isolated Systolic Hypertension (ISH). Unfortunately, as the efficacy from Zealand s animal experiments related to the NOP receptor properties cannot be reproduced in man and as the hypotensive effects are inconsistent, Zealand has decided to terminate the project. ZP1609/GAP-134 Zealand Pharma entered into a development and license agreement with Wyeth Pharmaceuticals in 2003 to co-develop gap junction modifiers for the treatment of cardiovascular diseases. Successive agreements granted Wyeth rights to the unique Zealand compound library for novel molecules with potential gap junctional modifying properties. From this library the two companies have identified ZP1609/GAP-134, a small modified dipeptide, as a potent and selective gap junction modifier with oral bioavailability. In 2008, Wyeth s arrhythmia Learn Team has reassessed the clinical strategy for ZP1609/GAP-134 and a POC strategy for GAP-134 has been endorsed. This will involve studying GAP-134 in prevention of Postoperative Atrial Fibrillation using i.v. dosing in hospital and oral dosing after discharge. In 2008, Wyeth conducted the Phase I clinical trial for the i.v. formulation and has decided to advance this first orally available gap junction modifier ZP1609/ GAP-134 into Phase I clinical trials in the US in the beginning of ZP1609/GAP-134 has shown pharmacological effects in animal models of both ventricular and atrial arrhythmias, and with its oral formulation, the molecule represents a novel paradigm for the potential prevention of chronic cardiac arrhythmias. ZP1846 ZP1846 is a peptide, which incorporates Zealand s proprietary SIP technology, developed as a therapy for the prevention and treatment of Chemotherapy- Induced Diarrhea, a debilitating adverse reaction affecting patients undergoing treatment with many cancer chemotherapies. In the first half of 2008, Zealand completed a Phase I double-blind, placebo controlled, randomized, escalating intravenous single dose safety and tolerability study of ZP1846 in healthy volunteers in the US. Zealand obtained its primary objectives of the Phase I study, which were to investigate the safety, tolerability and maximum tolerable single dose (MTD) of ZP1846 administered as i.v. bolus or subcutaneous injections to healthy volunteers. In November, Zealand and Helsinn Healthcare announced that they have signed a partnering

9 9 agreement for the development and worldwide commercialization of ZP1846. Under the terms of the agreement, Helsinn Healthcare will receive a worldwide exclusive license to ZP1846 and will be responsible for all further development, regulatory approvals, manufacturing, marketing and sales of the compound either on its own or through its sublicensees. In return Helsinn Healthcare will pay Zealand development milestones and sales milestones for an undisclosed amount. In addition, Zealand will receive royalties on future sales and has retained marketing rights to the Nordic countries. The total value of the non-royalty portion of the partnership is valued up to 140 million. ZP1848 ZP1848 is a novel peptide targeted as a subcutaneous injection for the treatment of acute inflammation in patients with Inflammatory Bowel Disease (IBD). Inflammation induces significant damage to the small intestinal mucosa and serosa, which in turn, aggravates the severity and perpetuates the inflammation. ZP1848 is a novel Glucagon-like Peptide-2 (GLP-2) agonist that has a regenerative effect on the intestine by stimulating mucosal growth and thereby enhancing recovery from inflammation. In pre-clinical studies ZP1848 has been shown to attenuate small intestinal inflammation and enhance recovery from inflammation in an experimental model of IBD. ZP1848 is advancing through an extensive pre-clinical toxicology and safety pharmacology program as recommended by the FDA, and an IND was submitted in the US in Zealand intends to bring ZP1848 through a Phase Ia escalating single dose study followed by a Phase Ib study including Crohn s disease patients in remission in addition to healthy volunteers, all dosed for up to 14 days with one dose of ZP1848. Dr. David Solomon brings more than 20 years of experience in medical research, healthcare investing, and key biopharmaceutical and medical device operating roles. He has extensive experience in pharmacology research, having served as a faculty member at Columbia University s College of Physicians and Surgeons in New York, NY, as well as leadership positions at several biotechnology, pharmaceutical and medical device companies, including Remedy Pharmaceuticals and Critical Diagnostics, both in New York. From , Dr. Solomon led healthcare investing at Carrot Capital Healthcare Ventures. Most recently, Dr. Solomon served as Chief Operating Officer of Vital Sensors, Inc. Dr. Solomon studied medicine and received his doctorate at Cornell University Medical College and the Sloan-Kettering division of its Graduate School of Medical Sciences, in New York City. Dr. Solomon succeeds Interim CEO Mogens Vang Rasmussen who will continue at Zealand as Executive Vice President, Chief Operating Officer and Chief Financial Officer. As a result of the partnership with Helsinn Healthcare, Zealand received an upfront payment during For the second year in the row Zealand has significant revenue. Combined with a reduction in cost the strengthened financial position enables Zealand to continue the clinical development of our most advanced programs and to bring new drugs into clinical development. These can come either from Zealand s own highly original research pipeline or later stage external inputs as a supplement to the traditional in-house development path. Zealand s strong cash position also provides us with a unique opportunity to pursue various strategic opportunities, including alliances or joining forces with a larger partner with interest in taking over Zealand s portfolio of compounds, projects and competencies. In April, shareholders of Zealand Pharma A/S elected Dr. Daan J. Ellens as Chairman of the Board of Directors. At an Extraordinary General Meeting in October, Mr. Jens W. Kindtler resigned from the Board of Directors and shareholders elected Dr. Thomas Tscherning as new member of Zealand s Board of Directors. With the progress of Zealand s clinical programs and the build-up of a solid discovery portfolio, we believe that Zealand possesses a rich product portfolio that holds great promise for the years to come. During 2008, we continued to strengthen our technical capabilities with competences in all aspects of peptide sciences and we have further advanced our flexible project organization to examine a range of pipeline and strategic options. Zealand s team spirit and our quest for transforming new opportunities from peptide science into novel drugs that provide better outcomes for patients is the catalyst for inspiring a progressive work environment at Zealand was a challenging year and we would like to thank Zealand s employees for their highly professional and committed efforts throughout the year. Owing their tremendous motivation and hard work it has been possible to reach our common goals and to stay focused in our lead and product development efforts to build further value. We believe that the continuation of the commitment will lead to significant results in Finally, we would like to thank our Board of Directors for their dedication and support throughout the year. Their important contribution continues to be an important inspiration in our pursuit of the company s strategic goals and objectives. Organization 2008 has been a year of substantial progress for Zealand and in August Zealand announced that Dr. David H. Solomon had been appointed President and Chief Executive Officer. Dr. David H. Solomon Mogens Vang Rasmussen President and Chief Executive Officer Executive Vice President, Chief Operating Officer and Chief Financial Officer

10 10 Press Releases February 2008 Phase III program for AVE0010/ZP10 licensed from Zealand Pharma A/S will begin in the first quarter of August 2008 Zealand Pharma today announced that Dr. David H Solomon has been appointed Chief Executive Officer 27 November 2008 Zealand Pharma and Helsinn Healthcare Sign a Partnering Agreement for ZP1846, a novel GLP-2 agonist

11 11 Key Figures DKK Income Statement Operating income 56,382 60,161 3,346 39,919 24,973 81,732 2,186 Research and Development Expenses -85, ,144-96,534-71,584-55,078-56,373-59,324 General and Administrative Expenses -15,308-17,544-13,232-26,138-13,462-11,157-10,234 Net Result (after tax) -33,732-55,000-98,991-43,307-47,161 15,289-68,401 Earnings per Share basic and diluted (DKK) Balance Sheet (31 December) Cash in Hand and Cash Equivalents 209, , , ,296 21,187 72,647 16,696 Total Assets 225, , , ,641 34,511 85,257 34,692 Share Capital ( 000 shares) 17,682 17,682 17,682 12,002 2,633 2,633 1,497 Shareholders Equity 208, , , ,042-35,724 10,813-42,696 Number of Full Time Employees (year end) Compounds in Clinical Development (year end)

12 12 lead development From project identification to clinical lead candidate: A focused and integrated approach In-house initiated projects Validated Concept Clinical Lead Candidate Out-Licensing Lead Development Product Development Introduction Zealand Pharma s primary focus is to develop validated peptide-based target molecules into pipeline drugs with a strong clinical and commercial potential. The development process at Zealand begins with Lead Development, which includes: Identification and selection of peptide programs based on validated concepts that address a significant unmet medical need Focused development of target peptides into drug-like clinical lead candidates supported by a strong IPR platform and business case The clinical lead candidate is transferred to Product Development, which includes: IND enabling pre-clinical development Early-stage clinical development Generation of a strong project partnering package aiming at out-licensing in Phase Ib or at most, IIa Zealand Pharma s demonstrated competency platform and strong external network within metabolic, cardiovascular and gastrointestinal diseases form the basis for pipeline development Over the last 10 years, Zealand has built and demonstrated a strong in-house platform for development of peptide-based drug candidates for treatment of metabolic, cardiovascular and gastrointestinal diseases. The internal competency platform is supported and strengthened by an extensive external academic network. Zealand s projects within metabolic, cardiovascular and gastrointestinal diseases have generated several current pipeline drugs including: Glucagon-like Peptide-1 analogue ZP10 out-licensed to Sanofi-Aventis (Phase III) GAP junction modifier ZP1609 out-licensed to Wyeth (Phase I) Glucagon-like Peptide-2 analogue ZP1846 partnered with Helsinn Healthcare (Phase I) Glucagon-like Peptide-2 analogue ZP1848 (Phase I) These pipeline drugs hold the potential to significantly improve the treatment options for metabolic, cardiovascular and gastrointestinal diseases. For indications outside the designated therapeutic focus areas, Zealand continues to be interested in new peptide-based opportunities, which address a significant unmet medical need and have a strong fit with Zealand s Lead Development competencies and integrated approach. Lead Development projects are selected by combining multi-disciplinary creativity Within each therapeutic focus area, a multi-disciplinary team of scientists, patent professionals and business analysts is assigned to facilitate effective assessment and early identification of unique approaches of promising peptide drug targets. Project ideas are evaluated and prioritized according to a set of pre-defined criteria designed to assure focus on projects, which: Address validated drug targets Hold the potential for a clinically and commercially attractive and competitive profile (i.e. a strong business case) Have a strong technological fit for Zealand Pharma Provide an opportunity for a solid IPR position To address the large unmet medical need within these major disease areas, Zealand is able to leverage its strengths, core competencies and track record to develop new and innovative drugs within the Type 2 Diabetes/metabolic diseases, cardiovascular/renal diseases and gastrointestinal diseases.

13 13 In-house initiated projects Validated Concept Clinical Lead Candidate Out-Licensing Lead Development Product Development Ex-house initiated projects Validated Concept Clinical Lead Candidate Out-Licensing Zealand s documented processes for development of target peptides into clinical lead candidates open opportunities for co-development scenarios Lead and Product Development at Zealand have established processes for developing target peptides into clinical lead candidates and early pipeline drugs. The processes are supported by in-house departments focusing on design and technological implementation within: Peptide chemistry and pre-formulation In vitro assay development and compound characterization Pharmacokinetics and bioanalysis for compound determination Determining compound efficacy in a range of rodent and rabbit disease models Zealand s demonstrated Lead Development platform opens an opportunity for in-licensing and co-development scenarios for university- and biotech-generated peptide projects and delivery technologies. Progress to clinical lead candidate is facilitated by careful planning and project support and execution Upon selection of a project for Lead Development, a multi-disciplinary project team is formed with the aim of driving the project along the critical path through Lead Development. Initially, the project team in collaboration with management outlines the target product profile of the future drug. The target product profile then forms the basis for defining the profile of the future clinical lead candidate in terms of: Physical-chemical properties Potency and selectivity Pharmacokinetics Efficacy and preliminary safety in animal models IPR i.e. properties that support the potential of the clinical lead candidate for further development into a clinically and commercially attractive product. Based on the target profile, decision points, go/nogo criteria and risk profile are delineated followed by development and implementation of a detailed project plan. In summary, Zealand s primary focus is to add value through developing and validating peptide-based target molecules into pipeline drugs with strong clinical and commercial potential. The development process at Zealand begins with Lead Development, which includes identification and selection of peptide-based projects followed by development of the target peptide into a clinical lead candidate. The clinical lead candidate is further advanced through early clinical development by Product Development aiming at building a strong package for out-licensing after Phase I to IIa. Zealand s proven and documented competencies and focused, integrated processes for development of target peptides into clinical lead candidates open opportunities for internally initiated projects as well as in-licensing and co-development scenarios for university- or biotech-generated peptide projects and delivery technologies. The Lead Development project teams work closely together with the departments in order to optimize resource planning and identify project synergies thereby facilitating progress of both the individual projects and the pipeline.

14 14 AVE0010/ZP10 New GLP-1 agonist with superior profile Science AVE0010/ZP10 is a Glucagon-like Peptide-1, or GLP-1, receptor agonist from Zealand s own lead development laboratories that incorporates Zealand s SIP technology and is being developed for the treatment of Type 2 Diabetes in adults who have not achieved adequate glycemic control. The compound mimics the endogenous hormone GLP-1 which is released from specialized cells in the small intestinal wall in response to food intake. The aim of this hormone is to stimulate insulin secretion when blood glucose increases during food intake, suppress the production of glucagon which otherwise would liberate glucose from the glucose depot in the liver, and delay the absorption of food from the gut. These are the three different mechanisms of action by which the blood sugar concentration synergistically is kept under control. GLP-1 only stimulates the liberation of insulin in cases of elevated blood sugar levels but not during periods of normal or low blood sugar. This reduces the risk of hypoglycaemia (low blood sugar levels). The aim of our research was to design a GLP-1 like compound with long lasting anti-diabetic effect and with limited or no nausea. The compound was out-licensed to Sanofi-Aventis in June 2003, and Sanofi-Aventis is responsible for all further development, manufacturing and marketing of the product candidate. In March 2005, Sanofi- Aventis completed a 28-days double blind, randomized, placebo-controlled Phase II clinical study of AVE0010/ZP10 in well-controlled Type 2 diabetic patients. The compound was found to be safe and well tolerated in this trial. Furthermore, a statistically significant reduction in aftermeal blood sugar levels was observed at the highest well tolerated dose. Importantly, although nausea is a common side effect of GLP-1 compounds, four weeks treatment with AVE0010/ZP10 was not associated with increased nausea relative to placebo. In the second half of 2007, Sanofi-Aventis successfully completed their double blind, placebo controlled Phase II dose ranging study for AVE0010/ ZP10 in 500 Metformin-treated patients with Type 2 Diabetes, meeting their primary endpoint of a reduction of the HbA1c levels at the end of treatment. In line with observations from treatment with AVE0010/ZP10 for up to 28 days, once daily dosing with doses that produced marked lowering of HbA1c during 13 weeks of treatment were associated with low incidence of nausea. In addition, treatment with AVE0010/ZP10 was associated with significant weight loss in obese diabetic patients. In May 2008, the first patients were enrolled into a global Phase III program for a short acting formulation. The submission for an NDA/MAA is expected to be filed in 2010 with an expected approval in Life Insulin is a naturally occurring, or endogenous, protein that is synthesized in the beta cells in the pancreas and is necessary for the body to be able to use blood sugar effectively. Insulin is responsible for transporting sugar from the blood into the cells in all tissues. Diabetics have an insufficient production of insulin. In patients with Type 2 Diabetes, often referred to as Adult Onset Diabetes, cells become less sensitive to insulin. Moreover, in late stages of the disease, the pancreas loses the ability to produce sufficient insulin. Type 2 Diabetes is the most common form of diabetes and is caused by both genetic and environmental factors, such as obesity. As a result, the blood sugar is not sufficiently controlled. Type 2 Diabetes is a disease with an alarming growth not only in the industrialized world but now also entering into less industrially developed part of the world. If Type 2 Diabetes is not successfully treated, the patient risks developing severe complications such as stroke, heart attacks, heart failure, kidney failure, blindness and disorders in peripheral nerves. Existing therapy is capable of controlling blood sugar in the first years of the disease but looses its effect over time due to progression of the disease and the compounds have a number of side effects among which weight gain and hypoglycaemia are among the most common. Consequently there is a strong need for an alternative treatment of Type 2 Diabetes and AVE0010/ ZP10 belongs to a new class of compounds which has the potential to delay progression of the disease and facilitate weight loss.

15 15 ZP1609/GAP-134 Pioneering gap junction programs for the treatment of Cardiac Arrhythmia Science Gap junctions are specialized pores that ensure the coordinated transmission of electrical impulses from cell to cell across the heart. This spreading is essential for synchronized contraction of the heart. During a heart attack (acute myocardial infarction) or during chronic heart disease, gap junction pores close, which inhibit spreading of electrical impulses. As a result, electrical impulses take atypical routes which may lead to irregular heart beats, or arrhythmias, and death. Using pre-clinical animal models, we demonstrated that our first generation gap junction modifier Rotigaptide specifically inhibits the re-entry arrhythmia mechanism by normalizing the electrical conduction in the heart and preventing life-threatening arrhythmias during conditions. Zealand Pharma entered into a development and license agreement with Wyeth Pharmaceuticals in 2003 to co-develop gap junction modifiers for the treatment of cardiovascular diseases. Successive agreements granted Wyeth rights to the unique Zealand compound library for novel compounds with potential gap junction modifying properties. From this library, the two companies have identified ZP1609/GAP-134, a small modified dipeptide, as a potent and selective second generation gap junction modifier with oral bioavailability. Following identification of an orally available gap junction modifier, further development of Rotigaptide has been stopped. ZP1609/GAP-134 shows promise for the prevention of Postoperative Atrial Fibrillation (AF) and the maintenance of sinus rhythm in patients with chronic AF. At the annual American Heart Association Meeting in November 2007, compelling data were presented, which showed that ZP1609/GAP-134 prevents postoperative AF and chronic AF in large animal models. In a canine model of acute sterile pericarditis, ZP1609/GAP-134 significantly reduced AF duration and overall AF burden. In a canine model of heart failure, induced by dual chamber simultaneous pacing of the right atria and right ventricle, ZP1609/ GAP-134 significantly reduced mean AF duration, number of AF episodes and inducibility. This canine heart failure model is designed to mimic patients in the early stages of heart failure presenting with AF requiring cardioversion and chronic maintenance of sinus rhythm therapy. These results demonstrate that ZP1609/GAP-134 is a novel antiarrhythmic agent that may be effective for the maintenance of sinus rhythm in patients with postoperative or chronic AF. In October 2008, Wyeth advanced this first orally available gap junction modifier ZP1609/GAP-134 into Phase I clinical trials in the US. With its oral formulation, this molecule represents a novel paradigm for the potential chronic prevention of both atrial and ventricular cardiac arrhythmias. Following completion of a Phase I study for the oral GAP-134, Wyeth will initiate a Phase II for the i.v. form, ZP 1609, for the treatment of AF following coronary artery bypass graft (CABG) surgery. Life Atrial Fibrillation (AF) is the most common sustained arrhythmia in Western patient populations, affecting almost 10% of persons aged 75 or more. With the increased life expectancy and the improved treatment of patients with ischemic heart disease leading to longer survival of this patient population, the prevalence of AF is expected to reach epidemic proportions as the population age. AF is a disease that is most frequently found in patients with chronic cardiovascular disease (e.g. hypertensive, congestive, ischemic, and valvular heart disease). It is a serious disorder associated with an increased risk of stroke (3-5 fold increased risk), morbidity and mortality ( fold increase). AF is the leading cause of hospitalization for arrhythmia and it has serious impact on quality of life. Postoperative AF is common in patients undergoing cardiac surgery (G Incidence: 625,000 operations). Risk of AF following valve surgeries is 1 in 2 and for coronary artery by-pass grafting, it is 1 in 3. The consequences of postoperative AF are increased hospital length of stay and increased risk of postoperative stroke. ZP1609/GAP-134 may provide a safe and well-tolerated treatment option for Atrial Fibrillation patients with or without structural heart disease or heart failure, for whom the long-term maintenance of normal sinus rhythm is the strategy of choice thereby providing patients an improved quality of life.

16 16 glp-2 story

17 17 Glucagon-like Peptide-2 (GLP-2) is a naturally occurring peptide hormone that enhances the regeneration of the compromised small intestinal epithelium in animals and humans. At Zealand Pharma we have developed a number of potent and biologically stable GLP-2 agonists targeted for the treatment of gastrointestinal indications. The small intestinal epithelium has a dynamic cell population which ensures that the structure and function of the small intestine are maintained The small intestinal epithelium is a dynamic tissue in which cells are constantly being removed and replaced with newly differentiated cells. The epithelium is a single layer of cells consisting primarily of three cell types: enterocytes (site of nutrient digestion and absorption), enteroendocrine cells (site of peptide and hormone synthesis) and goblet cells (site of mucous production). This heterogeneous cell composition of the small intestinal epithelium together with the intrinsic ability of the small intestine to frequently replenish its cell population ensures that both the structure and function of the small intestine are maintained. Glucagon-like Peptide-2 stimulates the natural renewal of the small intestinal epithelium Glucagon-like Peptide-2 (GLP-2) is a peptide hormone produced primarily by the enteroendocrine L cells of the small intestine. It is secreted in response to food ingestion and acts via binding to the GLP-2 receptor, which is primarily expressed in the gastrointestinal tract. chemotherapy-induced mucositis, ischemia-reperfusion injury and Inflammatory Bowel Disease (IBD), investigators worldwide have demonstrated that treatment with GLP-2 decreases disease severity and enhances animal survival. This beneficial effect of GLP-2 in these pre-clinical models, in which the structure and/or function of the small intestine is altered, clearly indicates that the compromised gastrointestinal tract maintains responsiveness to GLP-2. In addition to the effect in animals, GLP-2 has also been shown to be therapeutically beneficial in humans. In studies published in Gastroenterology, Jeppesen and his group convincingly showed that chronic treatment with GLP-2 enhanced nutritional status in patients with Short Bowel Syndrome. In conclusion, the observations that GLP-2 enhances the self renewal potential and function of the small intestine together with the demonstration that GLP-2 is therapeutically effective in man strongly suggests that GLP-2 is an attractive therapeutic candidate for the treatment of intestinal injury and/or disease. GLP-2 has multiple, beneficial effects in the healthy or compromised small intestine. use of GLP-2 in the treatment of gastrointestinal disorders. Nevertheless, a significant challenge for the use of GLP-2 clinically is the observation that GLP-2 is rapidly deactivated and excreted from the body. At Zealand we have applied our knowledge of peptide stabilization and our proprietary SIP technology to produce a series of novel, stable GLP-2 peptide analogues that specifically enhance the growth and function of the small intestinal epithelium. We believe that these novel developed GLP-2 agonists will give Zealand the unique possibility to exploit the multiple beneficial effects of GLP-2 for the treatment of gastrointestinal disease. Two Zealand Pharma-developed GLP-2 agonists are currently in clinical development for the treatment of Inflammatory Bowel Disease and Chemotherapy- Induced Diarrhea. The statuses of these projects are presented on page 16 and 17. In animals, GLP-2 administration has been shown to stimulate small intestinal epithelial growth, to enhance nutrient digestion and absorption, to increase intestinal blood flow and to increase intestinal barrier function. Using a broad range of pre-clinical models of gut injury, including irradiation- and A series of stable and potent GLP-2 agonists have been developed at Zealand Pharma for the treatment of gastrointestinal disorders The specific and beneficial effects of GLP-2 in the small intestine have raised much interest as to the

18 18 zp1848 A Mucosal Regeneration Enhancer for the treatment of Inflammatory Bowel Disease Epithelial regeneration TNF-α Ulceration Barrier function Science ZP1848 is a novel Zealand Pharma-developed GLP-2 agonist in development for the treatment of Inflammatory Bowel Disease. ZP1848 was tested in an extensive pre-clinical toxicology and safety pharmacology program that was recommended by the Food and Drug Administration (FDA). In December 2008 an IND was submitted to the FDA and approved. Zealand is currently running a Phase I trial to assess the safety and tolerability of ZP1848 in healthy volunteers and Crohn s Disease patients. The Phase I study is a double-blind, placebocontrolled, randomized, escalating subcutaneous single dose in healthy volunteers followed by a multiple dosing in Crohn s Disease patients. The study is being conducted in the US. Zealand expects to conclude this study during Zealand has demonstrated that ZP1848 binds potently and selectively to the GLP-2 receptor. Thereafter we investigated the therapeutic effect of ZP1848 in two animal models of IBD: the indomethacin-induced small intestinal inflammation model and the dextran sodium sulphate (DSS)-induced colitis model. Indomethacin-induced small intestinal inflammation is characterized primarily by ulcerations in the small intestinal epithelium, increased concentrations of the pro-inflammatory cytokine, tumor necrosis factor (TNF-ɑ), and decreased barrier function of the small intestine. We have shown that ZP1848 decreases ulceration, TNF-ɑ concentrations and enhances barrier function. Similarly we have shown that ZP1848 decreases the concentrations of inflammation markers and decreased bodyweight loss in mice with DSS induced-colitis. The indomethacin-induced model of small intestinal inflammation and the DSS-induced model of colitis are well accepted by the scientific and clinical community as reliable models of human IBD and recognized as useful tools to assess the therapeutic potential of new drugs for the treatment of Crohn s Disease. The demonstrated reparative and antiinflammatory effects of ZP1848 taken together with the selectivity of ZP1848 for the exclusively located GLP-2 receptor clearly suggest that ZP1848 may be a promising, selective therapeutic that specifically targets and repairs the gastrointestinal tract of the IBD patient. ZP1848 targets and treats multiple pathologies in the indomethacin-induced model of Crohn s Disease. Life IBD is an umbrella term that encompasses primarily Crohn s Disease and Ulcerative Colitis. Crohn s Disease and Ulcerative Colitis are chronic conditions characterized by episodic inflammation within the gastrointestinal tract followed by spontaneous remission. The main difference between Crohn s Disease and Ulcerative Colitis is the location and nature of the inflammatory changes. Crohn s Disease may affect any part of the gastrointestinal tract, but most commonly affects the terminal ileum and proximal colon. Inflammation in Crohn s Disease is characterized by focal, asymmetrical, transmural and occasionally granulomatous ulcerations on the small intestinal epithelium. In contrast to Crohn s Disease, inflammation is only found on the epithelial surface of colon and the anus in Ulcerative Colitis. The most common symptoms of IBD include abdominal pain, cramping, fatigue and diarrhea. Other complications associated with IBD include skin rashes, arthritis, and inflammation of the eye. The etiology and pathogenesis of IBD is yet unknown but environmental, genetic and immune factors are known to play a role. The primary goal of treatment in IBD is to relieve and/or to prevent inflammation. Five main classes of drugs are used to achieve this goal: aminosalicylates, corticosteroids, immunosuppressants, antibiotics and biologic therapies. Surgery is also frequently necessary to relieve symptoms or to correct complications such as blockage, perforation, abscess, fistulas, or bleeding in the intestine. The currently available therapeutics are, however, associated with significant drawbacks such as serious side effects, frequent dosing and lack of therapeutic efficacy. Approximately 700,000 and 1.3 million people globally live with Crohn s Disease and Ulcerative Colitis. Interestingly the incidence of Crohn s Disease is on the rise whereas that of Ulcerative Colitis is stable in industrialized countries. In conclusion the inadequacies of the current treatment options in Crohn s Disease coupled with the rise in the incidence of Inflammatory Bowel Disease in the industrialized world highlights the need for more efficacious therapeutic approaches for the treatment of IBD.

19 19 zp1846 For the treatment of Chemotherapy-Induced Diarrhea Science ZP1846 was tested in a pre-clinical toxicology and safety pharmacology program and a Phase I study to document safety and tolerability. The study was conducted in the US in In pharmacological studies we have shown that ZP1846 attenuates or inhibits Chemotherapy-Induced Diarrhea (CID) in animal models, most likely by enhancing the regeneration and function of the small intestinal epithelium. On 26 November 2008 a partnering agreement was entered into with Helsinn Healthcare SA, for the development and worldwide commercialization of ZP1846 for the treatment of CID. Under the terms of the agreement, Helsinn Healthcare will receive a worldwide exclusive license to ZP1846 and will be responsible for all further development, regulatory approvals, manufacturing, marketing and sales of the compound either on its own or through its sublicensees. In return Helsinn Healthcare will pay Zealand development and sales milestones for an undisclosed amount. In addition, Zealand will receive royalties on future sales and has retained the marketing rights to the Nordic countries. The total value of the nonroyalty portion of the partnership is valued up to 140 million. Life Chemotherapeutic agents target and damage the rapidly proliferating tumor cell. Nevertheless at the same time, chemotherapeutic agents also destroy other rapidly proliferating cell proliferations, such as cells of the small intestinal epithelium. Due to this damage to the intestinal epithelium, up to 50% of patients undergoing chemotherapy treatment experience gastrointestinal-related side effects. Chemotherapy-induced damage to the intestinal epithelium is clinically referred to as mucositis and can lead to intestinal dysfunction and diarrhea. Chemotherapy-Induced Diarrhea (CID) is reported to occur in 50-80% of patients receiving certain chemotherapeutic regimens and as such CID has recently emerged as a debilitating and potentially life-threatening condition requiring clinical attention. The therapies that are currently available to treat CID are only palliative, and as such there is a high unmet medical need for novel efficacious therapeutics. ZP1846 is a novel GLP-2 agonist developed at Zealand Pharma and targeted for the treatment of CID.

20 20 management David H. Solomon President and Chief Executive Officer Dr. Solomon has extensive experience in pharmacology research, having served as a faculty member at Columbia University s College of Physicians and Surgeons in New York, NY as well as leadership positions at several biotechnology, pharmaceutical and medical device companies, including Remedy Pharmaceuticals and Critical Diagnostics, both in New York. From , Dr. Solomon led healthcare investing at Carrot Capital Healthcare Ventures. Most recently, Dr. Solomon served as Chief Operating Officer of Vital Sensors, Inc. Dr. Solomon studied medicine and received his doctorate at Cornell University Medical College and the Sloan-Kettering division of its Graduate School of Medical Sciences, in New York City. Mogens Vang Rasmussen Executive Vice President, Chief Operating Officer and Chief Financial Officer Responsible for IT, Investor Relations and Communications Mr. Vang Rasmussen obtained an MSc in Economics from the University of Copenhagen and supplemented his degree with executive seminars from INSEAD and Stanford Business School. Mr. Vang Rasmussen holds experience from Novo Nordisk A/S where he served as corporate controller and manager of investor relations at their headquarters in Denmark and later with Novo Nordisk in New York holding responsibility for their North American financial reporting and investor relations activities. Before joining Zealand Pharma, Mr. Vang Rasmussen served as Chief Financial Officer and later as Chief Executive Officer at MediCult a/s. Mr. Vang Rasmussen has been with Zealand Pharma since 2003.

21 21 board of directors Daan J. Ellens Chairman of the Board PhD (Molecular Biology) MBA Venture Partner Life Scienses Partners, Amsterdam, The Netherlands President, Elkerim GmbH, Milken, Switzerland Chairman of the Supervisory Board of: Prosensa B.V., Leiden, The Netherlands Hybrigenics SA, Paris, France Alain Munoz MD (Cardiology and Aneasthesiology) President, Amistad Pharma SA, France Chairman of the Supervisary Board: Novagali Pharma SA, France Member of the Board: Vivalis SA, France Auris medical AG, Switzerland Genesystem SA, France Jean-Christophe Renondin MD (Medical Biology) and MBA General Partner, CDC Innovation, Paris, France Member of the Board: Aptanomics, France Cytheris, France Kuros Biosurgery, Switzerland Novagali Pharma, France Picometrics, France TXCELL, France Xytis, US Christian Thorkildsen M.Sc. (Pharm) Project Leader, Development Elected by the employees Zealand Pharma A/S Member of the Board: Kreatech Holding B.V., Amsterdam, The Netherlands Helle Størum M.Sc. (Economics) Business Development Manager Business Development Elected by the employees, Zealand Pharma A/S Christian Herskind BA (law), LLM (int. business transactions) Peter Benson M.A. Econ Thomas Tscherning MD, MBA Bank Invest Biomedical Venture, Denmark Chairman of the Board: Zymenex A/S, Denmark F2G, Ltd., UK CEO Refshaleoen Holding A/S Chairman of the Board: Sumisura A/S Herskind Venture Capital Aps Member of the Board: Mannaz A/S, Denmark COOR Service Management A/S, Denmark Helsingør-Århus Real Estate K/S, Denmark Kongevejen K/S, Denmark Managing Partner, Sunstone Capital Member of the Board: Natimmune A/S, Denmark Virogates A/S, Denmark M2Medical Inc., Sunnyvale, California Alsensa ApS, Denmark Observer Tyge Korsgaard M.Sc. (Economics) Member of the Board: FEH A/S, Denmark KM Holding A/S, Denmark KM Rustfri A/S, Denmark M-K-S Holding A/S, Denmark Sophion Bioscience A/S, Denmark Vivolution A/S, Denmark

22 22 Financial Review 2008 Income statement Zealand s net result for the year 2008 was a loss of DKK 33.7 million as compared to a loss of DKK 55.0 million in The improvement in Zealand s net result is a result of lower research and development expenses in 2008 as compared to Revenue from upfront payment and milestone payments and administrative costs were approximately at the same level in 2008 as in the previous year. Personnel expenses increased to 48.1 million in 2008 from DKK 47.6 million in The total number of employees increased to 65 by the end of 2008 compared with 63 by the end of Administrative expenses in 2008 amounted to DKK 15.3 million. During 2008 Zealand was able to reduce administrative expenses by DKK 2.2 million as compared to Revenue Zealand s revenue decreased by DKK 3.6 million, from DKK 59.9 million in 2007 to DKK 56.3 million in In 2008 Zealand successfully partnered ZP1846 for the prevention of Chemotherapy-Induced Diarrhea with Helsinn Healthcare and received an upfront payment. In addition, Zealand received a milestone payment for AP214, out-licensed to Action Pharma for Postoperative Organ Failure to enter into Phase II clinical development. In 2007, Zealand received two milestone payments from Sanofi-Aventis for the completion of a 24 months stability test for the final formulation of AVE0010/ ZP10 and the successful completion of the Phase IIb trial for AVE0010/ZP10 in addition to a milestone payment from Wyeth Pharmaceuticals for the advancement of the first orally available gap junction modifier ZP1609/GAP-134 into Phase I clinical trials in the US. Other operating income Zealand s other operating income consisting of public grants for Ph.D. students amounted to DKK 0.1 million in Of the total expenses in 2008, 85% was directly related to R&D activities, including salaries to R&D staff, laboratory expenses and clinical expenses, whereas administrative expenses accounted for 15%. The percentage of total spending related to R&D activities is at the same level as in 2007 and emphasizes Zealand s continued commitment and focus on R&D. Operating result Zealand s loss from operations decreased from DKK 62.5 in 2007 to DKK 44.7 million in This decrease in the loss from operations resulted primarily from lower research and development expenses in 2008 as compared to Financial items Financial items amounted to a net gain of DKK 11.0 million in 2008 as compared to a net gain of DKK 7.5 million in Financial income amounted to DKK 11.2 million in 2008 equal to the level in 2007, whereas financial expenses decreased from DKK 3.7 million in 2007 to DKK 0.3 million in 2008 mainly due to currency adjustments related to the development in the USD currency rate. Expenses Total operating expenses amounted to DKK million in 2008 as compared to DKK million in The main reason for the decrease in total operating expenses is a decrease in research and development expenses of DKK 19.3 million from DKK million in 2007 to DKK 85.8 million in The development in research and development expenses in 2008 reflects the completion of the Phase I clinical studies in humans in the US, to further advancement in the pre-clinical development of ZP1848 for the treatment of Inflammatory Bowel Disease and the continued spending on Zealand s promising early stage peptide lead development products. Results from ordinary activities before tax Zealand s result before tax in 2008 was a loss of DKK 33.7 million as compared to a loss of DKK 55.0 million in 2007 due to the factors described under revenue, expenses and financial items. Tax on ordinary activities Deferred tax assets have not been recognized in the balance sheet due to uncertainty as to whether tax losses can be utilized. As a consequence, no tax on ordinary activities has been recognized in either 2008 or Capital expenditure Investment in new equipment amounted to DKK 3.4 million in 2008 as compared to DKK 2.4 million in 2007.

23 23 financial review 2008 Cash Flow In 2008, Zealand s operating activities resulted in a negative cash flow of DKK 28.6 million as compared to a negative cash flow from operating activities in 2007 of DKK 57.6 million. Zealand continued to repay a loan to Vækstfonden at an amount of DKK 6.3 million in 2008 and the loan matured at the end of Cash flow from financing activities amounted to a net outflow of DKK 6.3 million in 2008 as compared to DKK 4.7 million in For 2008 Zealand had expected to reach the following milestones for its projects: End and reporting of Phase I study on ZP1846 for the prevention and treatment of Chemotherapy-Induced Diarrhea Filing of IND and initiation of Phase I study on ZP1848 for Inflammatory Bowel Disease Lead compound identified for Zealand s new diabetes/obesity project In May, Sanofi-Aventis announced the inclusion of the first patient into the clinical Phase III program for AVE0010/ZP10. An additional seven studies will be performed world wide with a total of approximately 3,000 patients. Sanofi- Aventis expects to submit an NDA/MAA for the product in The Phase I clinical studies in humans for ZP1846 in the US was completed and reported. In November, Zealand announced that it has signed a partnering agreement with Helsinn Healthcare, for the development and worldwide commercialization of ZP1846. Under the terms of the agreement, Helsinn Healthcare will receive a worldwide exclusive license to ZP1846 and will be responsible for all further development, regulatory approvals, manufacturing, marketing and sales of the compound either on its own or through its sub-licensees. In return Helsinn Healthcare will pay Zealand development milestones and sales milestones. In addition, Zealand will receive royalties on future sales and Zealand has retained the sales and marketing rights in the Nordic countries. The total value of the nonroyalty portion of the partnership is valued up to 140 million. The filing of an IND for ZP1848 took place in December 2008 and as a consequence the initiation of the Phase I study for ZP1848 for the treatment of Inflammatory Bowel Disease will take place in January The lead compound identified for Zealand s new diabetes/obesity project is still ongoing and is now expected to be finalized in the middle of In addition, clinical Phase I studies for Zealand s gap junction modifier, ZP1609/ GAP-134 developed by Wyeth was initiated in the second half of Zealand s major goals and milestones for 2009 are: Completion of Phase I study on ZP1848 for Inflammatory Bowel Disease Finalize the pre-clinical development for ZP2307 for the treatment of Osteoporosis Identify lead compound for Zealand s new diabetes/obesity project and initiation of pre-clinical development In 2009, Zealand will intensify its aim to pursue collaboration and licensing agreements with pharmaceutical companies having established clinical proof of concept or at an earlier stage if such collaborations or licensing arrangements would enhance the development of Zealand s product candidates. Partnering Zealand s compounds, it is still the intent in the overall strategy going forward to retain certain rights in specific geographical regions enhancing Zealand s value of the project. One of the objectives for 2009 is to initiate the partnering process for ZP1848 for the treatment for Inflammatory Bowel Disease. Based on the expected activities for each of Zealand s clinical development projects and the further development of Zealand s research pipeline of peptide lead product candidates, total operating costs in 2009 are expected to be on level with the costs in The costs include the costs associated with the initiation and completion of a Phase I trial for ZP1848 for Inflammatory Bowel Disease and the continuation of the pre-clinical projects within diabetes/obesity and osteoporosis.

24 24 CORPORATE GOVERNANCE Maintaining relations In accordance with good corporate governance practice Zealand s Board of Directors Board Members elected at the General Meeting Committees of the Board Audit Committee Zealand is focused and in favour of maintaining relations with its shareholders, Board of Directors, Executive Management Board and Management, generally consistent with good corporate governance as recommended by the Copenhagen Stock Exchange Corporate Governance Committee in 2001 and supplemented in In addition, the Company has chosen to follow the information regarding the Company s capital structure and share ownership in accordance with 107a in the Danish Financial Statement Act. The Board of Directors is composed to secure a diversity of expertise, nationalities, personalities and ages in order to qualify for its controlling, as well as strategic direction and advice and consent function, given the Company s existing stage of development. Election to the Board of Directors is restricted to persons below the age of 70. Additionally, the activities of the Board of Directors are governed by internal Rules of Procedure. The Company s Board of Directors has established a Remuneration Committee and an Audit Committee the duties of which are described below. Finally, the Rules of Procedure for the Board of Directors govern the allocation of powers between the Company s Board of Directors, Executive Board and Management. Zealand s general meeting shall elect at least five and not more than nine directors elected by simple majority of votes. In addition, the Board of Directors is supplemented by directors elected by the Company s employees, if applicable, in accordance with applicable laws. The directors elected by the general meeting shall retire from office at each annual general meeting but shall be eligible for re-election. The chairman of the Board of Directors is elected by the general meeting. An extraordinary meeting shall be held when decided by a general meeting, the Board of Directors or requested by the Company s auditors as well as when requested in writing by shareholders holding at least one-tenth of the share capital for consideration of a specific issue. At general meetings, resolutions shall be decided by simple majority of votes unless otherwise prescribed by law or the Articles of Associations. The Board of Directors has established an Audit Committee consisting of Dr. Daan J. Ellens. The duties of the Audit Committee are to assist the Board of Directors in its cooperation with the auditors of the Company and in its review of the financial reporting and procedures of the Company. Remuneration Committee The Board of Directors has established a Remuneration Committee consisting of Dr. Daan J. Ellens, Mr. Peter Benson and Mr. Jean-Christophe Renondin. The Remuneration Committee shall review and approve the remuneration offered to any senior manager and propose appropriate bonus and warrant schemes for adoption by the Board of Directors. Registered Management The Registered Management of the Company consists of Dr. David H. Solomon and Mr. Mogens Vang Rasmussen who are appointed by and serves under the instructions and guidelines of the Company s Board of Directors. Investor Relations Policy Zealand s Investor Relations aims to maintain a high and uniform level of information about the Company to ensure that Zealand s mission, vision, strategy and achieved results are communicated consistently and reliably. The Company intends to continue to pursue a strategy of good corporate governance. During 2009, the Company will continue to review its processes on governing issues to ensure that the Company will comply with the recommendations to the extent they are relevant and contributing to the Company given its scope and business. Zealand s Shares The nominal value of each share is DKK 1.

25 25 SHARE OWNERSHIP Dansk Erhvervsinvestering 6% Other 11% Bank Invest BioVenture 26% Life Sciences Partners 7% Foreign Investors Danish Investors Others AGF Private Equity 10% LD Pension 12% Sunstone Capital 13% CDC Innovation 15% Distribution of share capital and breakdown of Shareholders Liquidation and distribution preferences Share ownership The total number of shares held by institutional investors, private individuals, founders, members of the management and the employees, amounts to 17,682,069 shares of DKK 1 each, including 555,561 treasury shares, as of 31 December The shares are divided into four classes: A-Shares 1,496,787 B-Shares 3,186,021 C-Shares 7,319,064 D-Shares 5,680,197 All amounts and/or assets distributed or allocated by the Company to the Shareholders (whether as liquidation distribution, allocation or consideration in case of merger or demerger, consideration for repurchase of shares, declaration of dividend or in any other way), shall be distributed among the Shareholders in the following order of priority and payment: First D-Shareholders shall be entitled to receive an amount equal to 1.5 times the subscription amount relating to each D-Share plus 8% per annum from 1 July Second the C-Shareholders shall be entitled to receive a total amount of EUR 26,250,000. The following Shareholders have more than 5% ownership and/or voting rights: BankInvest BioVenture, Copenhagen, Denmark CDC Innovation, Paris, France Sunstone Capital, Copenhagen, Denmark LD Pension, Copenhagen, Denmark AGF Private Equity, Paris, France Life Sciences Partners, Amsterdam, The Netherlands A/S Dansk Erhvervsinvestering, Copenhagen, Denmark Third the B-Shareholders shall be entitled to receive an amount per B-Share equal to the subscription price paid to the Company for each B-Share. Finally all further distribution and allocation shall be allocated prorata among all Shareholders in proportion to their ownership of shares of any class.

26 26 Financial Policy The goal of Zealand s financial policy is to create a set of general guidelines for the financial risk management in order to reduce the Company s sensitivity towards fluctuations in the exchange rates, interest rates, credit rating and liquidity. Zealand s financial policy has been endorsed by Zealand s Audit Committee and ultimately approved by Zealand s Board of Directors. Zealand Pharma is a biopharmaceutical company with limited revenues consisting of upfront payments and milestones received as part of Zealand s partnering activities. Zealand receives milestone payments from its current partners in USD and EUR. Mainly exposed to research and development expenditures as well as a significant cash position, Zealand is exposed to various financial risks, which among other relate to foreign exchange rate risk, interest risk, credit risk and liquidity risk. Exchange Rate Risk Zealand does not engage in any exchange rate speculation and translation risk. Most of Zealand s financial transactions are made in DKK, USD and EUR. The EUR/DKK exchange rate has politically been fixed within very narrow limits and Zealand has evaluated that there are no transaction exposure or exchange rate risk regarding transactions in EUR. Zealand s milestone payments from Sanofi-Aventis and Wyeth have been agreed in USD, whereas the milestone payments associated with the Helsinn Partnership has been agreed in EUR. As milestone payments are speculative the payments are not included in the basic exchange risk evaluation. However, as Zealand conduct toxicology studies and clinical trials in the US, Zealand will be exposed to the exchange rate fluctuation and risks associated with transactions in USD. Zealand s policy has up until now been to manage the transaction and translation risk associated with the USD passively, placing the revenues received from milestone payments in USD on an USD account for future payment of Zealand s expenses denominated in USD, covering payments for the next months, hereby matching Zealand s assets with its liabilities. Interest Rate Risk Zealand has the policy to avoid any financial instrument which exposes the Company to any unwanted financial risk. Zealand does not speculate in the underlying trends in the basic economy. Zealand has at several occasions investigated if Zealand s free cash could be invested in any financial instrument with a limited acceptable overall risk and a minimum of transaction costs. In every case the examination of the risk and volatility of an alternative investment in bonds as compared to a risk free placement in fixed rate, time defined bank deposits has lead to the conclusion that an investment in bonds would increase Zealand s exposure to fluctuation in bond prices. This would expose Zealand to an unwanted risk as compared to investing Zealand s free cash in fixed rate, time defined bank deposits even if Zealand would be able to obtain a speculative higher yield investing in bonds. As a result, Zealand has decided to invest its free cash position solely in fixed rate, time defined bank deposits. Cash Management The purpose of Zealand s cash management is to ensure that the company at all times has sufficient and flexible financial resources at its disposal. Zealand s short-term liquidity situation is matched with Zealand s quarterly budget revisions to balance the demand for liquidity and maximize Zealand s interest income by matching Zealand s free cash in fixed rate, time defined bank deposits with Zealand s expected future cash burn. Financial Institutions Banking Policy Zealand maintains and develops relationship with its prime bank and other prospective banking partners. With the purpose to be seen as a professional partner, all contacts with banks and financial institutions are managed centrally by Zealand s financial department.

27 27 statement by the management Today we have discussed and approved the annual report for the financial year 1 January - 31 December 2008 of Zealand Pharma A/S. The annual report has been prepared in accordance with the Danish Financial Statements Act. The annual report has been prepared in accordance with the Danish Financial Statements Act. We find the accounting policies applied appropriate, and the Annual Report therefore gives a true and fair view of the Group s and Parent Company s assets, liabilities and equity, financial position at 31 December 2008 and of the results of the Group s and Parent Company s activities and cash flows for the financial year 1 January - 31 December We believe that the Managements review gives a fair presentation of developments in the Group s and the Parent Company s activities and finances, results for the year and of the Group s financial position in general as well as a fair description of the most significant risks and uncertainties to which the Group is exposed. We recommend that the annual report be approved at the Annual General Meeting. Glostrup, on 26 February 2009 Executive Board David H. Solomon mogens Vang Rasmussen Board of Directors Daan J. Ellens thomas Tscherning James Peter Arthur Benson Chairman alain Munoz Christian Herskind Jean-Christophe Renondin Helle Størum Christian Thorkildsen

28 28 Independent Auditor s Report To the Shareholders of Zealand Pharma A/S We have audited the Annual Report of Zealand Pharma A/S for the financial year 1 January - 31 December 2008, which comprises the Statement by the Management on the Annual Report, Management s Review, a summary of significant accounting policies, the income statement, balance sheet, cash flow statement, statement of changes in equity and notes for the Group as well as for the Parent Company for the year then ended. The Annual Report has been prepared in accordance with the Danish Financial Statements Act. audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors and Board of Executives, as well as evaluating the overall presentation of the Annual Report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. The Board of Directors and Board of Executives Responsibility for the Annual Report The Board of Directors and Board of Executives are responsible for the preparation and fair presentation of this Annual Report in accordance with the Danish Financial Statements Act. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of an Annual Report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor s Responsibility and Basis of Opinion Our responsibility is to express an opinion on this Annual Report based on our audit. We conducted our audit in accordance with Danish Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the Annual Report is free from material misstatement. Our audit has not resulted in any qualification. Opinion In our opinion, the Annual Report gives a true and fair view of the Group s and the Parent Company s financial position at 31 December 2008 and of the results of the Group s and the Parent Company s operations and the cash flow for the financial year 1 January - 31 December 2008 in accordance with the Danish Financial Statements Act. Copenhagen, on 26 February 2009 grant Thornton Incorporated State Authorised Public Accountants An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Annual Report. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the Annual Report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the Annual Report in order to design per H. Jensen State Authorised Public Accountant Henrik Ødegaard State Authorised Public Accountant

29 29 accounting policies The Annual Report for 2008 has been prepared in accordance with the provisions of the Danish Financial Statements Act regarding medium-sized reporting class C companies General information Recognition and Measurement Income is recognized in the Income Statement as earned, including value adjustments of financial assets and liabilities. All expenses including depreciation/amortisation and impairment losses are recognized in the Income Statement. Assets are recognized in the balance sheet when it is probable that future economic benefits will flow to Zealand and when the value of the asset can be measured reliably. Liabilities are recognized in the balance sheet when it is probable that the future economic benefits will flow out of Zealand and when the measurement of the value of the liability is reliable. On initial recognizion, non-financial assets and liabilities are recognized at cost. Subsequently, assets and liabilities are measured as described below for each item. After initial recognition certain financial assets and liabilities are measured at amortized cost where a constant effective interest is recognized over the maturity. Amortized cost is stated as the amount at which the financial asset is measured at initial recognition less any principal repayments and with the addition/deduction of the cumulative amortization of any difference between that initial amount and nominal amount. Allowances are made for predictable losses and risks that arise before the presentation of the Annual Report of Zealand and that confirm or invalidate circumstances that existed at the balance sheet date. The carrying amount of intangible assets and property, plant and equipment is reviewed annually in order to determine if there is any indication of impairment that exceeds what is normally expressed by ordinary amortization/depreciation. If this is the case, write/down is made to the lower recoverable amount. The Consolidated Financial Statements The consolidated financial statements and the financial statements comprise the parent company Zealand and the group enterprises, for which Zealand is entitled to determine finance and operating policies and which normally applies on ownership interests of more than half of the voting rights. The consolidated financial statements are prepared as a compilation of Zealand s and the subsidiaries financial statements prepared in accordance with the Group s accounting policies. On consolidation, intercompany income and expenses, shareholdings, intercompany accounts, dividends, and realized and unrealized intercompany profits and losses on transactions between the consolidated companies, have been eliminated. Unrealized losses are eliminated in the same way as unrealized profits to the extent no impairment exists. Investments in subsidiaries are eliminated by the proportionate share of the fair value of the subsidiaries identifiable net assets and recognized contingent liabilities at the date of acquisition. Translation Policies The amounts in the Annual Report are denominated in DKK 000. Transactions denominated in foreign currencies are translated at the exchange rates at the dates of transaction. Exchange differences arising between the rate on the date of transaction and the rate on the payment day are recognized in the Income Statement as financial income or financial expenses. Where foreign exchange exposures are considered cash flow hedges, value adjustments are recognized directly in equity. Receivables, payables and other monetary items denominated in foreign currencies that have not been settled at the Balance Sheet date are translated by applying the exchange rates at the Balance Sheet date. Differences arising between the rate at the Balance Sheet date and the rate at the date of the arising of the receivable or payable are recognized in the Income Statement under financial income and expenses. Fixed assets purchased in foreign currencies are measured at the rate of the date of transaction. Accounting Policies Derivative Financial Instruments On initial recognition derivative financial instruments are recognized at cost in the Balance Sheet and subsequently measured at fair value. Positive and negative fair values of derivative financial instruments are recognized under other receivables or other payables, respectively.

30 30 Changes in the fair values of classified derivative financial instruments that meet the criteria for hedging the fair value of a recognized asset or liability are recognized in the Income Statement with the changes in the value of the hedged asset or liability. Changes in the fair values of classified derivative financial instruments that meet the criteria for hedging the fair value of a future asset or liability are recognized directly in equity. Income and expenses related to such hedging transactions are transferred from equity at the realization of the hedged asset or liability and recognized under the same item as the hedged asset or liability. Changes in the fair values of derivative financial instruments that do not meet the criteria for treatment as hedging instruments are recognized in the Income Statement continuously. The Income Statement The Income Statement is classified by function. Revenue Revenue comprises milestone payments and other income from collaboration agreements. Revenue is recognized when it is probable that future economic benefits will flow to the Company and these economic benefits can be measured reliably. The income from agreements with multiple components and where the individual components cannot be separated is recognized over the period of the agreement. In addition, recognition requires that all material risks and benefits related to the ownership of the goods and services included in the transaction are transferred to the purchaser. If all risks and benefits have not been transferred, the revenue is recognized as deferred income until all components in the transaction have been completed. Administrative Expenses Administrative expenses include expenses for administrative and business development personnel, expenses related to company premises, operating leases etc. Overhead expenses (such as lease) have been allocated to administration due to the number of staff involved with administration and business development. Other Operating Income Other operating income includes income of a secondary nature, including grants related to research and development projects. Research and Development Expenses Research costs comprise salaries, contributions to pension schemes and other costs, including patent costs, as well as depreciation and amortisation attributable to the Company s research activities. Research costs are recognized in the Income Statement as incurred. Development costs comprise salaries, contributions to pension schemes and other costs, including depreciation and amortization, attributable to the Company s development activities. Capitalization assumes that the development of the technology or the product in the Group s opinion has been completed, that all necessary public registrations and marketing approvals have been received, and that costs can be reliably measured. Furthermore, it has to be established that the technology or the product can be commercialized and that the future income from the product can cover, not only the production, selling and administrative expenses, but also development costs. Public Grants Public grants are recognized when a final and firm right to the grant has been obtained. Public grants are included in other operating income as the grants are considered to be cost refunds. Grants related to investments are set off against the purchase price. Possible future conditional return obligations regarding the received grants will be disclosed in a note to the Annual Report as a contingent liability. Borrowing Costs All borrowing costs are expensed as incurred. Net Financials Financial income and financial expenses are recognized in the Income Statement with the amounts related to the financial year. Financial income and financial expenses include interest receivable and payable, financial expenses related to exchange gains and losses on debt and transactions denominated in foreign currencies and repayment of mortgage loans and charges. Tax on Results for the Year Tax on results for the year which comprises current tax and changes in deferred tax is recognized in the Income Statement with the portion of taxes related to the taxable income for the year whereas the portion attributable to entries on equity is recognized directly in equity. The Parent and the Danish subsidiary are assessed jointly for tax purposes. The Danish corporation tax is allocated to the jointly taxed Danish companies relative to the companies taxable income. The Parent acts as administration company for the joint taxation companies so that the Parent is responsible for the settlement of taxes etc. to the Danish tax authorities. Segment Reporting The entire Group is managed by a management team reporting to the chief executive officer. No separate business areas or separate business units have been identified in connection with product candidates or geographical markets. As a consequence of this, no segment reporting is made concerning business areas or geographical areas. The Balance Sheet Licenses and Rights Intangible rights acquired in the form of patents, licenses and other rights including rights acquired in connection with the takeover of subsidiaries are measured at cost less accumulated amortisation and impairment losses and amortized on a straight line basis over the expected useful economic life years. Property, Plant and Equipment Plant and machinery, other fixtures and fittings, tools and equipment and leasehold improvements are measured at cost less accumulated depreciation.

31 31 Cost comprises acquisition price and costs directly related to acquisition until the time when the Company starts using the asset. The basis for depreciation is cost less estimated residual value after the end of useful life. Assets are depreciated under the straight-line method over the expected useful lives of the assets. The depreciation periods are as follows: Leasehold improvements 5 years Plant and machinery 5 years Other fixtures and fittings, tools and equipment 3 5 years Profits and losses arising from disposal of plant and equipment are stated as the difference between the selling price less the selling costs and the carrying amount of the asset at the time of the disposal. Profits and losses are recognized in the Income Statement under depreciation. Investments in Group Enterprises Investments in group enterprises are measured by the equity method. Subsidiaries results are recognized in the Parent s Income Statement under the item»income from investments in group enterprises«. Investments in group enterprises are measured in the Balance Sheet under the item»investments in group enterprises«at the proportionate share of the companies net asset value calculated according to the Parent s Accounting Policies less or plus unrealized inter-group gains or loss reduced with the tax burden on the profit. Impairment of Non-Current Assets The carrying amount of intangible assets, property, plant and equipment as well as non-current asset investments is reviewed for impairment when events or changed conditions indicate that the carrying amount may not be recoverable. If there is such an indication, an impairment test is made. An impairment loss is recognized in the amount with which the carrying amount exceeds the recoverable amount of the asset, which is the higher of the net present value and the net selling price. In order to assess the impairment, the assets are grouped on the least identifiable group of assets that generates cash flows (cash flow generating units). Impairments are recognized in the income statement under the same items as the related depreciation and amortization. Financial Assets Financial assets include cash and financial instruments. Financial instruments, other than hedging instruments, can be divided into the following categories: loans and receivables, financial assets at fair value through profit or loss, available-for-sale financial assets and held-to-maturity investments. Financial assets are assigned to the different categories by management on initial recognition, depending on the purpose for which the investments were acquired. The designation of financial assets is re-evaluated at every reporting date at which a choice of classification or accounting treatment is available. All financial assets are recognized on their settlement date. All financial assets that are not classified as fair value through profit or loss are initially recognized at fair value, plus transaction costs. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are subsequently measured at amortized cost using the effective interest method, less provision for impairment. Any change in their value is recognized in profit or loss. Trade receivables are provided against when objective evidence is received that the company will not be able to collect all amounts due to it in accordance with the original terms of the receivables. The amount of the write-down is determined as the difference between the asset s carrying amount and the present value of estimated future cash flows. Leases All lease agreements are considered as operating leases. Lease payments under operating leases and other rental agreements are recognized in the Income Statement over the term of the agreements. The Company s total obligation related to operating leases and rental agreements is stated under contingent assets and liabilities etc. Own Shares Purchase and sales prices as well as dividend from own Shares are recognized directly under retained earnings under equity. Capital reductions by cancellation of own Shares reduces the share capital by an amount equaling the nominal values of the Shares. Profit from sale of own Shares, respectively issue of shares in connection with exercise of share options or employee shares, is entered directly on equity. Prepayments Prepayments comprise incurred expenses related to the following financial year. Tax Payable and Deferred tax Current tax liabilities and current tax receivables are recognized in the Balance Sheet as tax calculated on the taxable income for the year adjusted for tax on previous years taxable income and taxes paid on account/prepaid. Deferred tax is measured according to the balance sheet liability method in respect of temporary differences between the carrying amount and the tax base of assets and liabilities. In cases, e.g. in respect of shares in which the statement of the tax base can be made according to alternative taxation rules, deferred tax is measured on the basis of the planned use of the asset or settlement of the liability, respectively. Deferred tax assets including the tax value of tax loss carryforwards, are measured at the expected realizable value, either by elimination in tax on future earnings or by set-off against deferred tax liabilities within the same legal tax entity and jurisdiction. Deferred tax is measured on the basis of the tax rules and tax rates in force at the balance sheet date when the deferred tax is expected to crystallize as current tax. Any changes in deferred tax as a consequence of amendments to tax rates are recognized in the Income Statement. A tax rate of 25% has been applied for Liabilities other than Provisions Financial liabilities other than provisions are recognized initially at the proceeds received net of transaction expenses incurred. In subsequent periods, financial liabilities other than provisions are measured at amortized cost corresponding to

32 32 the capitalized value using the effective interest method; consequently the difference between the proceeds and the nominal value is recognized in the Income Statement over the maturity period of the loan. Other payables are measured at amortized cost corresponding to nominal value. Share Based Payments (Option Schemes) As regards share options granted, new Shares will be issued at the time of exercise. No recognition is made of costs in the Income Statement or as a liability in the Balance Sheet, neither at the time of grant nor in connection with the subsequent value adjustment. Information about the share option program is included in the notes to the financial statements. Cash Flow Statement The cash flow statement shows the cash flow for the year together with the cash and cash equivalents at the beginning and end of the year. Cash Flow from Operating Activities Cash flow from operating activities is presented indirectly and is calculated as the net profit adjusted for non-cash operating items, changes in the net working capital, financial and extraordinary items paid and income taxes paid. Cash Flow from Investment Activities Cash flow from investment activities includes payments associated with the purchase and sale of fixed assets and investments. Cash Flow from Financing Activities Cash flow from financing activities comprises new equity and loan financing, repayment of mortgage debt and other long-term debt. Cash and Cash Equivalents Cash and cash equivalents comprise cash and bank balances. Accounting Estimates and Assessments In the statement of the carrying amounts of certain assets and liabilities estimates are required on how future events will affect the carrying amounts of these assets and liabilities at the balance sheet date. Estimates material for the financial reporting are among others made in the statement of depreciation/amortization, write-downs and contingent assets and liabilities. The used estimates are based on assumptions assessed reasonable by Management, however, estimates are inherently uncertain and unpredictable. The assumptions can be incomplete or inaccurate and unexpected events or circumstances might occur. Furthermore, the enterprise is subject to risks and uncertainties that might result in deviations in actual results compared to estimates. As part of the accounting policies applied by the group and besides from estimates. Management assesses situations which might influence amounts recognized in the Annual Report materially. Such assessments comprise among others determination of revenue recognition in connection with cooperative agreements with the Company s commercialization partners as well as recognition of developments costs. Zealand considers a variety of factors in determining the appropriate method of revenue recognition under these arrangements, such as the degree to which elements of the contract can be separated, their value to Zealand, the earnings process associated with each element and the degree of further work required to be completed by Zealand under the agreement. With agreements for which Zealand is not involved in any further work, such as for the agreements with Sanofi-Aventis, Wyeth and Helsinn, the Company also recognizes payments as revenue when received. Zealand expenses research and development costs as incurred.

33 33 Income Statement for the Year 1 January - 31 December 2008 group group PArent parent DKK 000 DKK 000 Note DKK 000 DKK ,262 59,921 1 Revenue 56,262 59,921-85, ,144 research and development expenses -85, ,144-15,308-17,544 administrative expenses -15,306-17, Other operating income ,689-62,527 Operating result -44,687-62,509 7 Income from investments in group enterprises ,214 11,183 3 Financial income 11,212 11, ,656 4 Financial expenses ,702-33,732-55,000 results from ordinary activities before tax -33,732-55, Tax on ordinary activities ,732-55,000 net loss for the year -33,732-55,000 Earnings per shares Basic and diluted

34 34 Balance sheet at 31 December 2008 group group AssetS PArent parent DKK 000 DKK 000 Note DKK 000 DKK 000 7,957 7,535 plant and machinery 7,957 7, other fixtures and fittings, tools and equipment ,387 1,617 leasehold improvements 1,387 1,617 9,738 9,641 6 Property, plant and equipment 9,738 9,641 7 Investments in group enterprises 1,327 1,278 2,348 2,252 7 Deposits 2,348 2, other investments 2 2 2,350 2,254 other non current assets 3,677 3,532 12,088 11,895 non current assets, total 13,415 13,173 2,397 4,464 8 Other short term financial assets 2,397 4,464 1, prepayments 1, , ,299 Cash and cash equivalents 209, , , ,473 Current assets, total 213, , , ,368 total assets 226, ,562

35 35 Balance Sheet at 31 December 2008 group group liabilities and equity PArent parent DKK 000 DKK 000 Note DKK 000 DKK ,682 17,682 9 Share capital 17,682 17, , ,683 retained earnings 190, , , ,365 Equity, total 208, , ,120 Credit institutions 0 1, ,120 long-term liabilities other than provisions 0 1, ,999 Credit institutions 0 4,999 7,532 3,595 trade payables 7,532 3,595 Debt to subsidiary 1,251 1,202 9,078 11,289 other creditors 9,076 11,281 16,610 19,883 Current liabilities 17,859 21,077 16,610 21,003 total liabilities 17,859 22, , ,368 total equity and liabilities 226, , Contingent liabilities, security of credit institutions, etc. 11 Information on staff and remuneration 12 Related parties

36 36 Cash Flow Statement group group Cash Flow Statement PArent parent DKK 000 DKK 000 Note DKK 000 DKK ,732-55,000 net loss for the year -33,732-55,000-7,682-4, Adjustments -7,680-4, , Change in working capital 975-5,028-40,446-64,717 Cash flow from operating activities before financing items -40,437-64,695 11,899 10,801 financial income 11,896 10, ,656 financial expenses paid -75-3,656-28,622-57,572 Cash flow used in operating activities -28,616-57, Change in deposit ,372-2,376 purchase of fixed assets -3,372-2,376-3,468-2,932 Cash flow used in investing activities -3,468-2, Capital increase 0 0-6,301-4,705 Instalments on long-term creditors -6,301-4,705-6,301-4,705 Cash flow from financing activities -6,301-4,705-38,391-65,209 Decrease / increase in cash and cash equivalents -38,385-65, , ,508 Cash and cash equivalents at 1 January , ,406 1,773 0 Exchange rate adjustments 1, , ,299 Cash and cash equivalents at 31 December , ,215 Statement of Changes in Equity share retained capital earnings total DKK 000 DKK 000 DKK 000 Equity at 1 January , , ,366 Net loss for the year - -55,000-55,000 Equity at 31 December , , ,366 Net loss for the year - -33,732-33,732 Equity at 31 December , , ,634

37 37 Notes Note 1 Revenue In 2008, revenue is related to a milestone payment from Action Pharma A/S and an upfront payment from Helsinn Healthcare SA. In 2007, revenue is associated with a milestone payment under the licensing agreement with Sanofi-Aventis DKK 000 DKK 000 Export market 55,889 59,921 Domestic market total revenue 56,262 59,921 Note 2 Other Operating IncoME DKK 000 DKK 000 research funding 0 0 Government grants note 3 Financial Income group group parent parent DKK 000 DKK 000 DKK 000 DKK 000 9,484 11,183 Interest income 9,482 11, Capital gain on shares 0 2 1,730 0 Exchange rate adjustments 1, ,214 11,183 11,212 11,179 Note 4 Financial Expenses group group parent parent DKK 000 DKK 000 DKK 000 DKK other interest expenses Interest expenses from group enterprises ,145 Exchange rate adjustments 0 3, , ,702

38 38 Notes Note 5 Tax As a consequence of tax losses from previous years, there are no actual or deferred taxes in the parent. A tax value of DKK 115 million (parent)/dkk 124 million (group) regarding deferred tax reductions (tax asset) has not been recognized in the balance sheet due to uncertainty as to whether this can be utilized. group parent DKK 000 DKK 000 Results for the year before tax -33,732-33,732 Tax rate 25% 25% Expected tax expenses -8,433-8,433 Change in tax rate 0 0 Adjustment for non-deductible expenses Change in tax assets (not recognized) 8,408 8, Note 6 Property, Plant and Equipment leasehold plant other fixtures improvements and machinery and fittings DKK 000 DKK 000 DKK 000 Cost at 1 January ,885 28,798 6,414 Additions 250 2, Disposals Cost at 31 December ,135 31,721 6,614 Depreciation at 1 January ,268 21,263 5,925 Depreciation for the year 480 2, Depreciation for the year on disposed assets Depreciation at 31 December ,748 23,764 6,220 Carrying amount at 31 December ,387 7, Depreciation for the financial year has been charged as Research and development expenses 389 2, Administrative expenses , Note 7 Other non Current AssetS investment in group deposits enterprises DKK 000 DKK 000 Cost at 1 January , ,080 Additions 96 0 Disposals 0 0 Cost at 31 December , ,080 Revaluation at 1 January ,802 Net share of profit for the year 0 49 Revaluation at 31 December ,753 Carrying amount at 31 December ,348 1,327

39 39 Notes net results share for the year capital investments DKK 000 group enterprises BetaCure Holding A/S, Glostrup DKK 1, % 49 n ote 8 - Other Short Term Financial Assets DKK 000 DKK 000 Receivables 2,397 4,464 2,397 4,464 n ote 9 Share Capital The capital at 31 December 2008 consists of 17,682,069 ordinary Shares of DKK 1 each. The Shares are divided into four classes: A-Shares 1,496,787 B-Shares 3,186,021 C-Shares 7,319,064 D-Shares 5,680,197 17,682,069 Each of the B-, C- and D-Shares have liquidation rights in the event of a wind-up of the Company or a trade sale of the Company s Shares. (See Corporate Governance, page 22) Proceeds from the sale or surplus remaining after the wind-up shall be paid to the D-, C- and B-Shareholders according to the liquidation and preferential rights attached to each of the shares before a payment to all Shareholders on a pro-rata basis. (See Corporate Governance, page 22) Warrants At the financing round on 5 September ,801,970 D-warrants were issued with a right to subscribe for new D-Shares in the Company with a nominal value of up to DKK 56,801,970. Changes in share capital DKK 000 Share capital at 1 January ,497 Capital increase, March ,136 Capital increase at 7 January ,768 Capital increase at 17 February ,806 Capital increase at 1 September ,659 Capital increase at 11 November ,136 Capital increase at 5 September ,680 Share capital at 31 December ,682 Theasury Shares At the end of 2008, Treasury Shares amounted to 555,561 shares, equivalent to 3.1 per cent of the share capital. The Treasury Shares have been purchased for DKK 1.3 million.

40 40 Notes note 10 Contingent Liabilities, Security of Credit Institutions, etc. within 2 to more than 1 year 5 years 5 years DKK 000 DKK 000 DKK 000 Operating lease payments Non-terminable rental agreement of building 3, In the income statement there is recognized expenses of DKK 371,892 for the year 2008 regarding operating leases. note 11 Information on Staff and Remuneration DKK 000 DKK 000 The total amount of staff and salaries etc. is as follows: Wages and salaries 39,750 39,493 Pension schemes 3,646 3,485 Other social security costs 4,678 4,612 total 48,074 47,590 Remuneration included above to: Management 4,400 6,897 Board of Directors Average number of employees Pension schemes are defined contribution schemes and based on this, the Group has no additional payment obligations. Warrants The Company has established incentive programs for its employees in 2005 and The Employee incentive program The main incentive program was established in 2005 for senior mangement and employees. It was adopted in accordance with an agreement in principle from the financing rounds in The warrant program is designed to align the interests of senior management, employees and the shareholders. The program does not extend to Board members. All of the warrants issued were fully vested at the time of issue. As of October 17, 2005, 414,689 warrants had been issued, each conferring upon the warrant holder the right to subscribe for one Share at a price of DKK 26.90, or EUR The warrants were conditional upon the publication of results or the definitive termination of the current or expected Phase II trials for each of ZP10, ZP120 and ZP123. On 27 November 2007, the Company notified all warrant holders that the conditions for exercise had been fulfilled. Three years from this date, the warrants may be exercised during each Exercise Window. The Exercise Windows shall be (i) if the Company is listed on a stock exchange or on a recognized regulated market place, (a) a period of 21 days following the publication of the Company s quarterly and semi-annual report and (b) a period of 21 days following the publication of the Company s annual results, and (ii) if the Company is not listed at a stock exchange or on a recognized regulated market place, a period of 21 days following the adoption by the general meeting of the annual accounts of the Company. Any warrants remaining unexercised after such three years period or ten years after the date of issue shall automatically expire.

41 41 Notes The Employee incentive program On 15 June 2007 at the extraordinary general meeting of Zealand Pharma A/S a resolution was passed, authorizing the Board of Directors to issue warrants with a right to subscribe for up to an aggregate amount of nominally DKK 1,750,000 C-Shares to members of the Company s Board of Directors and Management Board and to the Company s employees and consultants/advisors without pre-emptive subscription rights for the Company s Shareholders. On 15 June 2007 the Board of Directors of the Company has resolved to exercise its authorization to issue warrants for an aggregate nominal amount of DKK 922,353 C-Shares to management and all employees. Each warrant gives the Warrant holder the right (but not the obligation) to subscribe for one C-Share of nominally DKK 1 against payment of a subscription price of EUR 3.60 per share of each nominally DKK 1. The Holder shall be entitled to exercise each Warrant within each Exercise Window. The Exercise Windows shall be (i) if the Company is listed on a stock exchange or on a recognized regulated market place, (a) a period of 21 days following the publication of the Company s quarterly and semi-annual report and (b) a period of 21 days following the publication of the Company s annual results, and (ii) if the Company is not listed at a stock exchange or on a recognized regulated market place, a period of 21 days following the adoption by the general meeting of the annual accounts of the Company. The Warrants granted to each Holder will vest in 2 equal portions as follows: 1/2 of the Warrants granted will vest and may be exercised at the earliest on 31 December /2 of the Warrants granted will vest and may be exercised at the earliest on 31 December The Company has notified all of the current warrant holders that the conditions for exercise for both portions have been fulfilled. In addition, on 15 June 2007 the Board of Directors of the Company resolved to exercise its authorization to issue warrants for an aggregate nominal amount of DKK 827,647 C-Shares to management and key employees. Exercise of any of the issued Warrants is subject to the occurrence of an Exit Event. As the assumption for excercise of the issued Warrants with regard to an Exit Event was not fulfilled on 31 August 2008, the Warrants expired on that date without any remuneration or compensation to the Holder. Note 12 Related Parties Zealand Pharma A/S has no related parties with controlling interest. Zealand Pharma A/S s related parties with significant influence comprise group enterprises as well as the companies Board of Directors and Executive Board. Transactions with related parties No transactions were conducted with the Board of Directors, the Management Group, major Shareholders or other related parties during the year. Ownership The following Shareholders are registered in the Company s register of Shareholders as being the owners of minimum 5% of the voting rights or minimum 5% of the share capital (1 Share equals 1 vote): BankInvest Biomedical Venture, Copenhagen, Denmark 26.8% CDC Innovation, Paris, France 14.7% Sunstone Capital, Copenhagen, Denmark 13.0% LD Pension (Lønmodtagernes Dyrtidsfond), Copenhagen, Denmark 11.8% AGF Private Equity, Paris, France 9.7% LSP, Amsterdam, The Netherlands 6.9% A/S Dansk Erhvervsinvestering, Copenhagen, Denmark 6.1%

42 42 Notes Note 13 Adjustments group group p a PArent parent DKK 000 DKK 000 DKK 000 DKK 000 3,275 2,842 Depreciation 3,275 2,842-11,215-11,183 financial income -11,212-11, ,656 financial expenses 306 3,702 Income from investments in group enterprises ,682-4,685 total adjustments -7,680-4,667 Note 14 Change in Working Capital group group p a PArent parent DKK 000 DKK 000 DKK 000 DKK ,017 Increase in receivables ,017 1,726-8,049 Increase in payables 1,733-8, ,032 Change in working capital 975-5,028 Note 15 Basic and Diluted Earnings per Share Basic earnings per share Basis earnings per share is calculated as the net result for the period that accrue to the Company s ordinary shares divided by the weighted average number of ordinary shares outstanding. Diluted earnings per share Diluted earnings per share is calculated as the result for the period that accrue to the Company s ordinary shares divided by the weighted average number of ordinary shares outstanding adjusted by the assumed dilutive effect of issued equity instruments in the form of convertible debt instruments and granted warrants outstanding that can be converted into ordinary shares. No adjustment has been made for dilutive effect as these are anti-dilutive DKK 000 DKK 000 Net loss for the year -33,732-55,000 Adjusted net loss accruing to the Company s ordinary shares -33,732-55,000 Adjusted average number of ordinary shares outstanding 17,682,069 17,682,069 Basic and diluted earnings per share

43

44 science-to-life Zealand Pharma A/S Smedeland 36 DK-2600 Glostrup Denmark Tel: Fax: graphic design: designvaerk.dk illustration: toril bækmark photos: tom ingvardsen printing: innographic