Zealand Pharma (ZLDPF) Risk Analysis
Risk Overview Q4, 2021
Source: the company's latest filing for the period ended Dec 31, 2021, filed Mar 24, 2022
Risk Change Over Time
No filing history is available.
- Accounting & Financial Operations - Risk 1Summary Risk Factors
We have incurred net losses in recent periods and may continue to do so. Our arrangement with Oberland Capital contains operating covenants which we may breach, and which may lead to a default event. The regulatory approval processes of the FDA, the EMA and other comparable regulatory authorities are lengthy, time consuming and inherently unpredictable, and if we or our collaboration partners are ultimately unable to obtain regulatory approval for our internal or out-licensed product candidates, our business could be substantially harmed. For certain marketed products, product candidates and clinical development programs, we depend on collaboration partners to develop and conduct clinical trials with, obtain regulatory approvals for, and market and sell our product candidates. If such collaboration partners fail to perform as expected, or abandon the collaboration, the potential for us to generate future revenue from such product candidates would be significantly reduced and our business would be significantly harmed. We will need to raise additional funding, which may not be available on acceptable terms, or at all, and failure to obtain this capital when needed may force us to delay, limit or terminate our product development efforts or other operations. We are dependent on the clinical success of our internal product candidates, including glepaglutide and dasiglucagon. Our product candidates will need to undergo clinical trials that are time consuming and expensive, the outcomes of which are unpredictable, and for which there is a high risk of failure. If clinical trials of our product candidates fail to satisfactorily demonstrate safety and efficacy to the FDA, the EMA and any other comparable regulatory authority, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development of these product candidates. We selectively rely on third parties to conduct our clinical trials and perform data collection and analysis, which may result in costs and delays that prevent us from successfully commercializing our product candidates. We rely completely on third parties to manufacture our preclinical, clinical and commercial drug supplies and we intend to rely on third parties to produce commercial supplies of our other approved product candidates, if any. We face substantial competition from companies with considerably more resources and experience than we have, which may result in others discovering, developing, receiving approval for or commercializing products before or more successfully than us. Our future success depends on our ability to retain our management team and key employees. Our ability to compete may decline if we or our collaboration partners are unable to or do not adequately protect intellectual property rights or if our intellectual property rights are inadequate for our product candidates or future product candidates. The current uncertainty surrounding the military action in the Ukraine may cause further market instability and reduction in investor confidence and industries like ours that may be perceived as high risk for investors.
- Debt & Financing - Risk 2Our arrangement with Oberland Capital contains operating covenants which we may breach and which may lead to a default event.
In December 2021, we entered into a seven-year $200 million debt facility with Oberland Capital, the proceeds of which are expected to be used for working capital and general corporate purposes. The arrangement with Oberland Capital provided for an upfront payment of $100 million in the form of a secured note, which funds were received on December 31, 2021. The interest rate for the secured note is 6.0% plus LIBOR or 0.25%, whichever is greater, and Oberland Capital is further entitled to a share of our revenue on products that we sell during a specified time period. In connection with the debt facility, we granted Oberland Capital a security interest in certain of our assets, including certain intellectual property that we own. We are subject to operating covenants in connection with the secured note, including a requirement that we maintain cash balances in the amount of at least $100 million until we meet certain revenue targets, or the liquidity covenant. As of December 31, 2021, we anticipated that our then-current cash position and budgeted cash requirements would provide a positive cash balance until April 2023, but that we would breach the liquidity covenant and have a working capital deficit beginning in September 2022 without additional financing and/or cost reductions. If we default under the debt facility, including by breaching the liquidity covenant, Oberland Capital may accelerate all of our repayment obligations. At such time, we may not have enough available cash or be able to raise additional funds on satisfactory terms, if at all, through equity or debt financings to repay our indebtedness at the time any such repayment is required. Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous or additional covenants, which could further restrict our business operations. There is no assurance that if we are required to secure funding, we can do so on terms acceptable to us, or at all. If we are unable to access funds to meet our obligations or to renegotiate the debt facility, Oberland Capital could take control of and may sell our pledged assets. In such an event, we may be required to delay, limit, reduce or terminate our product development or commercialization efforts or grant to others' rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. If our assets were liquidated, Oberland Capital's right to repayment would be senior to the rights of our shareholders to receive any proceeds from the liquidation. Any declaration by Oberland Capital of an event of default could significantly harm our financial condition, operating results, business, and prospects and cause the price of our ordinary shares and ADSs to decline.
- Debt & Financing - Risk 3We are subject to risks associated with the current interest rate environment and uncertainty or changes in interest rates will affect the cost of our debt facility with Oberland Capital.
Our debt facility with Oberland uses the London Interbank Offered Rate ("LIBOR") as a benchmark for establishing the interest rate. In July 2017, the Financial Conduct Authority (the "FCA") announced its intent to stop compelling banks to submit rates for the calculation of LIBOR after 2021. Regulators across the world have proposed and/or endorsed alternative reference rates to use as the alternative to the applicable Interbank Offered Rate ("IBOR") subject to that regulator's supervision for use in derivatives and other financial contracts indexed to the applicable IBOR. These reforms and other pressures may cause LIBOR to disappear entirely or to perform differently than in the past. Market participants are currently working on industry wide and company-specific transition plans as it relates to derivatives and cash markets exposed to LIBOR. In March 2021, the FCA announced that all LIBOR settings will either cease to be provided by any administrator or no longer be representative (a) immediately after December 31, 2021, in the case of all sterling, euro, Swiss franc and Japanese yen settings, and the one-week and two-month U.S. dollar setting and (b) immediately after June 30, 2023, in the case of the remaining U.S. dollar settings. In addition, in early March 2022, the U.S. Federal Reserve raised its interest rate for the first time in several years. The interest rate for our secured note with Oberland is set at 6.0% plus LIBOR or 0.25%, whichever is greater. In the event that LIBOR cannot be determined, the interest rate for the secured note will be adjusted by reference to the U.S. prime rate as quoted by the Wall Street Journal, which often adjusts in tandem with the U.S. federal reserve rate. An increase in the interest payable under our secured note could have a material adverse effect on our business, financial condition, results of operations or prospects, including as a result of any changes in the cost of our debt, disputes and other actions regarding the interpretation of current and prospective loan documentation or modifications to processes and systems.
Risk Highlights Q4, 2021
Risk Word Cloud
Risk Factors Full Breakdown - Total Risks 43
- Innovation / R&D - Risk 1We may not be successful in our efforts to use cash flows from our approved out-licensed products to expand our novel, internal target discovery platform to build a pipeline of product candidates.
A key element of our strategy is to use some of our cash flows from our portfolio of approved, out-licensed drug products to build a pipeline of novel internal product candidates and progress these product candidates through clinical development for the treatment of a variety of diseases. Although our R&D efforts to date have resulted in the development of out-licensed product candidates directed at various diseases, we may not be able to develop additional internal product candidates. We do not have any approved products under our other ongoing collaborations with Alexion (now part of Astra Zeneca), Beta Bionics, Boehringer Ingelheim and Deka Research and Development, and other than milestone payments that may become due under our ongoing collaborations with Alexion and Boehringer Ingelheim upon the achievement of certain clinical milestones, we are not currently entitled to any royalty or other payments thereunder which could be used to help progress our internal pipeline of product candidates through clinical development. Our current internal product candidates are in late stages of clinical development and will require further clinical development and testing, and eventually regulatory approval, prior to commercialization. Even if we are successful in continuing to develop our out-licensed pipeline, the potential product candidates that we identify may not be suitable for clinical development, including as a result of being shown to have harmful side effects or other characteristics that mean they are unlikely to receive marketing approval and achieve market acceptance. If we do not continue to successfully develop our out-licensed product candidates and if these out-licensed product candidates are not successfully commercialized by our collaboration partners, we will face difficulty in funding our internal pipeline of product candidates and in generally obtaining revenue in future periods, which could result in significant harm to our financial position and adversely affect the price of the ADSs and our ordinary shares.
- Innovation / R&D - Risk 2We are dependent on the clinical success of our internal product candidates, including glepaglutide and dasiglucagon.
We are dependent on our ability to successfully develop, obtain regulatory approval for, and then successfully commercialize our internal product candidates, including glepaglutide, amylin and other products that are still in early development. Our internal product candidates will require additional R&D clinical development, management of clinical and manufacturing activities, regulatory approval possibly in multiple jurisdictions (if regulatory approval can be obtained at all), securing sources of commercial manufacturing supply, building of, or partnering with, a commercial organization, substantial investment and significant marketing efforts before any revenue can be generated from product sales. We are not permitted to market or promote any of our product candidates in any jurisdiction before we receive regulatory approval from the FDA, the EMA or any other comparable regulatory authority in that jurisdiction, and we may not receive such regulatory approval for any of our current product candidates in any particular jurisdiction or at all. We cannot be sure that our clinical trials for glepaglutide or our other dasiglucagon programs will be completed in a timely manner, or at all, or that we will be able to obtain approval from the FDA, EMA or any other comparable regulatory authority for any of our product candidates. We cannot be certain that we will advance any other product candidates that are part of our early non-clinical pipeline into clinical trials. If any of our advanced product candidates, such as glepaglutide, or any future product candidate is not approved and commercialized in any particular jurisdiction, we may not be able to generate any royalties or product revenue, as the case may be, for that product candidate at all or in such jurisdiction. Moreover, any delay or setback in the development of any product candidate could materially adversely affect our business and cause the price of the ADSs or our ordinary shares to fall.
- Innovation / R&D - Risk 3Our product candidates will need to undergo clinical trials that are time consuming and expensive, the outcomes of which are unpredictable, and for which there is a high risk of failure. If clinical trials of our product candidates fail to satisfactorily demonstrate safety and efficacy to the FDA, the EMA and any other comparable regulatory authority, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development of these product candidates.
The FDA in the United States, the EMA in Europe, and any other comparable regulatory authorities in other jurisdictions must approve new product candidates before they can be marketed, promoted or sold in those territories. We must provide these regulatory authorities with data from preclinical studies and clinical trials that demonstrate that our product candidates are safe and effective for a specific indication before they can be approved for commercial distribution. We cannot be certain that our clinical trials for our product candidates will be successful or that any of our other internal or out-licensed product candidates will receive approval from the FDA, the EMA or any other comparable regulatory authority. Preclinical studies and clinical trials are long, expensive and unpredictable processes that can be subject to extensive delays. We cannot guarantee that any clinical trials will be conducted as planned or completed on schedule, if at all and delays to the recruitment of volunteers for those trials and those volunteers continued participation in those trials will affect their completion. It may take several years and require significant expenditures to complete the preclinical studies and clinical trials necessary to commercialize a product candidate, and delays or failure are inherently unpredictable and can occur at any stage. Interim results of clinical trials do not necessarily predict final results, and success in preclinical studies and early clinical trials does not ensure that later clinical trials will be successful. A number of companies in the pharmaceutical, biopharmaceutical and biotechnology industries have suffered significant setbacks in advanced clinical trials even after promising results in earlier trials, and we cannot be certain that we will not face similar setbacks. The design of a clinical trial can determine whether its results will support approval of a product, and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced or completed. Changing the design of a clinical trial can be expensive and time consuming. An unfavorable outcome in one or more trials would be a major setback for our product candidates and for us. An unfavorable outcome in one or more trials may require us to delay, reduce the scope of or eliminate one or more product development programs, which could have a material adverse effect on our business, financial position, results of operations and future growth prospects. An unfavorable or unclear outcome in any one of the clinical trials may require us to re-run the trial or redesign the trial at additional expense and delay. In addition, even if the trials' final results are deemed a success, they may not be accepted by the relevant regulatory authorities during the application for a marketing authorization. In connection with clinical trials of our product candidates, we face a number of risks, including risks that: - a product candidate is ineffective, inferior to existing approved products for the same indications, unacceptably toxic or has unacceptable side effects;- patients may die or suffer other adverse effects for reasons that may or may not be related to the product candidate being tested;- extension studies on long-term tolerance could invalidate the use of our product;- the results may not be positive or may be unclear and may not confirm the positive results of earlier trials;- the results may not meet the level of statistical significance required by the FDA, the EMA or other relevant regulatory agencies to establish the safety and efficacy of our product candidates for continued trial or marketing approval; and - our collaboration partners or contract research organizations, or CROs, are unable or unwilling to perform under their contracts. The results of preclinical studies do not necessarily predict clinical success, and larger and later-stage clinical trials may not produce the same results as earlier-stage clinical trials. Our and our collaboration partners' clinical trials of our product candidates conducted to date have generated favorable safety and efficacy data. However, we may have different enrollment criteria in our future clinical trials. As a result, we may not observe a similarly favorable safety or efficacy profile as in our prior clinical trials. In addition, we cannot assure you that during the course of potential widespread use of any of our product candidates in future, we will not suffer setbacks in maintaining production quality or stability. In addition, clinical trials of potential products often reveal that it is not possible or practical to continue development efforts for these product candidates. If we do not successfully complete preclinical and clinical development, we will be unable to market and sell our product candidates and generate additional revenue. Even if we successfully complete clinical trials, those results are not necessarily predictive of results of additional trials that may be needed before marketing applications may be submitted to the FDA, the EMA or other regulatory authority, as applicable. Two of our late-stage clinical programs have been designated as orphan products: glepaglutide, which is intended for the treatment of short bowel syndrome, and dasiglucagon, which is intended for, inter alia, the treatment of chronic hyperinsulinism as an additional indication to the current approval as a treatment for severe hypoglycemia in patients with diabetes aged six years and older. Products that are developed for the treatment of orphan diseases receive additional assistance, faster processing and reduced application fees from regulatory authorities like the FDA, EMA or comparable authorities in other countries. In addition to these benefits, orphan indications may also receive additional exclusivity protections that are not awarded to non-orphan drugs and enable orphan drugs to be awarded additional market exclusivity. If we are unable to obtain orphan exclusivity protection for glepaglutide, for dasiglucagon for the treatment of chronic hyperinsulinism or our other products, that may be otherwise eligible for such protection, we may be unable to prevent other companies from producing very similar products in the same therapeutic area or even generic versions. Furthermore, we sometimes estimate for planning purposes the timing of the accomplishment of various scientific, clinical, regulatory and other product development objectives. These milestones may include our expectations regarding the commencement or completion of scientific studies, clinical trials, the submission of regulatory filings or commercialization objectives. From time to time, we may publicly announce the expected timing of some of these milestones, such as the completion of an ongoing clinical trial, the initiation of other clinical programs, receipt of marketing approval or a commercial launch of a product. The achievement of many of these milestones may be outside of our control. All of these milestones are based on a variety of assumptions, which may cause the timing of achievement of the milestones to vary considerably from our estimates. If we, or our collaboration partners, fail to achieve any announced development milestones in the timeframes we expect, the commercialization of our product candidates may be delayed, we may not be entitled to receive certain contractual payments from our collaboration partners, and as a result this could have a material adverse effect on our business, financial position, results of operations and future growth prospects.
See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.
