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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

OR

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

Commission File Number 001-38178

ZEALAND PHARMA A/S

(Exact name of registrant as specified in its charter and translation of registrant’s name into English)

The Kingdom of Denmark

(Jurisdiction of incorporation or organization)

Sydmarken 11,

2860 Søborg

(Copenhagen)

Denmark

(Address of principal executive offices)

Emmanuel Dulac

President and Chief Executive Officer Zealand Pharma A/S

Sydmarken 11 2860 Søborg (Copenhagen) Denmark

Tel: +45 88 77 36 00

Fax: +45 88 77 38 98

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class

    

Trading Symbol(s)

    

Name of each exchange on which registered

American Depositary Shares, each representing one ordinary share, DKK

ZEAL

The Nasdaq Global Select Market

1 nominal value per shareOrdinary shares, DKK

1 nominal value per share*

The Nasdaq Global Select Market*

*            Not for trading, but only in connection with the registration of the American Depositary Shares. Securities registered or to be registered pursuant to Section 12(g) of the Act. None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

43,634,142 Ordinary Shares

519,232 American Depositary Shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  No 

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b of the Exchange Act. (Check one):

Large accelerated filer

    

Accelerated filer

    

Non-accelerated filer

    

Emerging growth company

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards†† provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

US GAAP

International Financial Reporting Standards as issued by the International Accounting Standards Board

Other

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow Item 17 Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Table of Contents

Page

INTRODUCTION

1

PART I

3

ITEM 1 IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

3

ITEM 2 OFFER STATISTICS AND EXPECTED TIMETABLE

3

ITEM 3 KEY INFORMATION

3

ITEM 4 INFORMATION ON THE COMPANY

32

ITEM 4A UNRESOLVED STAFF COMMENTS

51

ITEM 5 OPERATING AND FINANCIAL REVIEW AND PROSPECTS

51

ITEM 6 DIRECTORS, EXECUTIVE MANAGEMENT AND EMPLOYEES

54

ITEM 7 MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

56

ITEM 8 FINANCIAL INFORMATION

58

ITEM 9 THE OFFER AND LISTING

59

ITEM 10 ADDITIONAL INFORMATION

60

ITEM 11 QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISKS

66

ITEM 12 DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

67

ITEM 12A DEBT SECURITIES

67

ITEM 12B WARRANTS AND RIGHTS

67

ITEM 12C OTHER SECURITIES

67

ITEM 12D AMERICAN DEPOSITARY SHARES

67

PART II

68

ITEM 13 DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

68

ITEM 14 MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

68

ITEM 15 CONTROLS AND PROCEDURES

68

ITEM 16A AUDIT COMMITTEE FINANCIAL EXPERTS

69

ITEM 16B CODE OF ETHICS

69

ITEM 16C PRINCIPAL ACCOUNTANT FEES AND SERVICES

69

ITEM 16D EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

70

ITEM 16E PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED

70

ITEM 16F CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

70

ITEM 16G CORPORATE GOVERNANCE

71

ITEM 16H MINE SAFETY DISCLOSURE

71

PART III

72

ITEM 17 FINANCIAL STATEMENTS

72

ITEM 18 FINANCIAL STATEMENTS

72

ITEM 19 EXHIBITS

72

SIGNATURES

75

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

76

i

INTRODUCTION

In this Annual Report on Form 20-F the terms the “Company”, “Zealand Pharma”, “Zealand” and the “Group” refer to the parent company Zealand Pharma A/S together with its consolidated subsidiaries. The term “Zealand Pharma A/S” is used when addressing issues specifically related to this legal entity.

Pursuant to Rule 12b-23 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we incorporate information for certain items of this Annual Report on Form 20-F by reference to certain pages of the Zealand Pharma A/S statutory Annual Report 2021 (the “Annual Report 2021”) included as Exhibit 99.1(a) to Form 6-K furnished to the SEC on March 22, 2022 and statutory Annual Report 2020 (the “Annual Report 2020”) included as Exhibit 99.1(a) to Form 6-K furnished to the SEC on March 13, 2021 and Annual Report 2019 (the “Annual Report 2019”) included as Exhibit 99.1(a) to Form 6-K furnished to the SEC on March 12, 2020. Therefore, the information in this Annual Report on Form 20-F should be read in conjunction with Annual Report 2021, Annual Report 2020 and the Annual Report 2019.

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 20-F contains forward-looking statements concerning our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business operations and financial performance and condition. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would,” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology.

These forward-looking statements include, but are not limited to, statements about:

·

our projections regarding the potential market size and the size of the patient populations for our product candidates, if approved, for commercial use;

·

our expectations regarding the potential advantages or benefits of our product candidates over existing therapies;

·

our development plans with respect to our product candidates;

·

our ability to develop, acquire and advance product candidates into, and successfully complete, clinical trials;

·

the initiation, timing, progress and results of our preclinical studies and clinical trials, and our research and development programs;

·

our ability to recruit and obtain consent from subjects for our clinical trials and for those subjects to stay in the trial for the duration of the study;

·

the timing or likelihood of regulatory filings and approvals for our product candidates;

·

the implementation of our business model and strategic plans for our business, product candidates and technology;

·

the success of our license collaborations and the success of our partners in advancing those candidates to market, if approved;

·

uncertainties on the sales or sales potential of our products on the market, uncertainty with regard to re reimbursement of these products by payors, or our ability to supply them to the market on a timely basis;

·

continued uncertainties with respect to the COVID-19 global pandemic and the speed at which lockdowns that are in force in different countries will be lifted or the degree to which markets my impose or reimpose restrictions to contain or reduce the effect of the pandemic in certain areas;

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·

estimates of our expenses, future revenue, capital requirements, our ability to comply with our operating covenants under our debt facility with Oberland Capital, our needs for additional financing and our ability to obtain additional capital.

With reference to our Annual Report 2021 and Annual Report 2020, examples of forward-looking statements can be found under the headings ‘2022 Outlook and Objectives’ in our Annual Report 2021 and ‘2021 Outlook and Objectives’ in our Annual Report 2020, and elsewhere.

The forward-looking statements contained or incorporated by reference herein involve a number of known and unknown risks and uncertainties that could cause our future results, performance or achievements to differ significantly from the results, performance or achievements expressed or implied by such forward-looking statements.

You should understand that many important factors, in addition to those discussed or incorporated by reference herein, could cause our results to differ materially from those expressed in the forward-looking statements. Potential factors that could affect our results include, in addition to others not described in this report, those described under “Item 3-Key Information—D. Risk Factors.” These are factors that we think could cause our actual results to differ materially from expected results.

Forward looking statements speak only as of the date on which they are made, and we undertake no obligation to update any forward-looking statements or other information contained in this report, whether as a result of new information, future events or otherwise. You are advised, however, to consult any additional disclosures we make in our reports on Form 6-K filed with the U.S. Securities and Exchange Commission (the “SEC”). Please also see the cautionary discussion of risks and uncertainties under “Item 3—Key Information—D. Risk Factors”. This discussion is provided as permitted by the Private Securities Litigation Reform Act of 1995.

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

The consolidated financial statements contained in this Annual Report on Form 20-F have been prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB.

We maintain our books and records in Danish kroner (DKK) and report under IFRS as issued by the IASB. Our consolidated financial statements are not prepared in accordance with accounting principles generally accepted in the United States. We use the symbol “$” to refer to U.S. Dollars and the symbol “€” to refer to Euros herein.

This Annual Report on Form 20-F includes trademarks, tradenames and service marks, certain of which belong to us and others that are the property of other organizations. Solely for convenience, trademarks and tradenames referred to in this Annual Report on Form 20-F appear without the ® and ™ symbols where that is appropriate, but the absence of those references is not intended to indicate, in any way, that we will not assert our rights or that the applicable owner will not assert its rights to these trademarks and tradenames to the fullest extent under applicable law.

Unless otherwise indicated, information contained in this Annual Report on Form 20-F concerning our industry and the markets in which we operate, including our general expectations, market position, market opportunity and market share, is based on information from our own management estimates and research, as well as from industry and general publications, research, surveys and studies conducted by third parties. Management estimates are derived from publicly available information, our knowledge of our industry and assumptions based on such information and knowledge, which we believe to be reasonable. In addition, assumptions and estimates of our and our industry’s future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Item 3—Key Information—D. Risk Factors”. These, and other factors, could cause our future performance to differ materially from our assumptions and estimates. See “Forward-Looking Statements” above.

Enforceability of civil liabilities

The Company is a Danish corporation and many of its directors and officers, are non-residents of the United States. A considerable portion of the assets of Zealand Pharma A/S, its subsidiaries and such persons are located outside the United States. As a result, it may be difficult for shareholders of the Company to effect service within the United States upon directors, officers and experts who are not residents of the United States or to enforce judgments in the United States. In addition, there can be no assurance as to the enforceability in Denmark against the Company or its respective directors, officers and experts who are not residents of the United States, or in actions for enforcement of judgments of United States courts, of liabilities predicated solely upon the federal securities laws of the United States.

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PART I

ITEM 1 IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2 OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3 KEY INFORMATION

A.

RESERVED

B.CAPITALIZATION AND INDEBTEDNESS

Not applicable.

C.REASONS FOR THE OFFER AND USE OF PROCEEDS

Not applicable.

D.RISK FACTORS

Our business faces significant risks. You should carefully consider all of the information set forth in this annual report and in our other filings with the United States Securities and Exchange Commission, or the SEC, including the following risk factors which we face and which are faced by our industry. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. This report also contains forward-looking statements that involve risks and uncertainties. Our results could materially differ from those anticipated in these forward-looking statements, as a result of certain factors including the risks described below and elsewhere in this annual report and our other SEC filings. See “Special Note Regarding Forward-Looking Statements” above.

Summary 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.

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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.

Risks Related to Our Business

We have incurred net losses in recent periods and may continue to do so.

We recognized net losses of DKK 1,018,1 million, DKK 846.7 million and DKK 571.5 million for the years ended December 31, 2021, 2020 and 2019, respectively. Our ongoing source of revenue is limited to the product revenue generated from sales of the V-Go wearable insulin delivery device, the recently approved ZEGALOGUE (dasiglucagon) injection product in the US market, and certain development milestone payments under our other existing collaborations with partners. Our losses have primarily been the result of our internal and external expenditures for conducting research, preclinical studies clinical trials in respect of our internal product portfolio, pre-commercialization efforts for our late-stage clinical pipeline, as well as commercial support for V-Go and ZEGALOGUE (dasiglucagon). Our ability to generate revenue from our internal product portfolio depends on our ability, or the ability of our partners where those products have been licensed to them, to successfully develop and commercialize our product candidates, and to obtain the regulatory and marketing approvals necessary to commercialize one or more of our product candidates. Similarly, our ability to generate profits in the future depend on our ability in the US organization to penetrate and commercialize our products in the US market at proper price points and tight cost control in the organization.

Our ability and our collaboration partners’ ability to generate future revenue from product sales or pursuant to milestone payments depend heavily on many factors, including, but not limited to:

·

completing research activities and preclinical and clinical development of our out-licensed and internal product candidates;

·

on our own, or together with our strategic collaboration partners, obtaining regulatory approvals for our product candidates;

·

negotiating favorable terms of and entering further collaboration, licensing or other arrangements;

·

the ability of our collaboration partners to obtain the proper regulatory approval and then successfully commercialize or our ability to commercialize or co-promote our product candidates;

·

obtaining market access and market acceptance of our products and product candidates, if approved, on the timelines that we expect;

·

obtaining sales of our products in markets where there are established competing products or therapies;

·

maintaining or growing sales of our products or our collaboration partners’ products if competitive products enter the market that offer advantages over our or our collaboration partners’ products;

·

identifying, assessing, acquiring, in-licensing or developing new product candidates that we are successfully able to develop and then commercialize ourselves or via collaboration partners;

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·

maintaining, protecting and expanding our portfolio of intellectual property rights, including patents, trade secrets and know-how, and our ability to develop, manufacture and commercialize our product candidates and products without infringing the intellectual property rights of others;

·

the ability of our US sales force to market and sell the V-Go and ZEGALOGUE (dasiglucagon) products and to use its skills to market and sell any future product launches; and

·

attracting, hiring, and retaining qualified personnel.

In cases where we, or our collaboration partners, are successful in obtaining regulatory approvals to market one or more of our product candidates, our revenue will be dependent, in part, upon the size of the markets in the territories for which regulatory approval is granted, the price or prices at which we or our collaboration partners are able to sell such products and our ability to again acceptance for or get paid or reimbursed for such products. If the number of individuals suitable for our product candidates is not as significant as we estimate, the indications approved by regulatory authorities are narrower than we expect, or the population eligible for treatment is narrowed by competition, physician choice or other reasons, we may not generate significant revenue from the sale of such products, even if approved. If the level of revenue generated from sales of one or more of our products or product candidates or pursuant to license or milestone payments is lower than our or the market’s expectations, our business, financial position, results of operations and future growth prospects could experience a material adverse effect.

We expect our expenses to continue to increase and that we will continue to incur losses as we further develop our internal product portfolio. We anticipate that our expenses and losses will increase substantially if and as we:

·

continue the preclinical and clinical development of our internal product candidates;

·

expand or review the scope of or otherwise decide to repeat or materially modify our current clinical trials for our internal product candidates;

·

begin new clinical trials for our internal product candidates;

·

develop our commercial capabilities and infrastructure for our internal product candidates that have not yet been placed on the market;

·

seek regulatory and marketing approvals for any internal product candidates that successfully complete clinical trials;

·

utilize and expand our sales, marketing and distribution infrastructure for our commercial programs for V-Go and ZEGALOGUE (dasiglucagon) and any of our other product candidates that receive regulatory and marketing approvals in order to increase their commercial reach and commercial lives covered if we choose to do so;

·

increase pre-commercialization efforts for product candidates for which we may obtain marketing approval and for which we have not entered into a commercialization collaboration with a third party;

·

seek to identify and validate additional product candidates;

·

acquire or in-license product candidates and technologies;

·

maintain, protect and expand our intellectual property portfolio or defend any third-party action that relate to internal candidate for protection;

·

attract new and retain existing skilled personnel; and

·

create additional infrastructure to support our operations.

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Any net losses we incur may fluctuate significantly from year to year, such that a year-to-year comparison of our results of operations may not be a good indication of our future performance. In any period or periods, our operating results could be below the expectations of securities analysts or investors, which could cause the price of our American Depository Shares, or ADSs, and the price of our ordinary shares to decline.

Although we have obtained approval of ZEGALOGUE (dasiglucagon) injection for the treatment of severe hypoglycemia in patients with diabetes aged 6 years and above, we are subject to pervasive and continuous regulatory obligations with respect to the promotion, manufacture, distribution and post marketing surveillance of our approved product and of the V-GO medical device.

The manufacturing processes, labeling, packaging, distribution, post-approval monitoring and adverse event reporting, storage, import, export, advertising, promotion and recordkeeping of ZEGALOGUE and V-GO are subject to extensive and ongoing regulatory requirements. The FDA has significant post-market authority, including the authority to require labeling changes based on new safety information and to require post-market studies or clinical trials to evaluate safety risks related to the use of a product or to require withdrawal of the product from the market. The FDA also has the authority to require a REMS plan after approval, which may impose further requirements or restrictions on the distribution or use of an approved drug. The manufacturing facilities we use to make a future product, if any, will also be subject to periodic review and inspection by the FDA and other regulatory agencies, including for continued compliance with cGMP requirements. The discovery of any new or previously unknown problems with our third-party manufacturers, manufacturing processes or facilities may result in restrictions on the product, manufacturer or facility, including withdrawal of the product from the market.

Any product promotion and advertising will also be subject to regulatory requirements and continuing regulatory review. The FDA imposes stringent restrictions on manufacturers’ communications regarding use of their products. Although clinicians may prescribe products for off-label uses as the FDA and other regulatory agencies do not regulate a physician’s choice of drug treatment made in the physician’s independent medical judgment, they do restrict promotional communications from companies or their sales force with respect to off-label uses of products. If we promote our therapeutic candidates in a manner inconsistent with FDA-approved labeling or otherwise not in compliance with FDA regulations, we may be subject to enforcement action. If we or our existing or future collaborators, manufacturers or service providers fail to comply with applicable continuing regulatory requirements in the United States or foreign jurisdictions in which we seek to market our therapeutics, we or they may be subject to, among other things, fines, warning or untitled letters, holds on clinical trials, delay of approval or refusal by the FDA or similar foreign regulatory bodies to approve pending applications or supplements to approved applications, suspension or withdrawal of regulatory approval, product recalls and seizures, administrative detention of products, refusal to permit the import or export of products, operating restrictions, injunction, civil penalties and criminal prosecution.

Subsequent discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things:

·

restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market or voluntary or mandatory product recalls;

·

fines, warning or untitled letters or holds on clinical trials;

·

refusal by the FDA to approve pending applications or supplements to approved applications filed by us or our strategic partners;

·

suspension or revocation of product license approvals;

·

product seizure or detention or refusal to permit the import or export of products; and

·

injunctions or the imposition of civil or criminal penalties.

The FDA policies may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our therapeutic candidates. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability, which would adversely affect our business.

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Our 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.

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.

The time required to obtain approval by the U.S. Food and Drug Administration, or the FDA, the European Medicines Agency, or the EMA, and other comparable regulatory authorities is unpredictable, but could take many years following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approval policies, regulations or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and varies among jurisdictions. Other than the medical device authorisation that we have for V-go, we have obtained regulatory approval in the United States for only one medicinal product for which we retain full development, commercialization and marketing control, and it is possible that none of our other existing product candidates or any product candidates that we may seek to develop in the future will ever obtain regulatory approval.

Our product candidates could fail to receive regulatory approval for many reasons, including, but not limited to, the following:

·

the FDA, the EMA or other comparable regulatory authorities may disagree with the design or implementation of our clinical trials;

·

we or our collaboration partners may be unable to demonstrate to the satisfaction of the FDA, the EMA or other comparable regulatory authorities that a product candidate is safe and effective for its proposed indications;

·

we or our collaboration partners may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;

·

the FDA, the EMA or other comparable regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials.

7

·

the data collected from clinical trials of our product candidates may not be sufficient to support the submission of a new drug application, or NDA, the submission of a supplemental NDA or other submission or to obtain regulatory approval in the United States, Europe or elsewhere;

·

the FDA or the EMA may be unable to inspect our manufacturing facilities due to restrictions on international travel and may not have sufficient staff to timely review our applications due to the ongoing COVID-19 pandemic;

·

the FDA, the EMA or any other comparable regulatory authority may fail to approve the labeled conditions for use that we or our collaboration partners propose for a product candidate;

·

the FDA, the EMA or other comparable regulatory authorities may require restrictions on the label for the product, may restrict the patient population that the product can be offered to or may restrict the shelf life or other storage or transportation conditions in a way that means it is less attractive to patients.

·

the FDA, the EMA or other comparable regulatory authorities may fail to approve the manufacturing processes or facilities of any third-party manufacturers with which we may contract for clinical and commercial supplies or such processes or facilities may not pass a preapproval inspection; and

·

the approval policies or regulations of the FDA, the EMA or other comparable regulatory authorities may change or differ significantly from one another in a manner rendering our clinical data insufficient for approval.

This lengthy approval process, as well as the unpredictability of ongoing clinical trial results, may result in our or our collaboration partners’ failure to obtain regulatory approval to market our product candidates, which would harm our business, financial position, results of operations and future growth prospects significantly. In addition, even if we or our collaboration partners were to obtain approval, regulatory authorities may approve any of our product candidates for fewer or more limited indications than requested, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. They may also restrict the product in other ways that include the population that can be offered the product, its shelf life, the conditions its must be stored in that may make the product less attractive or more difficult to use. In certain jurisdictions, regulatory authorities may not approve the price we or our collaboration partners intend to charge for our products or may take the view that an analysis of the cost of the product versus its benefit is not favorable enough to warrant recommending its use. Any of the foregoing scenarios could materially harm the commercial prospects of our product candidates.

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.

For certain marketed products, product candidates and clinical development programs, we do, and may in the future continue to, rely on our collaboration partners to develop, conduct clinical trials of, and commercialize our product candidates and approved products. We have existing collaborations with Alexion Pharmaceuticals, Inc., or Alexion, Beta Bionics Inc., or Beta Bionics, Deka Research & Development Corporation and Boehringer Ingelheim GmbH. We may also enter into collaboration agreements with other parties in the future relating to product candidates in exchange for milestone payments and royalties on sales of the product candidate by them.

Ultimately, if such out-licensed product candidates are advanced through clinical trials and receive marketing approval from the EMA, the FDA, or similar regulatory authorities, certain of our collaboration partners will be responsible for commercialization of these out-licensed products. The potential for us to obtain future development milestone payments and, ultimately, generate revenue from royalties on sales of such out-licensed products depends on the successful development, regulatory approval, marketing and commercialization by our collaboration partners. If our collaboration partners do not perform in the manner we expect, fail to fulfill their responsibilities in a timely manner or at all, if the FDA, EMA or other similar regulatory authorities decline to grant a marketing authorization to them, or provide them with a restricted authorization, if our agreements with them terminate, they abandon the collaboration or if the quality or accuracy of the clinical data they obtain is compromised, the clinical development, regulatory approval and commercialization efforts related to our out-licensed product candidates could be delayed or terminated, and it could become necessary for us to assume the responsibility at our own expense, or seek new partners on reduced commercial terms, for the clinical development of such product candidates. In that event, if we are able to continue development we may be likely be required to limit the size and scope of efforts for the development and commercialization of such product candidate; we would likely be required to seek

8

additional financing to fund further development or identify alternative strategic collaboration partners; our potential to generate future revenue from royalties and milestone payments from such product candidates would be significantly reduced or delayed; and it could have a material adverse effect on our business, financial position, results of operations and future growth prospects.

Collaborations involving our out-licensed product candidates pose several risks, including the following:

·

collaboration partners have significant discretion in determining the efforts and resources that they will apply to these partnerships;

·

collaboration partners may not perform their obligations as expected or may perform them at a pace that we did not anticipate;

·

collaboration partners may not pursue development and commercialization of our out-licensed product candidates or may elect not to continue or renew development or commercialization programs, based on clinical trial results, changes in the collaboration partners’ strategic focus or available funding or external factors, such as an acquisition, that divert resources or create competing priorities;

·

collaboration partners may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;

·

collaboration partners may have or could independently develop, or develop with third parties, products that compete directly or indirectly with our out-licensed product candidates;

·

collaboration partners may be acquired or merged with other companies and as a result the priorities of the combined entity may change and led them to change or abandon our collaboration program;

·

disagreements with collaboration partners, including disagreements over proprietary rights, contract interpretation or the conduct of product research, development or commercialization programs, may cause delays or lead to termination of such programs, or require us to assume unplanned expenditures, responsibilities or liabilities with respect to product candidates we have out licensed, or may result in costly and time consuming litigation or arbitration;

·

collaboration partners may infringe the intellectual property rights of third parties, which may result in costly and time-consuming litigation or arbitration in which we may be involved, as a party or in support of our collaboration partners;

·

collaboration partners with marketing and distribution rights to one or more products may not commit sufficient resources to the marketing and distribution of such product or products;

·

collaboration partners with marketing and distribution rights may incur costs that have the effect of reducing the base on which royalties are calculated;

·

collaboration partners may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability; and

·

collaboration agreements may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates.

In addition, certain collaboration agreements provide our collaboration partners with rights to terminate such agreements and licenses granted under such agreements under various conditions, which, if exercised, would adversely affect our product development efforts, could make it difficult for us to attract new collaboration partners and may adversely affect our reputation. Our collaboration partners may have the right to terminate their respective collaboration agreements with us. Any such termination of any agreement or any future agreement that we may enter with our collaboration partners could have a material adverse effect on our business, financial position and results of operations.

The timing and amount of any milestone and royalty payments we may receive under our agreements with our collaboration partners will depend on, among other things, the efforts, allocation of resources, and successful development and commercialization of our product candidates. We cannot be certain that any of the development and regulatory milestones will be achieved or that we will receive any future milestone payments of any kind under these agreements. In addition, in certain circumstances we may believe that

9

we have achieved a particular milestone and the applicable collaboration partner may disagree with our belief. In that case, receipt of that milestone payment may be delayed or may never be received, which may require us to adjust our operating plans, seek resolution with the collaboration partner or resolve the matter in arbitration.

We have assigned our right to receive royalty revenue from the sales of Adlyxin/Lyxumia and/or Soliqua 100/33/ Suliqua, and except for certain development milestone payments under this license agreement and our other existing collaborations, we have no reliable ongoing source of revenue from our collaborations.

In 2003, we entered into our global license agreement, or the Sanofi License Agreement, with Sanofi-Aventis Deutschland GmbH, or Sanofi GmbH, a wholly-owned subsidiary of Sanofi S.A., or Sanofi. The Sanofi License Agreement granted Sanofi the exclusive worldwide rights to develop, manufacture, commercialize and market lixisenatide, both as a stand-alone product and combination therapy. Historically, the majority of our revenue has been derived from milestone payments made by Sanofi, as well royalty payments received from Sanofi on sales of these products.

Lixisenatide is out-licensed to and marketed by Sanofi both as a stand-alone therapy under the brand names Adlyxin in the United States and Lyxumia in the EU and in various other jurisdictions, and as a combination therapy with Lantus, the brand name of insulin glargine developed by Sanofi, under the brand name Soliqua 100/33 in the United States, and in some European countries under the brand name Suliqua.

In September 2018 we, together with two of our wholly-owned subsidiaries, entered into a purchase and sale agreement, or the Royalty Pharma Agreement, with Royalty Pharma Investments ICAV, or Royalty Pharma, to sell and transfer our and our subsidiaries’ respective rights to receive royalties and $85.0 million of potential commercial milestones in respect of global net sales of Soliqua 100/33/ Suliqua and Lyxumia/Adlyxin from and after July 1, 2018, payable under the Sanofi License Agreement in consideration for an upfront one-time payment of $205.0 million. As part of the Royalty Pharma Agreement, we and our subsidiaries remained eligible to receive payments from Sanofi of up to $15.0 million in milestone payments related to sales of lixisenatide. We received the first of these payments, in the amount of $5.0 million, in June 2021. The second of these payments, in the amount of up to $10.0 million, may become due in June 2022. However, we cannot be certain with regards to the timing of this payment, as it is dependent on factors that are outside of our control.

With the transfer to Royalty Pharma of all the royalties that we were due to earn under the Sanofi License Agreement, we are no longer receiving royalty payments under any of our collaboration agreements. Our other existing collaboration agreements do provide for development milestone payments to us, but achievement of any such milestones cannot be predicted with certainty. We currently have revenue from the sale of V-Go and ZEGALOGUE (dasiglucagon), but we are also reliant on our cash on hand and potential capital raising efforts to fund the development of our internal pipeline of product candidates and service our debt.

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 currently advancing most of our internal product candidates through clinical development and are conducting preclinical studies with respect to other programs. Developing product candidates is expensive, lengthy and risky, and we expect our research and development, or R&D, expenses to increase in connection with our ongoing activities, particularly as we seek to advance our internal product candidates toward commercialization or expand our pipeline with additional early-stage development candidates.

In addition, our ability to make scheduled payments of the interest on, or to refinance our indebtedness, including the secured note with Oberland Capital, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. As of December 31, 2021, our cash, cash equivalents and marketable securities were DKK 1,428 million. We expect that our existing cash and cash equivalents will be sufficient to fund our current operations until April 2023; however, some of this cash cannot be used to fund our operations under the terms of the liquidity covenant pursuant to our arrangement with Oberland Capital. With the liquidity covenant restrictions, our cash and cash equivalents may last only until September 2022. Our executive management team and board of directors are working to extend our cash runway, subject to the restrictions contained in the agreement between us and Oberland Capital, by means of new additional funding, either through issuance of shares or debt instruments, establishment of royalty arrangements, divestments, expense management activities or a combination of these alternatives. On this basis, we currently believe it is probable that sufficient resources will be obtained prior to the end of September 2022 that will enable us to continue our activities as planned well into 2023. Any of these activities and additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates.

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In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of our shareholders and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of the ADSs and our ordinary shares to decline. The sale of additional equity or convertible securities could be dilutive to our shareholders. The incurrence of indebtedness would result in increased fixed payment obligations, and we may be required to agree to certain restrictive covenants that are in addition to the covenants under the arrangement with Oberland Capital. These operating restrictions could adversely impact our ability to conduct our business. We could also be required to seek funds through arrangements with collaboration partners or at an earlier stage than otherwise would be desirable and we may be required to relinquish rights to some of our technologies or internal product candidates or otherwise agree to terms unfavorable to us. If we are unable to obtain funding on a timely basis or at all, we may be required to significantly curtail, delay or discontinue one or more of our research or development programs, the commercialization of any internal product candidate, be unable to expand our operations, have to reduce or divest some of our operations or otherwise capitalize on our business opportunities, as desired, which could impair our prospects.

We 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.

Risks Related to Our Products and Product Candidates

We 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.

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

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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:

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a product candidate is ineffective, inferior to existing approved products for the same indications, unacceptably toxic or has unacceptable side effects;

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patients may die or suffer other adverse effects for reasons that may or may not be related to the product candidate being tested;

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extension studies on long-term tolerance could invalidate the use of our product;

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the results may not be positive or may be unclear and may not confirm the positive results of earlier trials;

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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

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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.

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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.

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 currently, and expect to continue to, selectively rely on public and private research institutions, medical institutions, clinical investigators, CROs, contract laboratories and collaboration partners to conduct some of our early-stage product development activities, perform data collection and analysis and carry out our clinical trials. Our development activities or clinical trials conducted in reliance on third parties may be delayed, suspended or terminated if:

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the third parties do not devote a sufficient amount of time or effort to our activities or otherwise fail to successfully carry out their contractual duties or to meet regulatory obligations or expected deadlines;

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we replace a third party; or

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the quality or accuracy of the data obtained by third parties is compromised due to their failure to adhere to clinical protocols, regulatory requirements, the contractual requirements or for other reasons.

We do not have the ability to control the performance of third parties in their conduct of development activities. Third party performance failures may increase our development costs, delay our ability to obtain regulatory approval and delay or prevent the commercialization of our product candidates. While we believe that there are alternative sources to provide these services, in the event that we seek such alternative sources, we may not be able to enter into replacement arrangements without incurring delays or additional costs.

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 must arrange for production and supply of products (whether these be active ingredient, finished product, packaging material or associated devices) that are still in their development stage as well as products that are already on the market like V-Go and ZEGALOGUE (dasiglucagon). We do not currently have, nor do we plan to acquire, the infrastructure or capability internally to manufacture our preclinical or clinical drug supplies or commercial products and we lack the resources and the capability to manufacture any of our products or product candidates on a clinical or commercial scale. Therefore, we are dependent on third party manufacturers and suppliers that are located in countries in the European Union and China. If, for any reason, we were to experience an unexpected loss or disruption in the supply of any product candidate, placebo or comparator drug used in our clinical trials, whether as a result of manufacturing, supply or storage issues or otherwise, we could experience delays, disruptions, suspensions or terminations of, or be required to restart or repeat, the impacted pending or ongoing clinical trials. The facilities used by our contract manufacturers or other third party manufacturers to manufacture our product candidates are subject to the FDA’s, the EMA’s and other comparable regulatory authorities’ preapproval inspections that will be conducted after we submit our NDA to the FDA or the required approval documents to

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any other relevant regulatory authority. Due to the ongoing impact of the COVID-19 global pandemic, regulatory authority inspectors may not be able to travel to conduct necessary inspections, which may prevent or delay the approval of our applications.

The majority of our products and product candidates are peptides and the production of such peptide therapeutics that meet all product specification and regulatory requirements is complex. Even slight deviations at any point in the production process may lead to a reduction in yield, production failures, product recalls and regulatory actions. In addition, because the production process involves the use of materials of a biologic and chemical nature, the process can be affected by contaminants that could impact the end product. These manufacturing challenges are coupled with the fact that we have limited experience manufacturing commercial quantities of certain of our products (so we or our third party manufacturers may have limited previous experience resolving any issues in connection with the manufacture of certain of our products and any issues may take significant time to remediate or we may be unable to solve any manufacturing problems).

We do not control the implementation of the manufacturing process of, and are completely dependent on, our contract manufacturers or other third party manufacturers for compliance with the regulatory requirements, known as current good manufacturing practices, or cGMPs, for manufacture of both active drug substances and finished drug products.

If our third-party manufacturers (including those involved in drug substance, drug product, and finished product) and other suppliers fail to meet the highly technical requirements/specifications of manufacturing our peptide products and product candidates and our strict quality and control specifications, we (or they) may be unable to manufacture or supply our products. We have little or no control over the ability of our contract manufacturers or other third-party manufacturers to maintain adequate quality control and quality assurance procedures and qualified personnel. If the FDA, the EMA or another comparable regulatory authority finds deficiencies at these facilities for the manufacture of our commercial products or product candidates or if it withdraws any approval because of deficiencies at these facilities in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved.

We depend on our third-party manufacturers to perform effectively on a timely basis and to comply with regulatory requirements and meet our product specifications. For example, we rely on the Poly Peptide Group in Sweden for the production of many of our drug substances or SHL Medical in Switzerland for the production of syringes and on manufactures in China for the V-Go medical device. Our failure or the failure of our third-party manufacturers to produce sufficient quantities of our products and product candidates or to meet our specifications and quality standards or those standards imposed by regulatory authorities could result in lost revenue, diminish our profitability, delay the development of our product candidates, delay regulatory approval, result in the rejection of our product candidates or result in supply shortages for our patients, which may lead to lawsuits, harm to our reputation or could accelerate introduction of competing products to the market.

We rely on our manufacturers to purchase from third party suppliers the materials necessary to produce our product candidates for our clinical trials. There are a limited number of suppliers for raw materials that we use to manufacture our drugs and there may be a need to assess alternate suppliers to prevent a possible disruption of the manufacture of the materials necessary to produce our product candidates for our clinical trials, and if approved, for commercial sale. We do not have any control over the process or timing of the acquisition of these raw materials by our manufacturers. Moreover, we currently do not have any agreements in place for the commercial production of these raw materials. Although we generally do not begin a clinical trial unless we believe we have access to a sufficient supply of a product candidate to complete the clinical trial, any significant delay in the supply of a product candidate, or the raw material components thereof, for an ongoing clinical trial due to the need to replace a contract manufacturer or other third party manufacturer could considerably delay completion of our clinical trials, product testing and potential regulatory approval of our product candidates. If our manufacturers or we are unable to purchase these raw materials after regulatory approval has been obtained for our product candidates, the commercial launch of our product candidates would be delayed or there would be a shortage in supply, which would impair our ability to generate revenue from the sale of our product candidates. Additionally, if we receive regulatory approval for our product candidates, we may experience unforeseen difficulties or challenges in the manufacture of our product candidates on a commercial scale compared to the manufacture for clinical purposes.

We also depend on a very limited number of third-party providers for supply chain services with respect to our clinical and commercial product requirements, including product filling, finishing, packaging, labeling and logistics. Our third-party raw material providers and supply chain service providers operate as independent entities and we do not exercise control over any such third-party provider’s operations or their compliance with our internal or external specifications or the rules and regulations of regulatory agencies. Any contractual remedies we may have under agreements with these parties may not protect us from the harm suffered by our business or our patients if they fail to provide material or perform services that meet our specifications. Due to the highly specialized nature of the services performed by these third parties, particularly the supply of raw materials and other drug supply and drug product, as well as the delivery and supply chain operations regarding our products, we do not believe that we could quickly find replacement suppliers

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or service providers and, even if we were able to identify additional third parties, the terms of any such arrangement may not be favorable to us. In either of these cases, our revenue, results of operations, business and reputation may be harmed.

The success of our business may also depend on the security of our products while in the supply chain for delivery to patients, which, as noted above, is dependent on third-party providers. For example, if our products are not fully and adequately secured from unauthorized access by third parties, any of our products may be tampered with or contaminated. If our products were exposed to any tampering or contamination, or if they are not transported in accordance with the required specifications, our patients may be harmed through use of our products, and such harm may be severe. In addition, if the supply chain is not secure (or our distributors do not exercise control over our products while in their possession), we are also at risk for our products being diverted to patients other than those who are the intended recipient or to patients who do not have a prescription to receive our therapies (or it may be used for treatment by physicians who have not completed the necessary restrictions in order to treat patients) or it may be sold by distributors, channels or other entities that are not authorized by us to sell our products. In addition, an unauthorized distributor may not properly store or ship our products, thereby exposing patients to potential harm from use of the product that was not handled in accordance with our standards. If any of the foregoing were to happen, we could be subject to costly litigation, significant monetary penalties, harm to our reputation and investigation by regulatory authorities (and potentially subject to regulatory action, including recall, product withdrawals, suspensions and monetary penalties).

For our products that are authorized for and on sale in the US or other territories the sale and use of counterfeit versions of our products could result in significant harm to patients, reduced sales of our products and harm to our reputation.

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.

The pharmaceutical and biotechnology industries are characterized by intense competition and significant and rapid technological change as researchers learn more about diseases and develop new technologies and treatments. Any product candidates that we successfully develop and commercialize will compete with existing drugs and new drugs that may become available in the future. For instance, our ZEGALOGUE presentation with Dasiglugacon for the treatment of severe hypoglycemia for patients aged six years and above competes with products such as Gvoke produced by Xeris Inc. (which is a form of glucagon, for the treatment of severe hypoglyceamia in pediatric and adult patients with diabetes ages 2 and above), or Baqsimi produced by Eli Lilly & Co (a nasally administered version of glucagon for the treatment of severe hypoglyceamia in pediatric and adult patients with diabetes aged 4 years and above). We have competitors in each of the disease fields in which we compete, many of which have substantially greater name recognition, commercial infrastructure and financial, technical and personnel resources than we have, such as Insulet, Animas and Medingo. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with larger and established companies. Significant competitive factors in our industry include product efficacy and safety, quality and breadth of an organization’s technology, skill of an organization’s employees and its ability to recruit and retain key employees, timing and scope of regulatory approvals, government reimbursement rates for, and the average selling price of, products, the availability of raw materials and qualified manufacturing capacity, manufacturing costs, intellectual property and patent rights and their protection and sales and marketing capabilities. While we believe that our product and product candidate platform, development expertise and scientific knowledge provide us with competitive advantages, we face potential competition from many different sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions and governmental agencies and public and private research institutions. There can be no assurance that our competitors will not deploy their superior resources to damage our and our drug candidates’ prospects. Given the intense competition in our industry, we cannot assure you that any of the products that we successfully develop will be clinically superior or scientifically preferable to products developed or introduced by our competitors.

In addition, significant delays in the development of our product candidates could allow our competitors to succeed in obtaining the FDA, the EMA or other regulatory approvals for their product candidates more rapidly than us, which could place us at a significant competitive disadvantage or deny us marketing exclusivity rights.

Competitors may develop novel products or other technologies that could make our product candidates obsolete or uneconomical. Any of our product candidates that competes with an approved product may need to demonstrate compelling advantages, such as increased efficacy, convenience, pricing, tolerability and/or safety in order to be commercially successful. As a result, the pricing of certain of our products and product candidates, if and when approved for marketing, will depend, in part, on the pricing strategies adopted by our competitors. Any of our product candidates that are approved could also face other competitive factors in the future, including biosimilar competition, which could force us to lower prices or could result in reduced sales. Any failure to compete effectively against our current and future competitors could have a material adverse effect on our business, financial position, results of operations and future growth prospects.

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In addition, many of our competitors have significantly greater financial resources and expertise in R&D, manufacturing, conducting preclinical studies and clinical trials, obtaining regulatory approvals and marketing drugs. Partnership arrangements with large established companies or mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of competitors. These companies also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

Certain of our peptide product candidates are expected to be delivered parenterally by medical devices that may be regulated as combination products that are required to obtain separate FDA clearance or pre-market approval and/or approval by other regulatory authorities.

Certain of our peptide product candidates are intended to be used in combination with a delivery device, such as an injector or other delivery system. Medical products containing a combination of new drugs, biological products or medical devices may be regulated as “combination products” in the United States and Europe. A combination product generally is defined as a product comprised of components from two or more regulatory categories (such as drug/device, device/biologic, drug/biologic). Each component of a combination product is subject to the requirements established by the FDA for that type of component, whether a new drug, biologic or device. In order to facilitate pre-market review of combination products, the FDA designates one of its centers to have primary jurisdiction for the pre-market review and regulation of the overall product based upon a determination by the FDA of the primary mode of action of the combination product. The determination whether a product is a combination product or two separate products is made by the FDA on a case-by-case basis. Our product candidates intended for use with such devices, or expanded indications that we may seek for our products used with such devices, may not be approved or may be substantially delayed in receiving approval if the devices do not gain and/or maintain their own regulatory approvals or clearances.

Where approval of the drug or biologic product and device is sought under a single application, the increased complexity of the review process may delay approval. The FDA review process and criteria are not a well-established area, which could also lead to delays in the approval process. The EMA has a parallel review process in place for combination products, the potential effects of which in terms of approval and timing could independently affect our ability to market our combination products in Europe. In addition, because these delivery devices are provided by unaffiliated third-party companies, we are dependent on the sustained cooperation and effort of those third-party companies both to obtain regulatory approval and to maintain their own regulatory compliance. Failure of third-party companies to assist in the approval process or to maintain their own regulatory compliance could delay or prevent approval of our product candidates, or limit our ability to sell a product once approved.

Risks Related to Our Operations

There is a risk that our products may have major side effects that may give rise to substantial liability claims.

As a biopharmaceutical company, we operate in a market that is subject to risk of liability. To our knowledge, we are not currently subject to any product liability suits. However, we may be subject to future liability claims alleging adverse effects from the use of our products in clinical trials or medical practice. Any liability claims could have a material adverse effect on our business, financial position, results of operations and future growth prospects.

There is a risk that we may not be able to maintain insurance coverage, and that existing or any future insurance policies or our own resources will not sufficiently cover claims for damages that we may receive in the future.

Our business exposes us to potential product liability and other liability risks that are inherent in clinical development, manufacturing, marketing and use of human therapeutic products. It is generally necessary for us to secure certain levels of insurance as a condition for the conduct of clinical trials and any sale or use of our products. We have taken out product liability insurance with respect to all clinical trials and ongoing trials performed to date for which we were responsible (i.e., in respect of our internal product pipeline).

We may seek to expand our insurance coverage if we obtain marketing approval for any of our internal product candidates or if other risks related to our business increase. We may not be able to obtain or maintain adequate protection against potential liabilities at a cost that is acceptable to us. If we are unable to obtain insurance or other protection against potential product liability claims, we could be exposed to significant liabilities, which may materially and adversely affect our business and financial position. These liabilities could prevent or interfere with our product development and commercialization efforts. If we are sued for any injury caused by our products or processes, our liability could exceed our product liability insurance coverage and our own financial resources and, consequently, could have a material adverse effect on our business, financial position, results of operations and future growth prospects.

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Our future success depends on our ability to retain our management team and key employees.

We are highly dependent on the management, development, clinical, financial and business development expertise of our management team and employees. Recruiting and retaining qualified scientific, clinical and support personnel will also be critical to our future success. The loss of the services of any of the members of our management team or employees could impede the achievement of our development and commercialization objectives and seriously harm our ability to successfully implement our business strategy. Furthermore, replacing any of the members of our management team or employees may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to successfully develop, gain regulatory approval for and commercialize drugs. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate the members of our management team or key employees on acceptable terms given the competition among numerous pharmaceutical, biopharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. If we are unable to continue to attract and retain high quality management and employees, our ability to pursue our growth strategy will be limited.

Our internal computer systems, or those of our collaboration partners or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our product development programs.

Our internal computer systems and those of our current and any future collaboration partners and other contractors or consultants are vulnerable to damage from cyber security breaches, malware attacks, ransomware attacks or other such computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. While we do not believe that we have experienced any such material system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations, whether due to a loss of our trade secrets or other proprietary information or other similar disruptions. For example, the loss of clinical trial data for our product candidates from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications or other data or applications relating to our technology or product candidates, or inappropriate disclosure of confidential or proprietary information, we could incur liabilities, our competitive position could be harmed, and the further development and commercialization of our product candidates could be delayed.

Our operations as a global company subject us to various risks, and our failure to manage these risks could adversely affect our results of operations.

We face significant operational risks as a result of doing business internationally, such as:

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fluctuations in foreign currency exchange rates (in particular, U.S. dollars, Euros and Danish kroner);

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potentially adverse and/or unexpected tax consequences, including penalties due to the failure of tax planning or due to the challenge by tax authorities on the basis of transfer pricing and liabilities imposed from inconsistent enforcement;

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potential changes to the accounting standards, which may influence our financial situation and results;

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becoming subject to the different, complex and changing laws, regulations and court systems of multiple jurisdictions and compliance with a wide variety of foreign laws, treaties and regulations;

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reduced protection of, or significant difficulties in enforcing, intellectual property rights in certain countries;

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restrictions imposed by local labor practices and laws on our business and operations, including unilateral cancellation or modification of contracts;

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rapid changes in global government, economic and political policies and conditions, political or civil unrest or instability, terrorism, epidemics or pandemics (such as coronavirus), and other similar outbreaks or events, and potential failures in supply or demand for our products due to such changes or events or the fear that they may occur;

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global production, transportation and warehousing issues that may include delayed transit or damaged goods or parts and ingredients from our various supplier to the end users that may be beyond our control

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tariffs, trade protection measures, import or export licensing requirements, trade embargoes and other trade barriers.

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Additionally, as a global company, we are subject to the Foreign Corrupt Practices Act, or the FCPA, or other similar legislative provisions in other countries which generally prohibits companies and their intermediaries from making or offering improper payments to non-U.S. officials for the purpose of obtaining or retaining business. The FCPA generally also requires companies listed on a U.S. stock exchange to maintain a system of adequate internal accounting controls and to make and keep books, records and accounts that accurately and fairly reflect transactions and dispositions of assets. Because of the predominance of government-sponsored health care systems around the world, many of our commercial relationships outside of the United States are with governmental entities, and personnel of such entities may be considered non-U.S. officials for purposes of the FCPA. Violations of the FCPA and other applicable anti-bribery laws are punishable by criminal fines and imprisonment, civil penalties, disgorgement of profits, injunctions, debarment from government contracts as well as other remedial measures. We have adopted a written code of business conduct and other policies and procedures to assist us and our personnel in complying with the FCPA and other applicable anti-bribery laws prior to completion of the offering. However, our personnel and others acting on our behalf could take actions that violate these requirements.

If we were to experience any of the foregoing events, it could adversely affect our reputation, business, financial condition and results of operations.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner or prevent fraud, which may adversely affect our business, investor confidence in our company and the market price of our ordinary shares and ADSs.

In our Annual Report on Form 20-F for the year ended December 31, 2019, we reported material weaknesses in internal control related to lack of sufficient competencies related to IFRS and SEC reporting knowledge for the purposes of timely and reliable financial reporting. As of December 31, 2021, our testing of both the design and operating effectiveness of these controls was completed, and we have concluded that the material weaknesses existing at December 31, 2019 and prior have been remediated and this assessment includes the parent company and the US subsidiaries. Except for the remediation of IFRS and SEC reporting knowledge and related COSO material weaknesses and changes described, there were no changes during the year-ended December 31, 2021 in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Completion of remediation does not provide assurance that our remediation or other controls will continue to operate properly. If we are unable to maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to record, process and report financial information accurately, and to prepare financial statements within required time periods could be adversely affected, which could subject us to litigation or investigations requiring management resources and payment of legal and other expenses, negatively affect investor confidence in our financial statements and adversely impact our stock price.

Risks Related to Our Intellectual Property

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.

Our commercial success and viability depend on our and our collaboration partners’ ability to obtain and maintain patent protection in the United States, Europe and other countries with respect to our existing product candidates owned by us and to successfully defend these rights against third party challenges, as well as our ability to maintain adequate intellectual property protection for any future products. If we or our collaboration partners do not adequately protect our intellectual property, competitors may be able to use our technologies and erode or negate any competitive advantage we may have, which could materially harm our business, negatively affect our position in the marketplace, limit our ability to commercialize our product candidates and delay or render impossible our achievement of profitability.

Our strategy and future prospects are based, in particular, on our patent portfolio. We and our collaboration partners or licensees will best be able to protect our product candidates and their uses from unauthorized use by third parties to the extent that valid and enforceable patents, effectively protected trade secrets, or other regulatory exclusivities, cover them. Also, intellectual property rights have limitations and do not necessarily address all potential threats to our competitive advantage. Our ability to obtain patent protection for our product candidates is uncertain and the degree of future protection afforded by our intellectual property rights is uncertain due to a number of factors, including, but not limited to:

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we or our collaboration partners may not have been the first to make the inventions covered by pending patent applications or issued patents;

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we or our collaboration partners may not have been the first to file patent applications for our product candidates or the compositions we developed or for their uses;

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others may independently develop identical, similar or alternative products or compositions and uses thereof;

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our, or our collaboration partners, applications for patents may be declined by the patent offices or may be granted with limited scope or in fewer countries than we or our collaboration partners would prefer;

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our or our collaboration partners’ disclosures in patent applications may not be sufficient to meet the statutory requirements for patentability;

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any or all of our or our collaboration partners’ pending patent applications may not result in issued patents or may not result in issued patents in all territories where we or our collaboration partners may wish to market products;

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we or our collaboration partners may not seek or obtain patent protection in countries that may eventually provide us with a significant business opportunity;

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any patents issued to us or our collaboration partners may not provide a basis for commercially viable products, may not provide any competitive advantages, or may be successfully challenged by third parties;

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our or our collaboration partners’ compositions and methods may not be patentable;

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others may design around our or our collaboration partners’ patent claims to produce competitive products or uses which fall outside of the scope of our patents;

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others may identify prior art or other bases which could result in the prohibition or limitation of our or our collaboration partners’ patents;

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our competitors might conduct R&D activities in the United States and other countries that provide a safe harbor from patent infringement claims for certain R&D activities, as well as in countries where we or our collaboration partners do not have patent rights, and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; or

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we may not develop additional proprietary technologies that are patentable.

Issued patents covering our product candidates could be found invalid or unenforceable if challenged in court.

Even if our patents do successfully issue and even if such patents cover our product candidates and methods of use, third parties may initiate interference, re-examination, post-grant review, inter partes review, or derivation actions in the U.S. Patent and Trademark Office, or the USPTO, may initiate third party oppositions in the European Patent Office, or the EPO, or similar actions challenging the validity, enforceability or scope of such patents in other patent administrative proceedings worldwide, which may result in our patent claims being narrowed or invalidated. Such proceedings could result in revocation or amendment of our patents in such a way that they no longer cover our product candidates or competitive products. Further, if we initiate legal proceedings against a third party to enforce a patent covering our product candidate or technology, the defendant could counterclaim that the patent covering our product candidate or technology is invalid or unenforceable. In patent litigation in the United States, certain European and other countries worldwide, it is commonplace for defendants to make counterclaims alleging invalidity and unenforceability in the same proceeding, or to commence parallel defensive proceedings such as patent nullity actions to challenge validity and enforceability of asserted patent claims.

In administrative and court actions, grounds for a patent validity challenge may include alleged failures to meet any of several statutory requirements, including lack of novelty, obviousness (lack of inventive step) and in some cases, lack of sufficiently teaching, or non-enablement of, the claimed invention. Grounds for unenforceability assertions include allegations that someone connected with prosecution of the patent withheld relevant information from the Examiner during prosecution in the USPTO or made a misleading statement during prosecution in the USPTO, the EPO or elsewhere. Third parties may also raise similar claims before administrative bodies in the USPTO or the EPO, even outside the context of litigation. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to validity, for example, we cannot be certain that there is no invalidating prior art, of which we or the patent examiner were unaware during prosecution. Further, we cannot be certain that all of the potentially relevant art relating to our patents and patent applications has been cited in every patent office. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our product candidates.

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We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time consuming and unsuccessful and have a material adverse effect on the success of our business.

Competitors may infringe our patents, trademarks, copyrights or other intellectual property. To counter infringement or unauthorized use, we may be required to file infringement claims on a country-by-country basis, which can be expensive, unpredictable, time consuming and divert the time and attention of our management and scientific personnel. Any claims we assert against perceived infringers could provoke these parties to assert counterclaims against us alleging that we infringe their patents, in addition to counterclaims asserting that our patents are invalid or unenforceable, or both. In any patent infringement proceeding, there is a risk that a court will decide that a patent of ours is invalid or unenforceable, in whole or in part, and that we do not have the right to stop the other party from using the invention at issue. There is also a risk that, even if the validity of such patents is upheld, the court will construe the patent’s claims narrowly or decide that we do not have the right to stop the other party from using the invention at issue on the grounds that our patent claims do not cover the invention. An adverse outcome in a litigation or proceeding involving one or more of our patents could limit our ability to assert those patents against those parties or other competitors and may curtail or preclude our ability to exclude third parties from making and selling similar or competitive products. Similarly, if we assert trademark infringement claims, a court may determine that the marks we have asserted are invalid or unenforceable, or that the party against whom we have asserted trademark infringement has superior rights to the marks in question. In this case, we could ultimately be forced to cease use of such trademarks.

Even if we establish infringement, the court may decide not to grant an injunction against further infringing activity and instead award only monetary damages, which may or may not be an adequate remedy. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could adversely affect the market price of the ADSs and ordinary shares. Moreover, there can be no assurance that we will have sufficient financial or other resources to file and pursue such infringement claims, which typically last for years before they are concluded. Even if we ultimately prevail in such claims, the monetary cost of such litigation, any award of damages or loss of profit and the diversion of the attention of our management and scientific personnel could outweigh any benefit we receive as a result of the proceedings.

Claims that our product candidates or their uses infringe the intellectual property rights of third parties could result in costly litigation, and unfavorable outcomes could require us to pay damages or royalties and could limit our R&D activities or our ability to commercialize certain products.

Even if we have or obtain patents covering our product candidates, compositions or uses, we may still be barred from making, using, importing or selling our product candidates or technologies because of the intellectual property rights of others. Others have filed, and in the future may file, patent applications covering compositions or products and uses that are similar or identical to ours. There are many issued U.S., European and other worldwide patents relating to therapeutic drugs, and some of these relate to compounds we intend to commercialize. Numerous worldwide patents and pending patent applications owned by others exist in the metabolic disease, gastrointestinal disease and cardiovascular disease field and cover other product candidates that we are developing. To the extent that we identify any potential issue with third party patents that may affect our product candidates, we ensure that we have a strategy to deal with such third party patents, either by ensuring that we believe that such patents are invalid, not infringed or that we commercialize our products upon expiry of such patents. Such strategies can include seeking a judicial or administrative revocation of such patents, ensuring that we are in a position to defend a claim for infringement, or seeking a license where that is appropriate. We cannot guarantee that our products, compositions and their uses do not or will not infringe third party patent or other intellectual property rights. Because patent applications can take 18 months to publish and many years to issue, there may be currently pending applications with patent claims unknown to us or which will change over time and may later result in issued patents that purportedly cover our product candidates or compositions and uses. These patent applications may have been filed earlier than or have priority over patent applications filed by us. We may be required to develop or obtain alternative technologies, review product design or, in the case of claims concerning registered trademarks, rename our product candidates.

Claims that our or our collaboration partners’ products, compositions or their uses infringe or interfere with the intellectual property rights of third parties, or that we or our collaboration partners have misappropriated third party trade secrets, could result in costly litigation and could require substantial time and money to resolve, even if litigation were avoided. The basis of such litigation could be, amongst other allegations the infringement of existing patents or patents that are granted in the future or the misappropriation of confidential information or trade secrets. If we or our collaboration partners were to face infringement claims or challenges by third parties, an adverse outcome could subject us or our collaboration partners to significant liabilities to such third parties. Litigation or threatened litigation could result in significant demands on the time and attention of our management team. A negative outcome could expose us or our collaboration partners to payment of costs, damages and other financial remedies, including in some jurisdictions, increased damages, such as treble damages and attorneys’ fees, if found to have willfully infringed a patent. Litigation with third parties

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concerning alleged infringement of their intellectual property rights could require us and our collaboration partners to bear substantial costs and impose burdens on our and their management and personnel, even if we or our collaboration partners were to ultimately succeed in such proceedings. Costs of patent litigation and awards of damages in patent infringement cases can be significant, and equitable remedies such as temporary restraining orders and injunctions can negatively impact or prevent product development and commercialization.

In light of these risks, settlements are often a preferred alternative, to avoid litigation uncertainties and costs, even when there are strong defenses to claims that are made. A negative outcome, potential or actual, could cause us or our collaboration partners to pursue contractual and other remedies against each other; in particular, our license agreements generally allow our collaboration partners to reduce amounts we are owed as royalties and/or milestones by amounts paid to third parties as a result of or in settlement of certain infringement claims, subject to contractual conditions and limitations. We or our collaboration partners could also face equitable remedies, such as being forced, including by court order, to cease developing, manufacturing, importing or commercializing an infringing product candidate or product in one or more jurisdictions. A negative outcome could also lead us or our collaboration partners to delay, curtail or cease the development and commercialization of some or all of our candidate drugs, or could cause us or our collaboration partners to seek legal or administrative actions against third parties. We or our collaboration partners may need to obtain licenses from third parties and such licenses may not be available on commercially reasonable terms, or at all. Even if we or our collaboration partners are able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same rights licensed to us. In addition, even if we or our collaboration partners were ultimately to succeed in asserting one or more patent defenses in an infringement suit, or to settle at an early stage to avoid litigation uncertainties and costs despite having strong patent defenses, such litigation could burden us and our collaboration partners with substantial unanticipated costs and damages. A negative outcome could cause us or our collaboration partners to pursue contractual remedies against each other or against us, including, for example, over settlement or license related payments or royalty reductions.

Biopharmaceutical patents and patent applications involve highly complex legal and factual questions, which, if determined adversely to us, could negatively impact our patent position.

The patent positions of biopharmaceutical companies can be highly uncertain and involve complex legal and factual questions. The interpretation and breadth of claims allowed in some patents covering biopharmaceutical compositions may be uncertain and difficult to determine and are often affected materially by the facts and circumstances that pertain to the patented compounds, compositions and related patent claims. The standards of the USPTO, the EPO and other international patent offices are evolving and could change in the future. Consequently, we cannot predict the issuance and scope of patents with certainty. Patents, if issued, may be challenged, invalidated or circumvented. European patents and patents in certain other jurisdictions are subject to third party opposition proceedings. U.S. patents and patent applications may also be subject to interference proceedings, and U.S. patents may be subject to reexamination proceedings, post-grant review and/or inter partes review in the USPTO. The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability and our patents or pending patent applications may be challenged in the courts or patent offices in the United States, Europe and elsewhere worldwide. There is no assurance that all of the potentially relevant prior art relating to our patents and patent applications has been found. For example, publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot know with certainty whether we were the first to make the inventions claimed in our owned and licensed patents or pending patent applications, or that we were the first to file for patent protection of such inventions. If such prior art exists, it may be used to invalidate a patent, or may prevent a patent from issuing from a pending patent application. For example, such patent filings may be subject to a third-party pre-issuance submission of prior art to the USPTO, EPO or to other patent offices around the world. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights may be uncertain.

Our pending and future patent applications may not result in patents being issued that protect our technology or products, in whole or in part, or may not effectively prevent others from commercializing competitive technologies and products. For example, such patent filings may be subject to a third-party pre-issuance submission of prior art to the USPTO, the EPO or to other patent offices around the world. Alternately or additionally, we may become involved in post-grant review procedures, oppositions, derivations, proceedings, reexaminations, inter partes review post grant proceedings or interference proceedings, in the United States or elsewhere, challenging patents or patent applications in which we have rights, including patents on which we rely to protect our business. An adverse determination in any such challenges may result in loss of exclusivity or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and products. European patents or patents in other jurisdictions may be subject also to administrative opposition or comparable proceedings in corresponding worldwide patent offices, which could result in either loss of the patent or denial of the patent application or loss or reduction in the scope of one or more of the claims of the patent or patent application. In addition, such interference, reexamination, post-grant review, inter partes review and opposition proceedings may be time consuming and costly. Also, given the amount of time required for the development, testing and

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regulatory review of new product candidates, patents protecting such candidates may expire before or shortly after such candidates are commercialized. Accordingly, rights under any issued patents may not provide us with sufficient protection against competitive products or processes.

In addition, changes in or different interpretations of patent laws in the United States, Europe and other countries worldwide may diminish the value of our patents or narrow the scope of our patent protection, while patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents. For example, changes in or different interpretations of patent laws in the United States, Europe and other countries worldwide may permit others to use our or our collaboration partners’ discoveries or to develop and commercialize our technology and products without providing any compensation to us or may limit the number of patents or claims we can obtain. The laws of some countries may not protect intellectual property rights to the same extent as the laws of the United States or Europe, and those countries may lack adequate rules and procedures for defending our intellectual property rights, or vice versa.

If we fail to obtain and maintain patent protection and trade secret protection for our product candidates, we could lose our competitive advantage and competition we face would increase, reducing any potential revenue and adversely affecting our ability to attain or maintain profitability.

If we are unable to protect the confidentiality of our trade secrets and know-how or the trade secrets and know-how that is entrusted to us, our business and competitive position would be harmed.

In addition to seeking patent protection for our product candidates, we also rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position. We seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, collaboration partners, consultants, advisors, university and/or institutional researchers and other third parties. We similarly enter into such non-disclosure and confidentiality agreements with third parties to access their trade secrets or know-how when we collaborate with them or when we are involved in an assessment of their technology. We also have entered or seek to enter into confidentiality and invention or patent assignment agreements with our employees, advisors and consultants. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Our trade secrets may also be obtained by third parties by other means, such as breaches of our physical or computer security systems. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. Moreover, if any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to, or independently developed by, a competitor, our competitive position would be harmed.

We will not seek to protect our intellectual property rights in all jurisdictions throughout the world, and we may not be able to adequately enforce our intellectual property rights even in the jurisdictions where we seek protection.

Obtaining and maintaining a patent portfolio entails significant expense and resources. Part of the expense includes periodic maintenance fees, renewal fees, annuity fees, various other governmental fees on patents or applications due in several stages over the lifetime of patents or applications, as well as the cost associated with complying with numerous procedural provisions during the patent application process. Filing, prosecuting and defending patents on our product candidates in all countries and jurisdictions throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States and Europe could be less extensive than those in the United States and in Europe, assuming that rights are obtained in the United States or in Europe. We may choose not to pursue or maintain protection for particular inventions where we deem it not to be economic or where the territory is deemed of little commercial interest. In addition, there are situations in which failure to make certain payments or noncompliance with certain requirements in the patent process can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. If we choose to forego patent protection or allow a patent application or patent to lapse purposefully or inadvertently, our competitive position could suffer. Competitors may use our technologies in jurisdictions where we do not pursue and obtain patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States or in Europe. These products may compete with our product candidates and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing. Even if we pursue and obtain issued patents in particular jurisdictions, our patent claims or other intellectual property rights may not be effective or sufficient to prevent third parties from so competing.

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In addition, the laws of some countries do not protect intellectual property rights to the same extent as the federal and state laws in the United States and Europe. Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. The legal systems of some countries, particularly developing countries, do not favor the enforcement of patents and other intellectual property protection, especially those relating to biopharmaceuticals or biotechnologies. This could make it difficult for us to stop the infringement of our patents, if obtained, or the misappropriation of our other intellectual property rights. For example, many foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, many countries limit the enforceability of patents against third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit. Patent protection must ultimately be sought on a country-by-country basis, which is an expensive and time consuming process with uncertain outcomes and outcomes that are subject to unexpected change. For example, as a result of the February 2022 invasion of Ukraine by Russia, the Biden administration and other governments announced certain sanctions against Russia. These sanctions could adversely affect our ability to renew certain patent rights or applications for patent rights, and such similar registered rights, that we have in Russia.

We may choose not to seek patent protection in certain countries, and we will not have the benefit of patent protection in such countries. Proceedings and legal actions to enforce our patent rights in the United States or in Europe and in foreign jurisdictions can be expensive, could result in substantial costs, and could divert management time and our efforts and attention from other aspects of our business. In addition, such proceedings or legal actions could put our patents at risk of being invalidated, found unenforceable or interpreted narrowly, could put our patent applications at risk of not being issued and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. We may or may not choose to pursue litigation or other actions against those that have infringed our patents, or used them without authorization, due to the associated expense and time commitment of monitoring these activities. If we fail to protect or to enforce our intellectual property rights successfully, our competitive position could suffer, which could harm our results of operations.

In addition, changes in the law and legal decisions by courts in the United States, Europe and foreign countries may affect our ability to obtain adequate protection for our technology and the enforcement of intellectual property. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

Patent terms and regulatory exclusivities may be inadequate to protect our competitive position on our product candidates for an adequate amount of time.

Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. We expect to seek extensions of patent terms in the United States and, if available, in other countries where we have patents.

Depending upon the timing and duration of the U.S. regulatory review process and patent life considerations, certain of our U.S. patents may be eligible for patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Amendments. The Hatch-Waxman Amendments provide up to five years of patent term extension, or PTE, on a patent that covers an approved product or method of use as compensation for patent term lost during the FDA regulatory review process. Patent term restoration cannot extend the term of a patent beyond a total of 14 years from the product’s approval date. Only one patent with a claim covering an approved drug or method is eligible for the extension, and the extension must be applied for prior to the patent expiration date (which due date may be extended by submission of one or more applications for interim extensions for periods of up to one year each and cannot be extended longer than the maximum period of patent term extension). The USPTO, in consultation with the FDA, reviews and approves a request for patent term extension or restoration and calculates the PTE period that will be awarded. PTE only extends patent coverage on the approved product or method of use.

In certain Member States of the EU, patent term extensions may be obtained through a Supplementary Protection Certificate to recover some of the time lost between the patent application filing date and the date of first regulatory approval, up to a maximum term of five years. Up to five years of patent term extension are also available in Japan for patent term recovery related to the pharmaceutical regulatory review and approval process.

Applicable authorities, including the FDA/USPTO in the United States, and comparable regulatory authorities and intellectual property offices in other EU countries and worldwide, may not agree with our assessment of whether such extensions are available, and may refuse to grant extensions to our patents, or may grant more limited extensions than we request. If this occurs, our competitors may be able to take advantage of our investment in development and clinical trials by referencing our clinical and preclinical data and launch their product earlier than might otherwise be the case.

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Third parties may challenge the inventorship of our patent filings and other intellectual property or may assert ownership or commercial rights to inventions we develop.

Third parties may in the future make claims challenging the inventorship or ownership of our intellectual property. We have written agreements with collaboration partners that provide for the ownership of intellectual property arising from our collaborations. These agreements provide that we or our licensees must negotiate certain commercial rights with collaboration partners with respect to joint inventions or inventions made by our collaboration partners that arise from the results of the collaboration. In addition, our standard employment contracts ensure that any inventions are ours by right and this contractual position is in addition to our rights to any invention by the operation of law where we conduct research and development ourselves.

In some instances, there may not be, or parties may dispute that there are, adequate written provisions to address clearly the resolution of intellectual property rights that may arise from collaboration. If we or our licensees cannot successfully negotiate sufficient ownership and commercial rights to the inventions that result from our use of a third party collaboration partner’s materials where required, or if disputes otherwise arise with respect to the intellectual property developed with the use of a collaboration partner’s samples, we may be limited in our ability to capitalize on the market potential of these inventions. In addition, we may face claims by third parties that our agreements with employees, contractors or consultants obligating them to assign intellectual property to us are ineffective, or in conflict with prior or competing contractual obligations of assignment, which could result in ownership disputes regarding intellectual property we have developed or will develop and interfere with our ability to capture the commercial value of such inventions. Litigation may be necessary to resolve an ownership dispute, and if we are not successful, we may be precluded from using certain intellectual property, or may lose our exclusive rights in that intellectual property. Either outcome could have an adverse impact on our business, financial position, results of operations and future growth prospects.

Governments may grant, and third parties may seek compulsory licenses to our, or our partners, intellectual property or our, or our partners, intellectual property may be forcibly appropriated under government sanctions

Governments may grant third parties’ access to our, or our collaboration partners, via compulsory licenses that enable them to access or use our intellectual property on terms that are not favorable to us which may, in turn, reduce or prevent our ability to receive revenue in territories where the governments take that step. In addition, governments may use their inherent powers to appropriate our intellectual property and either seek to use it themselves or provide it on reduced terms to another party. Such a step would likely mean a total loss of the ability to receive royalties in those territories or may make those territories unattractive or unfeasible for commercial sales for us or for our collaboration partners. In addition to these possibilities if there are sanctions in place against the government of a territory, we or our partners, may not be able to pay for the renewal of our registered intellectual property in those territories and so such patents or patent applications may lapse due to non-renewal. In this event we, or our collaboration partners, may be forced or may choose not to enter that territory and therefore our ability to receive revenue will be reduced or prevented.

Third parties may assert that our employees or consultants or we have wrongfully used or disclosed confidential information or misappropriated trade secrets or claim ownership of what we regard as our own intellectual property.

We employ individuals who were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees and consultants do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants or independent contractors have used or disclosed intellectual property, including trade secrets or other proprietary information, of a former employer or other third parties. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

Obtaining and maintaining patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and applications are required to be paid to the USPTO and various governmental patent agencies outside the United States in several stages over the lifetime of the patents and applications. The USPTO and various non-U.S. governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process and after a patent has issued. There are situations in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction.

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Risks Related to Government Regulation

Government restrictions on pricing and reimbursement, as well as other healthcare payor cost-containment initiatives, may negatively impact our ability to generate revenue.

Sales of certain of our approved products, out-licensed products, and our product candidates, if and when approved for marketing, has and will depend, in part, on the extent to which our products will be covered by third party payors, such as government health care programs like Medicare and Medicaid, commercial insurance and managed healthcare organizations. These third-party payors play an important role in determining the extent to which new drugs, biologics and medical devices will be covered. The Medicare and Medicaid programs increasingly are used as models for how private payors and other governmental payors develop their coverage and reimbursement policies for drugs, biologics and medical devices. It is difficult to predict at this time what third party payors will decide with respect to the coverage and reimbursement for our product candidates. The primary trend in the U.S. healthcare industry and elsewhere has been cost containment, including price controls, restrictions on coverage and reimbursement and requirements for substitution of generic products and/or biosimilars. Adoption of price controls, cost containment measures and adoption of more restrictive policies in jurisdictions with existing controls and measures, could limit our net revenue and results.

Government authorities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for medical products, drugs and services. Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for drugs. We cannot be sure that coverage will be available for our approved products and any product candidate that we commercialize and, if coverage is available, the level of reimbursement. Because coverage and reimbursement determinations are made on a payor-by-payor basis, obtaining coverage and adequate reimbursement from a third-party payor does not guarantee that we will obtain similar coverage or reimbursement from another third-party payor. Reimbursement may impact the demand for, or the price of, our approved products and any other product candidate for which we obtain marketing approval. If reimbursement is not available or is available only to limited levels, we may not be able to successfully commercialize any product candidate for which we obtain marketing approval. Further, coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which we or our collaborators receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future. Decreases in third party reimbursement for our product candidates or a decision by a third-party payor not to cover our products or product candidates or provide only limited reimbursement could reduce physician usage of our products once approved and have a material adverse effect on our sales, results of operations and financial condition. Further, the adoption and implementation of any future governmental cost containment or other health reform initiative may result in additional downward pressure on the price that we may receive for any approved product.

Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe, Canada, and other countries has and will continue to put pressure on the pricing and usage of our product candidates. In many countries, the prices of medical products are subject to varying price control mechanisms as part of national health systems. Other countries allow companies to fix their own prices for medical products but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our approved products. Accordingly, in markets outside the United States, the reimbursement for our products may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenue and profits.

Moreover, increasing efforts by governmental and third-party payors in the United States and abroad to cap or reduce healthcare costs may cause such organizations to limit both coverage and the level of reimbursement for new products approved and, as a result, they may not cover or provide adequate payment for our approved products. We expect to experience pricing pressures in connection with the sale of any of our products due to the trend toward managed healthcare, the increasing influence of health maintenance organizations, and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs, medical devices and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erected to the successful commercialization of new products.

We may face difficulties from changes to current regulations and future legislation.

Existing regulatory policies may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability.

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There have been executive, judicial and Congressional challenges to certain aspects of the Patient Protection and Affordable Care Act, as amended by the Health Care Education Reconciliation Act, or collectively, the ACA. For example, on June 17, 2021 the U.S. Supreme Court dismissed a challenge on procedural grounds that argued the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress. Thus, the ACA will remain in effect in its current form. Further, prior to the U.S. Supreme Court ruling, on January 28, 2021, President Biden issued an executive order that initiated a special enrollment period for purposes of obtaining health insurance coverage through the ACA marketplace, which began on February 15, 2021 and remained open through August 15, 2021. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is possible that the ACA will be subject to judicial or Congressional challenges in the future. It is unclear how any such challenges and the healthcare reform measures of the Biden administration will impact the ACA and our business. In addition, other legislative changes have been proposed and adopted since the ACA was enacted. These changes included aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, effective April 1, 2013, which, due to subsequent legislative amendments, including the Infrastructure Investment and Jobs Act, will stay in effect through 2031 unless additional Congressional action is taken. Further, COVID-19 relief legislation suspending the 2% Medicare sequester from May 1, 2020 through March 31, 2022. Under current legislation, the actual reduction in Medicare payments will vary from 1% in 2022 to up to 3% in the final fiscal year of this sequester. In January 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments to several providers and increased the statute of limitations period for the U.S. government to recover overpayments to providers from three to five years. These laws may result in additional reductions in Medicare and other healthcare funding, which could have a material adverse effect on customers for our out-licensed products and product candidates (if and when approved) and accordingly, our financial results.

Likewise, the annual Medicare Physician Fee Schedule update, which, until recently, was based on a target-setting formula system called the Sustainable Growth Rate, or SGR, was adjusted to reflect the comparison of actual expenditures to target expenditures. Because one of the factors for calculating the SGR was linked to the growth in the U.S. gross domestic product, or GDP, the SGR formula often resulted in a negative payment update when growth in Medicare beneficiaries’ use of services exceeded GDP growth. Congress repeatedly intervened to delay the implementation of negative SGR payment updates. However, the Medicare Access and CHIP Reauthorization Act of 2015, or MACRA, ended the use of the statutory formula and established a quality payment program, also referred to as the Quality Payment Program. The quality payment program has two tracks, one known as the merit-based incentive payment system for providers in the fee-for service Medicare program, and the advanced alternative payment model for providers in specific care models, such as accountable care organizations. In November 2019, the Centers for Medicare & Medicaid Services, or CMS, issued a final rule finalizing the changes to the Quality Payment Program. At this time, it is unclear how the introduction of the Quality Payment Program will impact overall physician reimbursement under the Medicare program.

There have been several recent U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the cost of drugs under Medicare, and reform government program reimbursement methodologies for drugs. At the federal level, the Trump administration used several means to propose or implement drug pricing reform, including through federal budget proposals, executive orders and policy initiatives. For example, on July 24, 2020 and September 13, 2020, President Trump announced several executive orders related to prescription drug pricing that attempt to implement several of the Administration’s proposals. The FDA concurrently released a final rule and guidance in September 2020 implementing a portion of the importation executive order providing pathways for states to build and submit importation plans for drugs from Canada. Further, on November 20, 2020, the U.S. Department of Health and Human Services, or HHS, finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The implementation of the rule has been delayed by the Biden administration from January 1, 2022 to January 1, 2023 in response to ongoing litigation. The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a new safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers, the implementation of which have also been delayed until January 1, 2023. As a result of litigation challenging the Most Favored Nation model, on December 27, 2021, CMS published a final rule that rescinded the Most Favored Nation Model interim final rule. In July 2021, the Biden administration released an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at prescription drugs. In response to Biden’s executive order, on September 9, 2021, HHS released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress could pursue to advance these principles. No legislation or administrative actions have been finalized to implement these principles. In addition, Congress is considering drug pricing as part of other reform initiatives. We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our product candidates or additional pricing pressures.

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We expect more rigorous coverage criteria in the future in the U.S. healthcare market and an additional downward pressure on the prices that we receive for approved products. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our out-licensed products and product candidates.

Our operations involve hazardous materials and we and third parties with whom we contract must comply with environmental and safety laws and regulations, which can be expensive and restrict how we do business.

As a pharmaceutical company, we are subject to environmental and safety laws and regulations, including those governing the use of hazardous materials. The cost of compliance with health and safety regulations is substantial. Our business activities involve the controlled use of hazardous materials. Our R&D activities involve the controlled storage, use and disposal of hazardous materials, including the components of our product candidates and other hazardous compounds. We and manufacturers and suppliers with whom we may contract are subject to laws and regulations governing the use, manufacture, storage, handling and disposal of these hazardous materials. In some cases, these hazardous materials and various wastes resulting from their use are stored at our and our manufacturers’ facilities pending their use and disposal. We cannot eliminate the risk of accidental contamination or injury from these materials, which could cause an interruption of our commercialization efforts, R&D efforts and business operations, environmental damage resulting in costly clean-up and liabilities under applicable laws and regulations governing the use, storage, handling and disposal of these materials and specified waste products. We cannot guarantee that that the safety procedures utilized by third party manufacturers and suppliers with whom we may contract will comply with the standards prescribed by laws and regulations or will eliminate the risk of accidental contamination or injury from these materials. In such an event, we may be held liable for any resulting damages and such liability could exceed our resources and European, U.S. federal and state or other applicable authorities may curtail our use of certain materials and/or interrupt our business operations. Furthermore, environmental laws and regulations are complex, change frequently and have tended to become more stringent. We cannot predict the impact of such changes and cannot be certain of our future compliance. We do not currently carry biological or hazardous waste insurance coverage. In the event of an accident or environmental discharge, we may be held liable for any consequential damage and any resulting claims for damages, which may exceed our financial resources and may materially adversely affect our business, results of operations and prospects, and the value of our shares.

We are subject to healthcare laws and regulations, which may require substantial compliance efforts and could expose us to criminal sanctions, civil penalties, exclusion from government healthcare programs, contractual damages, reputational harm and diminished profits and future earnings, among other penalties.

Our current and future operations may directly, or indirectly through our prescribers, customers and purchasers, expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we research, market, sell and distribute our products. Restrictions under applicable U.S. federal, state, local and non-U.S. healthcare laws and regulations include, but are not limited to, the following:

·

the federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, offering, receiving or providing remuneration, including any kickback, bribe or rebate, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase or lease, order or recommendation of, any item, good, facility or service, for which payment may be made under federal healthcare programs such as Medicare and Medicaid;

·

the federal Beneficiary Inducement Statute, which prohibits giving anything of value to a government insurance beneficiary that could influence the choice of provider or reimbursable covered product;

·

federal civil and criminal false claims laws, including the civil False Claims Act, and the Civil Monetary Penalties Law, which impose criminal and civil penalties, including those from civil whistleblower or qui tam actions, against individuals or entities for, among other things, knowingly presenting, or causing to be presented, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;

·

the anti-inducement law prohibits, among other things, the offering or giving of remuneration, which includes, without limitation, any transfer of items or services for free or for less than fair market value (with limited exceptions), to a Medicare or Medicaid beneficiary that the person knows or should know is likely to influence the beneficiary’s selection of a particular supplier of items or services reimbursable by a federal or state governmental program;

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·

the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created additional federal criminal statutes that impose criminal and civil liability for, among other things, executing or attempting to execute a scheme to defraud any healthcare benefit program or knowingly and willingly falsifying, concealing or covering up a material fact or making false statements relating to healthcare matters;

·

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, which impose certain requirements on covered entities and their business associates and subcontractors, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;

·

the federal transparency requirements under the Physician Payments Sunshine Act, enacted as part of the Patient Protection and ACA that require applicable manufacturers of covered drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program, with specific exceptions, to track and annually report to the Centers for Medicare & Medicaid Services, or CMS, payments and other transfers of value provided to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), other healthcare professionals (such as physician assistants and nurse practitioners), and teaching hospitals, and certain ownership and investment interests held by physicians or their immediate family members;

·

analogous state, local and non-U.S. laws and regulations, such as state anti-kickback and false claims laws, which may apply to items or services reimbursed by any third party payor, including commercial insurers; state, local and non-U.S. marketing and/or transparency laws applicable to manufacturers that may be broader in scope than the federal requirements; state laws that require biopharmaceutical companies to comply with the biopharmaceutical industry’s voluntary compliance guidelines, relevant compliance guidance promulgated by the federal government, implementation of compliance programs, and compliance with the state’s code of conduct; state and local laws that require a pharmaceutical company’s sales representatives to be registered or licensed by the state or local governmental entity; and state and non-U.S. laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may be more stringent than HIPAA, thus complicating compliance efforts; and

·

rules or legislation covering more or less the same subject matter are found in numerous other countries, including in Denmark, which sometimes result in lower or higher exposures in those countries than in the United States.

Ensuring that our business arrangements with third parties comply with applicable healthcare laws and regulations will likely be costly. It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations were found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, possible exclusion from government funded healthcare programs, such as Medicare and Medicaid, integrity obligations, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which could substantially disrupt our operations. If the physicians or other providers or entities with whom we expect to do business are found not to be in compliance with applicable laws, they may be subject to significant criminal, civil or administrative sanctions, including exclusion from government funded healthcare programs.

The risk of us being found in violation of these laws is increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations. For example, the definition of the “remuneration” under the federal Anti-Kickback Statute has been interpreted to include anything of value. Further, courts have found that if “one purpose” of remuneration is to induce referrals, the federal Anti-Kickback Statute is violated.

Additionally, recent healthcare reform legislation has strengthened federal and state healthcare fraud and abuse laws. For example, the ACA amends the intent requirement of the federal Anti-Kickback Statute and criminal healthcare fraud statutes to clarify that liability under these statutes does not require a person or entity to have actual knowledge of the statutes or a specific intent to violate them. Moreover, the ACA provides that the government may assert that a claim that includes items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act. Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws.

Our employees and collaboration partners may engage in misconduct or other improper activities, including violating applicable regulatory standards and requirements or engaging in insider trading, which could significantly harm our business.

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We are exposed to the risk of employee fraud or other misconduct and the fraud and misconduct of our collaboration partners. Misconduct by our employees or our collaboration partners could include intentional failures to:

comply with legal requirements or the requirements of the FDA, the EMA, the CMS and other comparable regulatory authorities;
provide accurate information to applicable government authorities;
comply with fraud and abuse and other healthcare laws and regulations in the United States, or similar laws in Denmark and elsewhere;
comply with the FCPA and other applicable anti-bribery laws;
report financial information or data accurately; or
disclose unauthorized activities to us.

In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing, bribery and other abusive practices. These laws and regulations restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee or collaboration partner misconduct could also involve the improper use of, including trading on, information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. We have adopted a code of conduct, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may be ineffective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we or such collaboration are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions. Further, if any actions are instituted against any of our collaboration partners and such partner fails to defend itself or assert its rights and as a result, is subjected to criminal, civil or administrative sanctions, including exclusion from government funded healthcare programs, such actions and outcomes could have a significant impact on our business.

The United Kingdom’s withdrawal from the EU could result in increased regulatory and legal complexity, which may make it more difficult for us to do business in the United Kingdom  and the rest of Europe and impose additional challenges in securing regulatory approval of our product candidates in the United Kingdom and the rest of Europe.

The United Kingdom is a major market for pharmaceutical products. Following the result of a referendum in 2016, the United Kingdom left the EU on January 31, 2020, commonly referred to as “Brexit”. Pursuant to the formal withdrawal arrangements agreed between the United Kingdom and the EU, the United Kingdom was subject to a transition period until December 31, 2020, or the Transition Period, during which EU rules continued to apply. Negotiations between the United Kingdom and the EU resulted in a bi-lateral treaty referred to as the Agreement on the withdrawal of the United Kingdom of Great Briton and Northern Island from the European Union and the European Atomic Energy Community was signed on 24 January 2020 referred to as the “Brexit Withdrawal Agreement”. The effect of Brexit on trade between the EU and the United Kingdom may be not known for some time and may continue to create uncertainty. Further, there may continue to be considerable uncertainty resulting from a lack of precedent and the complexity of the United Kingdom and EU’s intertwined legal regimes as to how Brexit  will impact the life sciences industry in Europe, including our company and our ongoing or future clinical trials. Given these unprecedented changes and others we may not anticipate, as well as the absence of comparable precedent, it is unclear what business, financial, regulatory, and legal implications Brexit will have and how such withdrawal will affect us, and the full extent to which our business could be adversely affected.

In addition, as a result of Brexit, the EMA, formerly situated in London, relocated to Amsterdam. As a result of this change and the withdrawal of United Kingdom representation from the EMA, there may be delays and uncertainty in the regulatory approval process which could create delays in the EMA issuing regulatory approvals for our product candidates and, accordingly, have a material adverse effect on our business, financial condition, results of operations or prospects.

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We 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.

If we are a passive foreign investment company, there could be adverse U.S. federal income tax consequences to U.S. Holders.

Under the Internal Revenue Code of 1986, as amended, or the Code, we will be a passive foreign investment company, or PFIC, for any taxable year in which (1) 75% or more of our gross income consists of passive income or (2) 50% or more of the average quarterly value of our assets consists of assets that produce, or are held for the production of, passive income, including cash. For purposes of these tests, passive income includes dividends, interest, gains from the sale or exchange of investment property and certain rents and royalties. In addition, for purposes of the above calculations, a non-U.S. corporation that directly or indirectly owns at least 25% by value of the shares of another corporation is treated as if it held its proportionate share of the assets and received directly its proportionate share of the income of such other corporation. If we are a PFIC for any taxable year during which a U.S. Holder (as defined in Item 10.E. “Taxation — Material U.S. Federal Income Tax Considerations for U.S. Holders”) holds the ADSs, the U.S. Holder may be subject to adverse tax consequences regardless of whether we continue to qualify as a PFIC, including ineligibility for any preferred tax rates on capital gains or on actual or deemed dividends, interest charges on certain taxes treated as deferred, and additional reporting requirements.

Based on our analysis of our income, assets, activities and market capitalization, we do not believe we were a PFIC for our taxable year ended December 31, 2021. We have not yet made any determination as to our expected PFIC status for the current year and, accordingly, any such expectation would be subject to change based on, among other factors, our use of cash, the source and nature of our income, and the price of our ordinary shares or ADSs. No assurances regarding our PFIC status can be provided for any past, current or future taxable years. The determination of whether we are a PFIC is a fact-intensive determination made on an annual basis and the applicable law is subject to varying interpretation. In particular, the characterization of our assets as active or passive may depend in part on our current and intended future business plans, which are subject to change. In addition, for our current and future taxable years, the total value of our assets for PFIC testing purposes may be determined in part by reference to the market price of our ordinary shares or ADSs from time to time, which may fluctuate considerably. Under the income test, our status as a PFIC depends on the composition of our income which will depend on the transactions we enter into in the future and our corporate structure. The composition of our income and assets is also affected by how, and how quickly, we spend the cash we raise in any offering. Our U.S. counsel expresses no opinion with respect to our PFIC status for our taxable year ended December 31, 2021, and also expresses no opinion with regard to our expectations regarding our PFIC status in the future.

If we are a PFIC, U.S. Holders (as defined in Item 10.E. “Taxation — Material U.S. Federal Income Tax Considerations for U.S. Holders) of the ADSs would be subject to adverse U.S. federal income tax consequences, such as ineligibility for any preferred tax rates on capital gains or on actual or deemed dividends, interest charges on certain taxes treated as deferred, and additional reporting requirements under U.S. federal income tax laws and regulations. For further discussion of the PFIC rules and the adverse U.S. federal income tax consequences in the event we are classified as a PFIC, see Item 10.E. “Taxation — Material U.S. Federal Income Tax Considerations for U.S. Holders.”

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If a United States person is treated as owning at least 10% of our ordinary shares, including ordinary shares represented by ADSs, such holder may be subject to adverse U.S. federal income tax consequences.

If a U.S. Holder is treated as owning (directly, indirectly or constructively through the application of attribution rules) at least 10% of the value or voting power of our ordinary shares, including ordinary shares represented by ADSs, such U.S. Holder may be treated as a “United States shareholder” with respect to each “controlled foreign corporation” in our group (if any). Because our group includes at least one U.S. subsidiary (Zealand Pharma U.S., Inc.), certain of our non-U.S. subsidiaries may be treated as controlled foreign corporations (regardless of whether Zealand Pharma A/S is treated as a controlled foreign corporation). A United States shareholder of a controlled foreign corporation may be required to annually report and include in its U.S. taxable income its pro rata share of “Subpart F income,” “global intangible low-taxed income” and investments in U.S. property by controlled foreign corporations, regardless of whether we make any distributions. An individual that is a United States shareholder with respect to a controlled foreign corporation generally would not be allowed certain tax deductions or foreign tax credits that would be allowed to a United States shareholder that is a U.S. corporation. We cannot provide any assurances that we will assist investors in determining whether any of our non-U.S. subsidiaries, if any, are treated as a controlled foreign corporation or whether such investor is treated as a United States shareholder with respect to any of such controlled foreign corporations. Further, we cannot provide any assurances that we will furnish to any U.S. shareholder information that may be necessary to comply with the reporting and tax paying obligations discussed above. Failure to comply with these reporting obligations may subject you to significant monetary penalties and may prevent the statute of limitations with respect to your U.S. federal income tax return for the year for which reporting was due from starting. U.S. Holders should consult their tax advisors regarding the potential application of these rules to their investment in the ADSs.

Tax authorities may disagree with our positions and conclusions regarding certain tax positions, resulting in unanticipated costs, taxes or non-realization of expected benefits.

A tax authority may disagree with tax positions that we have taken, which could result in increased tax liabilities. For example, the U.S. Internal Revenue Service or another tax authority could challenge our allocation of income by tax jurisdiction and the amounts paid between our affiliated companies pursuant to our intercompany arrangements, our treatment of the Oberland Capital LLC agreement, the relief’s that we claim or transfer pricing policies that we have, including amounts paid with respect to our intellectual property development. Similarly, a tax authority could assert that we are subject to tax in a jurisdiction where we believe we have not established a taxable connection, often referred to as a “permanent establishment” under international tax treaties, and such an assertion, if successful, could increase our expected tax liability in one or more jurisdictions. A tax authority may take the position that material income tax liabilities, interest and penalties are payable by us, in which case, we expect that we might contest such assessment. Contesting such an assessment may be lengthy and costly and if we were unsuccessful in disputing the assessment, the implications could increase our anticipated effective tax rate, where applicable.

Changes in Danish, U.S. or other foreign tax laws or compliance requirements, or the practical interpretation and administration thereof, could have a material adverse effect on our business, financial condition and results of operations.

We are affected by various Danish, U.S. and foreign taxes, including direct and indirect taxes imposed on our global activities, such as corporate income, withholding, customs, excise/energy, value added, sales, environmental and other taxes. Significant judgment is required in determining our provisions for taxes and there are many transactions and calculations where the ultimate tax determination is uncertain.

In recent years, tax authorities around the world have increased their scrutiny of company tax filings, and have become more rigid in exercising any discretion they may have. As part of this, the Organization for Economic Co-operation and Development, or OECD, has proposed a number of tax law changes under its Base Erosion and Profit Shifting, Action Plans to address issues of transparency, coherence and substance.

At the same time, the European Commission is finalizing its Anti-Tax Avoidance Directive, which seeks to prevent tax avoidance by companies and to ensure that companies pay appropriate taxes in the markets where profits are effectively made and business is effectively performed. The European Commission also continues to extend the application of its policies seeking to limit fiscal aid by Member States to particular companies, and the related investigation of the Member States’ practices regarding the issuance of rulings on tax matters relating to individual companies.

These OECD and EU tax reform initiatives also need local country implementation, including in our home country of Denmark, which may result in significant changes to established tax principles. Although we have taken steps to be in compliance with the evolving OECD and EU tax initiatives, and will continue to do so, significant uncertainties remain as to the outcome of these efforts.

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In general, such tax reform efforts, including with respect to tax base or rate, transfer pricing, intercompany dividends, cross border transactions, controlled corporations, and limitations on tax relief allowed on the interest on intercompany debt, will require us to continually assess our organizational structure against tax policy trends, and could lead to an increased risk of international tax disputes and an increase in our effective tax rate, and could adversely affect our financial results.

Changes in Danish or foreign direct or indirect tax laws or compliance requirements, including the practical interpretation and administration thereof, including in respect to market practices, or otherwise, could have a material adverse effect on our business, financial position, results of operations and future growth prospects.

ITEM 4 INFORMATION ON THE COMPANY

A.HISTORY AND DEVELOPMENT OF THE COMPANY

We were founded in 1998 in Denmark as a Danish limited liability company. We are a biotechnology company focused on the discovery, design and development of innovative peptide-based medicines. We intend to be a leader in specialty medicines for metabolic and gastrointestinal diseases and other specialty disease areas with significant unmet medical needs.

Our current pipeline of internally developed product candidates is concentrated on potential treatments for specialty gastrointestinal and metabolic diseases where we believe that the present standard of care is inadequate. In addition, we are looking to focus our efforts on drug candidates that may qualify for orphan/rare disease status.

Our shares are listed on Nasdaq Copenhagen (ZEAL). Our American Depositary Shares (ADS) are listed on the Nasdaq Global Select Market in the United States (ZEAL).

Legal name:

    

Zealand Pharma A/S

Commercial name:

Zealand Pharma

Domicile:

Sydmarken 11 2860 Søborg (Copenhagen), Denmark

Tel:

+45 8877 3600

Fax:

+45 8877 3898

Website:

zealandpharma.com

The SEC maintains an Internet site at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Our website address is www.zealandpharma.com.

(The contents of this website are not incorporated by reference into this Annual Report on Form 20-F.)

Date of incorporation:

    

December 22, 1998

Legal form of the Company:

A Danish limited liability company

Legislation under which the Company operates:

Danish law

Country of incorporation:

Denmark

Important events

Sanofi License Agreement and Royalty Pharma Agreement

Since 2003 we have had a license collaboration with Sanofi, or the Sanofi License Agreement, in the diabetes field pertaining to the development and commercialization of lixisenatide, both as a standalone therapy and as a combination therapy. Pursuant to the Sanofi License Agreement, we were entitled to receive certain royalties and commercial milestones in respect of global net-sales of Soliqua 100/33/ Suliqua and Lyxumia/Adlyxin. In September 2018 we, together with two of our wholly-owned subsidiaries, entered into a purchase and sale agreement with Royalty Pharma, or the Royalty Pharma Agreement, pursuant to which we sold and transferred our and our subsidiaries’ respective rights to receive royalties and $85.0 million of potential commercial milestones in respect of global net sales of Soliqua 100/33/ Suliqua and Lyxumia/Adlyxin from and after July 1, 2018. In September 2018 we received DKK 1,310.2 million, or $205.0 million, upon closing of the transactions contemplated by the Royalty Pharma Agreement. The net gain from the

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transaction amounted to DKK 1,098.9 million, or $170.6 million. As part of the Royalty Pharma Agreement, we and our subsidiaries remained eligible to receive payments from Sanofi of up to $15.0 million in milestone payments related to sales of lixisenatide. The first of these payments, in an amount of $5.0 million, was received in the second quarter of 2021, and the second of these payments, in an amount of up to $10.0 million, may become due in June 2022. However, we cannot be certain with regards to the timing and final amount of this payment, as both are dependent on factors that are outside of our control.

Under the terms of the Royalty Pharma Agreement, we remain required to perform certain of our obligations under the Sanofi License Agreement and to perform certain administrative obligations under the Royalty Pharma Agreement, which include that retain the underlying intellectual property and pay the relevant renewals thereon in a timely manner. A failure by us to comply with the terms of the Royalty Pharma Agreement or the Sanofi License Agreement may place us in breach of our contractual obligations with either party, expose us to liability for indemnification of either party and/or may result in arbitration and/or litigation against us that may lead, in the event of an adverse finding against us, to an award of significant damages, loss of profits and/or award of attorney fees against us.

Boehringer Ingelheim Agreements

On June 15, 2011, we signed a collaboration agreement Boehringer Ingelheim GmbH with respect to a research and collaboration for the development of GLP-1/glucagon dual agonists, or the GDDA Agreement. In June 2021, the FDA granted Fast Track Designation to the GLP-1/glucagon dual agonist BI 456906 that is a product candidate in development under this program for the treatment of non-alcoholic steatohepatitis, or NASH, in adults. This agreement could result in milestone payments of Euro 365.0 million and royalties on global sales of any product that is authorized from this collaboration. The royalties are structured according to the commercial success of the product, and the agreed royalty rates, depending on sales, are between 1% and 15% of net sales.

On July 28, 2012, we signed a collaboration agreement with Boehringer Ingelheim GmbH with respect to a research and collaboration for the development of islet amyloid polypeptide analogues, or the IAPP Agreement. This agreement was terminated by mutual agreement between the parties on February 1, 2021 and all the assets under this agreement have been returned to us. We are currently developing one of the assets that was subject to the IAPP Agreement. Alexion Collaboration

On March 20, 2019, we announced a collaboration with Alexion to discover and develop novel peptide therapies for complement-mediated diseases. The collaboration agreement provides Alexion with exclusive worldwide licenses for one preclinical target, with an option for up to three additional targets, in the complement pathway. We received an upfront payment of $25.0 million and an equity investment of $15.0 million (pursuant to Alexion’s subscription for 802,859 of our ordinary shares), with potential for additional milestone-dependent and royalty payments.

For the lead target, the agreement provides the potential for development-related milestones of up to $115.0 million, as well as up to $495.0 million in sales-related milestones and the potential for royalties of between 5% and 20% that are dependent on certain annual sales levels being reached. Each of the three subsequent targets can be selected for an option fee of $15.0 million and has the potential for additional development-related milestones and sales-related milestones and royalty payments at a reduced price to the lead target.

Pursuant to the collaboration agreement, we placed the relevant intellectual property to be developed under the collaboration in our wholly owned subsidiary, ZP SPV 3 K/S, and pledged our shares in that subsidiary and an intermediate wholly owned subsidiary to Alexion Pharma International Operation Unlimited Company, or Alexion Pharma. Alexion Pharma is required to consent to any transfer of our shares in these subsidiaries and Alexion Pharma also has a right to acquire such shares under certain conditions.

Encycle Acquisition

On October 22, 2019, we announced the acquisition of Encycle Therapeutics, Inc., or Encycle. The acquisition is centered on a pre-clinical lead asset that complements Zealand’s focus on developing next-generation peptide therapeutics for gastrointestinal diseases. We are no longer actively pursuing any product candidates acquired in this transaction and this subsidiary was closed in December 2021.

Valeritas Acquisition

On April 2, 2020, we acquired substantially all of the assets of Valeritas Holdings, Inc. (Nasdaq: VLRX), or Valeritas, for a total cash consideration of $23 million and the assumption of certain liabilities related to the ongoing business (including up to approximately $13.3 million related to open purchase orders, license payments and cure costs relating to prepetition contracts that will

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be assumed by Valeritas under the U.S. Bankruptcy Code upon exiting Chapter 11 proceedings), pursuant to the terms of the “stalking horse” asset purchase agreement entered into with Valeritas.

The Valeritas assets included all medical technology business related tangible and intangible assets, including but not limited to the V-Go wearable insulin delivery device and a US-based dedicated sales force and research and development infrastructure in Massachusetts.

Deka Research, Development and Supply Agreements for the Deka pump

On 5 November 2021 we entered into a research & development agreement with DEKA Research & Development Corp. and DEKA Products Limited Partnership (“DEKA”) for the development of a pump that can be used with dasiglucagon for the treatment of CHI (Congenital Hyperinsulisum) in pediatric patients. The DEKA pump will be adapted so that dasiglucagon can be administered to pediatric patients for the treatment of CHI. The consideration for the development of the pump is set out in the research and development agreement and is based on a formula that is composed of reimbursement of material costs and a time cost element for labor and overheads incurred by DEKA during development. Together with this agreement we entered into a parallel agreement with an affiliate of DEKA, Millyard Advanced Medical Products LLC, on the same date for the production and supply of the pump developed under the research agreement with DEKA. Under the terms of these agreements, Zealand will reimburse manufacturing costs to supply pumps for commercial sale and will pay single-digit royalties on net product sales of the pump and net sales of dasiglucagon for use with the system.

Oberland Capital LLC Note Purchase Agreement

December 14, 2021, we entered into a Note Purchase Agreement with Zoolander SA LLC as agent for Oberland Capital LLC, or the Note Purchase Agreement, pursuant to which we obtained a $200 million debt facility, the proceeds of which are expected to be used for working capital and general corporate purposes. The arrangement with Oberland Capital LLC, or Oberland Capital, provided for an upfront payment of $100 million in exchange for a seven-year interest-only secured note. We are eligible receive an additional $50 million prior to December 31, 2023, if we receive FDA marketing authorization of glepaglutide for the treatment of short bowel syndrome and subject to certain other conditions. We can also request an additional $50 million to acquire products or companies, which funds will be available at Oberland Capital’s discretion on terms to be agreed. 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 single digit royalty that is between 1 and 5% of net sales as defined in the agreement for a period of time beginning on January 1, 2023 and ending on the maturity date, which percentage is subject to increase in the event we purchase additional secured notes under the facility. As collateral for the secured note, we granted Oberland Capital a floating charge collateral with all assets which can be collateralized including, where appropriate, shares in subsidiaries including certain intellectual property that we own.

We are subject to affirmative operating covenants under the Note Purchase Agreement, including requirements that we (i) maintain cash balances in the amount of at least $100 million until we meet certain revenue targets, or the liquidity covenant, (ii) maintain our properties and insurance, (iii) timely file all tax returns and (iv) provide certain detailed information to Oberland Capital. The Note Purchase Agreement governing the secured note further restricts our ability to, among other things, (i) sell assets or dispose of certain material assets, (ii) merge, consolidate or sell all or substantially all assets, (iii) incur indebtedness other than certain forms of permitted debt, (iv) pay dividends or make other payments or distributions on share capital, other than certain permitted distributions or (v) enter into certain transactions with affiliates. Events of default under the Note Purchase Agreement include, among others, the failure to make payments of principal or interest when due and a breach of certain representations, warranties, and operating covenants, including the liquidity covenant. If we default under the Note Purchase Agreement, Oberland Capital may accelerate all of our repayment obligations. If we are unable to access funds to meet our obligations under the Note Purchase Agreement or to renegotiate the debt facility, Oberland Capital could take control of and may sell our pledged assets.

Reference is also made to ‘Note 25 – Borrowings on pages 84-85 in our Annual Report 2021.

Capital expenditure

Capital expenditures primarily relate to building improvements and purchase of lab equipment at our headquarters in Søborg, Denmark. All capital expenditures are expected to be financed internally through cash on hand.

Reference is also made to “Consolidated statements of cash flow” on page 50 in our Annual Report 2021.

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Public takeover offers in respect of the Company’s shares

No such offers occurred during 2021 or 2022 to date.

B.BUSINESS OVERVIEW

We are a biotechnology company focused on the discovery, design and development of innovative peptide-based medicines. Our current pipeline of internally developed product candidates is concentrated on specialty gastrointestinal and metabolic diseases where we believe that the present standard of care is inadequate. In addition, we are looking to focus our efforts on drug candidates that may qualify for orphan/rare disease status. We have the following programs in late clinical development:

ZEGALOGUE (dasiglucagon) single use syringe or autoinjector for severe hypoglycemia. ZEGALOGUE (dasiglucagon) injection was approved by the U.S. FDA on March 22, 2021 for the treatment of severe hypoglycemia in people with diabetes aged 6 and over. Severe hypoglycemia is an acute, life-threatening condition resulting from a critical drop in blood glucose levels associated primarily with insulin therapy. People require assistance from another person to treat severe hypoglycemia, but studies have suggested that up to 85% of trained caregivers fail to give the full dose of glucagon when using currently marketed glucagon kits in a simulated emergency situation, due to complexity of use. ZEGALOGUE (dasiglucagon) single use syringe or autoinjector offers diabetes patients and their families a fast treatment solution for severe hypoglycemia that is easier to use than currently marketed glucagon kits and offer a different mode of administration than the recently approved nasally administered glucagon powder Baqsimi. ZEGALOGUE (dasiglucagon) is the first and only glucagon analogue for the treatment of severe hypoglycemia in patients with diabetes aged six and above.
V-Go wearable insulin delivery device. All people with type 1 diabetes and most people with severely affected type 2 diabetes must constantly monitor and adjust their blood glucose levels to remain in proper glycemic control, as both high and low blood glucose may affect their health, both in the short and long term. The V-Go is a simple, affordable, all-in-one basal-bolus insulin delivery device option for adult patients requiring insulin that is worn like a patch and can eliminate the need for taking multiple daily shots.

We have the following programs in late clinical development:

Glepaglutide, a long-acting GLP-2 analog in development for the treatment of short bowel syndrome, or SBS. Orphan drug designation has been granted in the U.S. We have published the results of a Phase 2 trial where glepaglutide was dosed for three weeks in 18 patients with SBS. The trial demonstrates significant positive effects on gastrointestinal absorption and other efficacy parameters with the two highest doses, whilst the lowest dose was non-effective. Based on the findings of this trial, the pivotal Phase 3 trial in 129 SBS patients was initiated in the fourth quarter of 2018 and patient enrollment was completed in 2021. Full results from the trial are expected in the third quarter of 2022. This study will evaluate the ability to reduce patient dependency on parenteral (intravenous) support when treated with glepaglutide over 26 weeks. We believe glepaglutide may have the potential to offer patients with SBS a convenient once-weekly treatment alternative.
Dasiglucagon dual-hormone artificial pancreas for automated diabetes management. In a non-exclusive collaboration with Beta Bionics, we are developing dasiglucagon for use in an artificial pancreas device containing both insulin and dasiglucagon. Breakthrough Device designation was received from the FDA in December 2019. Guided by an algorithm, this device is designed to maintain and control blood glucose levels with minimal patient intervention. We have already reported positive results from two Phase 2a trials during the second quarter of 2017, and top-line results from a small home-use Phase 2 trial in iLet™ gen 3.2 dual-hormone artificial pancreas system were announced in June 2019. Beta Bionics has begun test run screening for the iLet bihormonal pivotal Phase 3 trial, utilizing dasiglucagon and insulin, and is on track to commence a Phase 3 trial of patients by the end of 2022. Approximately 350 adults and 350 children with type 1 diabetes will be randomized into the Phase 3 trial. The primary outcome measure is superiority on HbA1c of the bihormonal iLet configuration using dasiglucagon over the insulin only iLet configuration at week 26. Overall, the program has been designed to demonstrate the clinical outcome of utilizing dasiglucagon in the bihormonal iLet versus an insulin-only iLet, while also comparing these results to intensified usual care.
Dasiglucagon for congenital hyperinsulinism. Congenital hyperinsulinism, or CHI, is an ultra-rare but devastating disease caused by inappropriately elevated insulin secretion irrespective of glucose levels. This leads to frequent and often severe hypoglycemia and long-term irreversible damage to health. In 2017, the FDA and the European

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Commission both granted orphan drug designation to dasiglucagon for the treatment of CHI. In early 2019, we initiated our first Phase 3 trial of dasiglucagon for the treatment of CHI in 32 pediatric patients (ages three months to 12 years). In December 2020, we reported the study results, which were that dasiglucagon on top of standard-of-care did not meet its primary endpoint of reducing the incidence of hypoglycemia compared with standard of care, or SOC. However, dasiglucagon treatment resulted in 40-50% reductions in all measures of hypoglycemia assessed by blinded continuous glucose monitoring (including number of events and time in hypoglycemia) compared to SOC treatment alone (all post-hoc p<0.05). These findings were seen both for hypoglycemia defined as glucose <70 mg/dL and glucose <54 mg/dL. Treatment with dasiglucagon was associated with higher rates of gastrointestinal symptoms and skin changes. Overall, dasiglucagon was assessed to be safe and well tolerated in the study. In May 2019, we enrolled all but one of the 32 children in a long-term Phase 3 extension study, from which we announced data in December 2020. This trial evaluated children from 3 months to 12 years old with more than three hypoglycemic events per week despite previous near-total pancreatectomy and/or maximum medical therapy. Dasiglucagon on top of standard of care (SOC) did not significantly reduce the rate of hypoglycemia compared to SOC alone when assessed by the primary endpoint, intermittent self-measured plasma glucose. However, hypoglycemia was reduced by 40–50% with dasiglucagon as compared to SOC alone when assessed by blinded continuous glucose monitoring. Dasiglucagon treatment was assessed to be well tolerated in the study and 31 out of 32 patients continued into the long-term extension study. In December 2019, we initiated a second Phase 3 trial with 12 pediatric patients (ages seven days to one year) with CHI. Results from this trial are expected in the first half of 2022 . We also signed a collaboration agreement with DEKA Research & Development Corp. to develop a continuous infusion pump to be used in combination with dasiglucagon for the treatment of CHI.
Dasiglucagon for post bariatric surgery hypoglycemia. In March 2020, we reported positive topline results from our Phase 2 dose-finding clinical proof-of-concept trial that explore the potential benefits of mini-doses of dasiglucagon in correcting serious hypoglycemic events following meal ingestions in some patients who have undergone bariatric surgery. Subjects were randomly assigned to be treated with two different subcutaneous administered doses of dasiglucagon (80 μg and 200 μg) and placebo (saline injection) after the meal. Results of the trial demonstrate that both dasiglucagon doses significantly reduced meal-induced hypoglycemia compared to placebo.

Our other internally developed product candidate programs include:

Dapiglutide (INN). This product candidate is a long-acting GLP-1R/GLP-2R dual agonist. The Phase 1a single-ascending dose, safety and tolerability trial investigating dapiglutide in healthy volunteers was completed in the third quarter of 2020 and dapiglutide was found to have an acceptable safety and tolerability profile. Results showed a plasma half-life allowing for once weekly dosing. Based on the results of the Phase 1a trial, Zealand initiated a Phase 1b (multiple ascending dose) safety and tolerability trial. In November 2021, Zealand announced that dapiglutide was assessed to be safe and well tolerated in the study. Dapiglutide displayed a linear dose-response for the pharmacokinetics parameters with a half-life of approximately 120 hours giving the possibility for once weekly dosing. For pharmacodynamics, a dose-response relationship was found for several biomarkers suggesting that clinically relevant exposures of dapiglutide were achieved in the study. Zealand will be exploring several potential indications in gastrointestinal and metabolic diseases where dapiglutide’s profile could provide new treatment options including Short Bowel Syndrome.
ZP 7570. This product candidate is a potential once-weekly GLP-1-/GLP-2 agonist for treatment of SBS in Phase 2 development.
ZP 6590 GIP Agonist. This program is in preclinical development as a potential treatment for obesity.
ZP 8396 Amylin Analog. This product candidate is being developed as a potential once-weekly treatment for obesity and type 2 diabetes. We have initiated patient dosing in a Phase 1 clinical trial with ZP8396 for potential treatment of obesity. The Phase 1, first-in-human, randomized, single ascending dose trial will assess the safety, tolerability, pharmacokinetics, and pharmacodynamics of ZP8396 administered to healthy subjects. Preclinical data on ZP8396 was presented at The Obesity Society Annual Meeting, which showed anti-obesity effects of ZP8396 in in vivo models, with up to 20% weight loss when combined with GLP1 analogue semaglutide.
Additional Pre-clinical programs. We are also working on several additional preclinical programs that include an ion channel blocker and an α4β7 integrin inhibitor that may enter the clinic in the years to come.

We are engaged in joint development efforts under the following programs:

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Boehringer Ingelheim. We have a clinical license collaboration with Boehringer Ingelheim targeting treatments for type 2 diabetes, obesity, and NASH. In June 2021, the FDA granted Fast Track Designation to the GLP-1/glucagon dual agonist BI 456906 in development under this program for the treatment of NASH in adults. The GLP-1/glucagon dual agonist activates two key gut hormone receptors simultaneously and may offer better blood sugar and weight-loss control than current single-hormone receptor agonist treatments. At Obesity Week in November 2021, Boehringer Ingelheim presented 16-week body weight data from the BI 456906 Phase 1b trial. Three parallel Phase 2 trials are ongoing. All subjects have been randomized in the first phase 2 trial which evaluates the dose-relationship of BI 456906 on HbA1c from baseline to 16 weeks relative to placebo in 410 people with diabetes. Secondary objectives are to assess the effect on change in body weight and an open-label comparator (semaglutide) will allow for comparison of the effects against a pure GLP-1R agonist. The second Phase 2 randomized double-blind placebo-controlled dose-finding trial will evaluate BI 456906 in people with obesity or who are overweight with a BMI 27 kg/m2 or higher without diabetes. Participants will receive a subcutaneous injection of either BI 456906 or placebo once a week for the duration of the trial. The primary endpoint of this trial is the percentage change in body weight at week 46 compared to placebo. The third Phase 2 randomized double-blind placebo-controlled dose-finding trial will evaluate BI 456906 in people with NASH and liver fibrosis (F2/F3) with and without diabetes. The primary endpoint of this trial is the histological improvement of steatohepatitis without worsening of fibrosis after 48 weeks of treatment. Participants will receive a weekly subcutaneous injection of either different doses of BI 456906 or placebo for the duration of the trial. Boehringer Ingelheim is funding all research, development and commercialization activities related to the treatment. Zealand Pharma is eligible to receive up to EUR 345 million in outstanding milestone payments, and high-single to low-double digit royalties on global sales.
Alexion. We have a pre-clinical license collaboration with Alexion that targets Complement C3, which has the potential to treat a broad range of complement mediated diseases. The complement system is part of the immune system that protects the body against, among other things, infection. This system can become dysregulated, which leads to certain auto-immune diseases. We and Alexion are pursuing certain peptide-based therapeutic candidates that may be able to treat some of these diseases. Zealand Pharma will lead the joint discovery and research efforts through the preclinical stage, and Alexion will lead development efforts beginning with IND filing and Phase 1 trials. We are looking to initiate a Phase 1 trial of the C3 inhibitor in 2022. For this lead target, Zealand Pharma is eligible to receive up to USD 610 million in development and sales milestone payments, plus royalties on global sales in the high single to low double digits. In addition, Alexion has the option to select up to three additional targets with Zealand Pharma eligible for USD 15 million upfront per target plus development/regulatory milestones for each target selected similar to the lead target with slightly reduced commercial milestones and royalties.

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Our Product Pipeline

We operate within the global market for peptide-based medicines. All revenues are generated from milestones, royalty payments related to our license agreements and revenue from V-Go and Zegalogue that is on the market in the US. See Note 3 ‘Revenue’ to the consolidated financial statements on pages 57-60 in our Annual Report 2021 for disclosure of revenue by category. We do not sell products to specific geographic markets.

Graphic

Overview of Short Bowel Syndrome (SBS)

SBS is a complex chronic and severe condition associated with reduced or complete loss of intestinal function. Many patients have to be connected to infusion lines and pumps every day, which significantly restricts their ability to engage in ordinary daily activities. In addition, these patients are at risk of experiencing a number of serious and life-threatening complications such as sepsis, blood clots, liver damage and renal impairment.

In 2012, the FDA approved teduglutide as a novel treatment for adult patients with SBS who are dependent on parenteral support. Teduglutide has a mean terminal half-life of approximately 1.3 hours in SBS patients and has to be administered daily via syringe, following reconstitution of the lyophilized power. In the first quarter of 2021 Tekeda reported sales of 18.1 billion Japanese Yen ($164 million US dollars) for Teduglutide (sold under the names Gattex or Revestive).

Glepaglutide for SBS

Like teduglutide, glepaglutide is a long-acting GLP-2 analogue with an effective half-life of approximately 50 hours with potential for once-weekly dosing via an auto-injector pen. In our pre-clinical studies, we observed that glepaglutide was effective in increasing intestinal weight and length. W completed a Phase 2 clinical proof-of-concept, dose-finding trial in 2017. Eighteen patients with SBS were enrolled in the trial and the data demonstrated that treatment with 1 mg and 10 mg glepaglutide reduced mean fecal output by 592 g/d (p=0.002) and 833 g/d (p=0.0002), respectively, and increased intestinal wet weight absorption. No changes were observed in the 0.1 mg dose group. Common adverse events included stoma complications, injection site reactions, peripheral edema, polyuria, nausea, and abdominal pain.

In October 2018, we initiated our pivotal EASE-SBS Phase 3 trial of glepaglutide in up to 108 patients with SBS at sites across the United States, Canada and Europe. The Phase 3 trial seeks to demonstrate efficacy and safety of once-and twice-weekly subcutaneous

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injections of 10 mg glepaglutide in SBS patients on parenteral support. The trial is placebo-controlled, randomized, parallel-group, double-blind, and with fixed dose injection. The primary objective is to evaluate the efficacy of glepaglutide in reducing parenteral support volume in SBS patients. The secondary objectives are to evaluate additional efficacy endpoints, as well as safety and tolerability. In December 2021, we completed patient enrollment in this trial. The trial sample size has been reduced to approximately 108 patients from the original sample size of 129 patients to mitigate expected recruitment challenges caused by the renewed COVID outbreak. The trial will have 95% power (versus the original 98%) to detect a treatment effect on the primary endpoint. However, because of the extent of patient roll-over into long-term extension trials and prolonged follow-up caused by COVID disruptions, the cumulative exposure to glepaglutide at the time of the potential new drug application (“NDA”) submission will be larger than originally anticipated at the End of Phase 2 meeting with the FDA. Full results from the trial are expected in the third quarter of 2022.

In August 2021, we initiated a Phase 3b trial assessing glepaglutide in patients with SBS. This long-term follow-on study will monitor the safety of ongoing glepaglutide treatment in patients with SBS as well as its long-term effects on intestinal absorption and nutritional status. Initial data from this trial are not expected for several years and we do not expect to submit this data in connection with any potential NDA for glepaglutide.

Bi-hormone artificial pancreas for automated diabetes management

Despite availability of modern insulins and improved insulin pump systems and glucose sensors, management of type 1 diabetes remains a significant patient burden and independent third party data suggest that only 20% to 30% of patients in the United States are below the glucose targets recommended by the American Diabetes Association. Maintaining tight glycemic control with infusion or injection with insulin is difficult due to delays in uptake and constant changes in insulin requirements. Therefore, several academic researchers and a few device companies are working on glucose-sensor guided dual-hormone pumps that injects insulin when glucose is high and glucagon with glucose is low. These devices hold the potential to remove the burden of maintaining tight glucose control from patients and their families.

Dasiglucagon for bi-hormone artificial pancreas for automated diabetes management

Dasiglucagon is being developed in a 1ml pre-filled cartridge for use in dual-hormone artificial pancreas device systems, with insulin being the other hormone. In 2017, we reported positive results from two Phase 2a trials. Data from these Phase 2a trials and additional toxicology studies that we have conducted provided the foundation for further clinical development of dasiglucagon for use in the iLet artificial pancreas device. Guided by an algorithm, this device is designed to maintain and control blood glucose levels with minimal patient intervention. We have a non-exclusive collaboration with the developer of the iLet, Beta Bionics. In December 2019, the iLet received Breakthrough Device designation from the FDA.

We and Beta Bionics are in discussion with the FDA and expect to initiate the pivotal Phase 3 trial the second half of 2022.

Congenital hyperinsulinism

CHI is an ultra-rare but devastating disease caused by inappropriately elevated insulin secretion irrespective of glucose levels. This leads to frequent and often severe hypoglycemia and long-term irreversible damage to health.

Dasiglucagon for congenital hyperinsulinism

In 2017, the FDA and the European Commission both granted orphan drug designation to dasiglucagon for the treatment of CHI. In January 2018, the FDA issued a safe-to-proceed letter, and the first Phase 3 trial with 32 pediatric patients (ages three months to 12 years) with CHI started in the first quarter of 2019. In May 2019, we enrolled all but one of the 32 children in a long-term Phase 3 extension study, from which we announced data in December 2020. This trial evaluated children from 3 months to 12 years old with more than three hypoglycemic events per week despite previous near-total pancreatectomy and/or maximum medical therapy. Dasiglucagon on top of standard of care (SOC) did not significantly reduce the rate of hypoglycemia compared to SOC alone when assessed by the primary endpoint, intermittent self-measured plasma glucose. However, hypoglycemia was reduced by 40–50% with dasiglucagon as compared to SOC alone when assessed by blinded continuous glucose monitoring. Dasiglucagon treatment was assessed to be well tolerated in the study and 31 out of 32 patients continued into the long-term extension study. In December 2019, we initiated a second Phase 3 trial with 12 pediatric patients (ages seven days to one year) with CHI and we completed patient enrollment in this trial in early 2022. Top line results from the second Phase 3 trial are expected in the second quarter of 2022, and if the trial is positive we plan to file for marketing approval with the FDA based on data from both Phase 3 trials and an ongoing long-term extension safety trial.

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Post gastric bypass hypoglycemia

Certain patients who undergo surgery for gastric bypass experience hypoglycemia events (post gastric bypass hypoglycemia, or PGBH) beginning approximately six months after surgery and following a meal. Although it is rare, severe PGBH can be life threatening with reports of associated seizure, syncope and motor vehicle accidents. The mechanisms underlying PGBH are not completely understood but may include inappropriate secretion of insulin and gut hormones, increased beta cell response to oral stimuli, increased glucose effectiveness, dysfunction of counter-regulatory hormones such as glucagon, and rapid post-weight loss improvement in insulin sensitivity.

Dasiglucagon for post bariatric surgery hypoglycemia

In October 2019, we initiated a Phase 2 dose-finding clinical proof of concept trial to explore potential benefit of mini-doses of dasiglucagon in correcting serious hypoglycemic events following meal ingestions in some patients who have undergone bariatric surgery. Subjects were randomly assigned to be treated with two different subcutaneous administered doses of dasiglucagon (80 μg and 200 μg) and placebo (saline injection) after the meal. In March 2020, we reported positive topline results from the trial that demonstrated both dasiglucagon doses significantly reduced meal-induced hypoglycemia compared to placebo.

Recent Developments

Reference is also made to the section “Zealand Pharma’s First Independent Launch” on page 12 and “Zealand Pharma’s R&D Platform and Pipeline” on pages 15-19 of our Annual Report 2021.

Update regarding COVID-19

Zealand Pharma continues to monitor the COVID-19 pandemic and take precautions to keep our employees, patients, business and clinical partners safe. This is an ongoing exercise in monitoring the effects of the pandemic on all of our key stakeholders and responding appropriately. We maintain compliance with guidance from applicable government and health authorities as appropriate. We have adapted the way we work to support our community’s efforts to reduce the transmission of COVID-19 and protect our employees, while continuing to provide patient care and maintain business continuity.

Zealand Pharma has taken measures to secure its discovery activities, which remain ongoing, while work in laboratories and offices has been organized to reduce the risk of COVID-19 transmission. The impact of COVID-19 on our research activities has thus far been minimal. Employees who can work from home have been doing so, while those needing to work in laboratory facilities are divided into shifts to reduce the number of people gathered at one time. Business travel has been minimized and online and video conference technology is used to meet virtually rather than in person. We have continued our clinical trials while working with authorities, investigators, trial sites and contract research organizations to minimize site visits and ensure optimal trial follow-up. In late April, Zealand Pharma in Denmark commenced a gradual return to office program, which currently allows up to 60% occupancy, consistent with local health authority guidelines and practice including frequent testing, sanitizing, and other protective measures.

COVID-19 restrictions have not affected our Phase 3-program for dasiglucagon in CHI and we expect topline data from the second Phase 3 trial in the second quarter of 2022. We currently do not anticipate changes to the timelines for the bi-hormonal artificial pancreas pump Phase 3 program. The pandemic has had a negative impact on the speed of patient recruitment for our EASE-SBS Phase 3 trial of glepaglutide, and we have adjusted the size of the trial from an original 129 patients to 108 patients to compensate for the delay. As a result of this adjustment, the trial will have 95% power (versus the original 98%) to detect a treatment effect on the primary endpoint. However, because of the extent of patient roll-over into long-term extension trials and prolonged follow-up caused by COVID disruptions, the cumulative exposure to glepaglutide at the time of the potential NDA submission will be larger than originally anticipated at the End of Phase 2 meeting with the FDA. Full results from the trial are expected in the third quarter of 2022.

Our research and in particular our development programs may be impacted if the pandemic continues to put increased pressure on hospital systems, slow recruitment of patients into the trials or cause lockdowns that affect our clinical trial sites if key external medical resources are diverted elsewhere.

Direct engagement with health care providers and patients has been reduced and transformed by leveraging virtual meetings, training, and support. Our commercial team is focused on supporting the businesses for the V-Go wearable insulin delivery device and ZEGALOGUE (dasiglucagon) while ensuring a continued high level of service and support for existing patients.

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Litigation

On December 18, 2020 Amyndas Pharmaceuticals S.A. and Amyndas Pharmaceuticals LLC (together “Amyndas”) filed a complaint in the U.S. District Court for the District of Massachusetts, which named Alexion Pharmaceuticals, Inc., Zealand Pharma A/S and Zealand Pharma U.S., Inc. as defendants. The complaint alleges claims against the Zealand Pharma A/S (and its U.S. subsidiary) and its collaboration partner Alexion related to Zealand Pharma A/S’s collaboration with Alexion on C3 peptide-based assets. The complaint alleges federal and state law claims, including claims for breach of confidentiality agreements, trade secret misappropriation and unfair competition. The complaint seeks an unspecified amount of damages plus interest and injunctive relief. On June 8, 2021 the District Court dismissed the proceedings against Zealand Pharma U.S., Inc. for failure to state a claim, and dismissed the claims against Zealand Pharma A/S on the ground that the matter should be heard in the courts of Denmark. On July 6, 2021 Amyndas moved the District Court to reconsider its dismissal of the claims against Zealand Pharma A/S (and its U.S. subsidiary), and in the alternative for leave to amend its complaint against Zealand Pharma A/S (and its U.S. subsidiary). On August 27, 2021 the District Court denied Amyndas’s motion for reconsideration and motion for leave to amend. On September 27, 2021, Amyndas filed an appeal of this decision to the First Circuit Court of Appeals and the appeals court has set a schedule for briefing of this hearing.

On January 10, 2021 Amyndas Pharmaceuticals LLC and Amyndas Pharmaceuticals S.A (Amyndas) commenced legal action in Denmark before the courts of Denmark against Zealand Pharma A/S and ZP SPV 3 A/S for breach of a disclosure agreement between Amyndas and Zealand Pharma A/S dated April 20, 2105 and a mutual disclosure agreement dated 26 August 26, 2016 between Amyndas and Zealand Pharma A/S. Zealand is due to file its defense to these proceedings and intends to defend against the claims.

On January 23, 2020 Protagonist Therapeutics filed a demand for arbitration with the International Court of Arbitration of the International Chamber of Commerce seeking a declaration that it has no past, present or future milestone or royalty payment obligations with respect to the compound it is advancing, PTG-300, alleging that the compound is not within the set of compounds to which such payment obligations apply. On August 4, 2021 the parties reached a mutually acceptable settlement of the proceedings, and Protagonist paid $2.5 million as the first payment under the settlement agreement.

Segment information

Zealand Pharma A/S and its subsidiaries, or the Group, is managed by a corporate management team reporting to the Chief Executive Officer. The corporate management team, including the Chief Executive Officer, represents the chief operating decision maker. 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.

Seasonality

Although the sales of some of the products that are on the market in the United States are sensitive to seasonal sales trends the Group’s financial performance, financial position and cash flows are not subject to significant seasonality.  However, it is noted that the sales of ZEGALOGUE (dasiglucagon) for school aged children are likely to be increased in the period leading up to the start of the school year.

Raw materials

A number of raw materials are used to produce our proprietary product candidates. The bulk of the raw materials are items that are also used by other pharmaceutical producers, so are generally not difficult for us to obtain. We are dependent only on suppliers of raw materials solely for use in the preclinical and clinical development stages of our product candidates. The raw materials have relatively low price volatility.

Market and competition

The pharmaceutical and biotechnology industries are characterized by intense competition and significant and rapid technological change as researchers learn more about diseases and develop new technologies and treatments. Significant competitive factors in our industry include: (i) product safety and efficacy; (ii) quality and breach of an organization’s technology; (iii) skill of an organization’s employees and its ability to recruit and retain key employees; (iv) timing and scope of regulatory approvals; (v) government reimbursement rates for, and the average settling price of, products; (vi) the availability of raw materials and qualified manufacturing capacity; (vii) manufacturing costs; (viii) intellectual property and patent rights and their protection; and (ix) sales and marketing capabilities. While we believe that our product and product candidate platform, development expertise and scientific knowledge provide us with competitive advantages, we face potential competition from many different sources, including major

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pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions and governmental agencies and public and private research institutions.

Any product candidates that we successfully develop and commercialize will compete with existing drugs and new drugs that may become available in the future.

We compete with companies that are producing drugs for, among other disease indications, SBS, such as Takeda plc which currently markets and distributes Gattex, and hypoglycemia, such as Novo Nordisk, Xeris and Eli Lilly which each market and distribute glucagon rescue kits. In addition, Baqsimi, a nasally-administered dry powder glucagon product which does not require mixing before administration, was recently approved by the FDA as an alternative treatment for severe hypoglycemia. Xeris Pharmaceuticals Inc. developed an FDA-approved ready-use glucagon injection, Gvoke, which is designed to be delivered in a pre-filled syringe or an auto-injector.

Our competitors may also succeed in obtaining FDA, EMA or other regulatory approvals more rapidly than us, which could place us at a significant competitive disadvantage or deny us marketing exclusivity rights. Market acceptance of our product candidates will depend on a number of factors, including:

potential advantages over existing or alternative therapies or tests;
the actual or perceived safety of similar classes of products;
the effectiveness of our sales, marketing and distribution capabilities; and
the scope of any approval provided by the FDA, the EMA or other comparable regulatory authorities.

Although we believe our drugs and product candidates possess attractive attributes, we cannot ensure that our product candidates will achieve regulatory or market acceptance, or that we will be able to compete effectively in the market.

If our product candidates fail to gain regulatory approvals and acceptance in their intended markets, we may not generate meaningful revenue or achieve profitability.

In addition, many of our competitors have significantly greater financial resources and expertise in R&D, manufacturing, preclinical studies, conducting clinical trials, obtaining regulatory approvals and marketing drugs. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of competitors, particularly through partnership arrangements with large established companies. These companies also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

Patents

Patent Strategy

Our strategy for filing patent applications is to file early in the drug discovery process, typically before a lead compound has been selected. Before filing an initial patent application, we conduct searches of patents and publications based on keywords, patent classification codes and/or sequences to verify patentability of the compounds identified to date. A more focused, structure-based search is conducted once a lead compound is selected.

Patent applications are generally prepared by our in-house patent professionals in collaboration with outside patent counsel. Patent applications drafted before a lead compound is chosen typically to disclose a large number of structurally related compounds. Our patent applications cover compositions of matter and methods of use, and may additionally cover dosing regimens and methods of making the compounds. Later-filed patent applications typically cover next-generation compounds having for example, structural differences that might confer improved properties. Initially, we file one or more patent applications that establish priority to be claimed in later-filed applications. For most patent families, we file a patent application under the International Patent System, or PCT, which can be entered for examination into the patent office in any of the countries that are signatories to the PCT. In some cases, we file national applications directly in the major jurisdictions, which include Europe, the United States and Japan. For certain patent families, we file in parallel an application under the PCT and national applications in certain jurisdictions, such as the United States. Our patent strategy includes an evaluation of the of third party patents that may be infringed by our drug candidate products and development

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programs, and we prepare our development and commercialization plans to avoid claims of infringement. To the extent that we identify any potential issue with third party patents that may affect any of our product candidates, we develop a strategy to deal with such third party patents by ensuring that we are satisfied that such patents are invalid, not infringed, or that we commercialize our products after the expiry of such patents. Such strategies can include seeking a judicial or administrative revocation of such patents, ensuring that we are in a position to defend a claim for infringement, or seeking a license where that is appropriate.

We or our outside patent counsel handle the prosecution of our patent applications. If we enter into a licensing arrangement with a collaboration partner, we typically retain ultimate control of patent prosecution of patent applications for our inventions. For new inventions arising from collaboration under the license agreement, the collaboration partner may, depending on the identity of the inventors, file patent applications that are owned either by the collaboration partner alone or jointly with us.

Patent and Patent Application Portfolio

We own one patent family covering lixisenatide. This entire family is licensed exclusively to Sanofi. We own five patent families covering our proprietary GLP-2 analog glepaglutide or backup candidates. Although the disclosures of one of these patent families encompass both elsiglutide and glepaglutide, it has been possible to claim the subject matter relating to glepaglutide in separate patents in the United States for our internal compound dasiglucagon, a glucagon analog that has a favorable stability profile.

We also possess certain technologies we employ when designing novel peptide drug candidates. An example of one of our internal peptide enhancing technologies is the SIP technology. The SIP technology adds a number of specific amino acids to a peptide thereby strengthening or tightening the molecular structure to make the peptide less susceptible to biological degradation. The SIP technology can assist to maintain the peptide in the blood for a longer period of time before the peptide is degraded and may permit less frequent dosing of the peptide. The SIP technology has been employed for the development of lixisenatide, and glepaglutide. Any proprietary technology we employ involves the addition of a fatty acid to the amino acid chain of a given peptide to potentially increase the half-life of the peptide in the blood stream.

Although specific reference is made to the status of patents granted or pending in the U.S. Patent and Trademark Office, or USPTO, the European Patent Office, or EPO, and Japan, in many cases the patent families also include patents or applications in a number of additional jurisdictions, including Australia, Canada, China, and India. Upon marketing approval, patent term extensions or supplementary protection certificates may be obtainable in various jurisdictions, including the United States, certain European jurisdictions, and Japan, with respect to certain patents claiming compositions of matter, methods of use or methods of manufacturing the products, with a maximum of five years of extension potentially available. U.S. patents may also be entitled to adjustments to their statutory patent term depending on the length of the delay to the issuance of the patents caused by the USPTO.

Glepaglutide

We own seven patent families that cover glepaglutide. These patent families include granted patents in Australia, Brazil, Canada, China, Europe, Eurasia, Hong Kong, Israel, India, Japan, South Korea, Mexico, New Zealand, Norway, Ukraine, South Africa and USA. The granted U.S. patents include composition of matter claims covering both the peptide and composition of glepaglutide and related compounds. The granted European patent includes claims drawn to the composition of matter of a genus of compounds that encompasses glepaglutide, as well as analogs thereof and methods of using glepaglutide.

Dasiglucagon

We own five patent families covering dasiglucagon including patents and applications in the United States and non-U.S. jurisdictions, including Australia, Brazil, Canada, China, Egypt, Eurasia, Europe, India, Israel, Japan, South Korea, Mexico, Malaysia, the Philippines, Singapore, Thailand, Taiwan, Ukraine, and Vietnam. The pending claims in one family cover the dasiglucagon compound and a group of structurally related compounds having glucagon agonist activity and increased solubility and/or stability relative to the native glucagon, as well as pharmaceutical compositions comprising such compounds and related uses for treating a variety of diseases including hypoglycemia, type 1 and 2 diabetes and other metabolic conditions, and nucleic acid molecules for expression of the compounds in host cells. The patent applications in the family that protect the compound itself, when issued, will have a nominal expiration date in July 2033. A United States patent in this family granted with claims covering the dasiglucagon compound. This patent received a patent term adjustment of 560 days, and is scheduled to expire in February 2035.

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ZP 10,000 α4β7 Integrin Inhibitor

This is an asset that was acquired with our acquisition of Encycle. This includes the acquisition of seven patent families consisting of granted patents and patent applications in various territories, including two patent families that are co-owned with the University of Montreal and two patent families that are licensed from the University of Toronto. The remaining two families are wholly owned by Encycle, including the family that includes the composition of matter patent application.

Other Assets

We also have patents and patent applications that encompass or relate to other pre-clinical and clinical assets that include our GLP-1/GLP-2 agonist (11 families), Amylin (two families), GIP agonist (four families), Kv1.3 (two families), GGDA (five families) and C3 (three families).

We (or our wholly owned subsidiaries that include ZP Holding SPV K/S and ZP SPV 3 K/S) own all the patents and applications set out above.

Government Regulation

The FDA and comparable regulatory authorities in state and local jurisdictions and in other countries impose substantial and burdensome requirements upon companies involved in the clinical development, manufacture, marketing and distribution of drugs, such as those we are developing. These agencies and other federal, state and local entities regulate, among other things, the R&D, testing, manufacture, quality control, safety, effectiveness, labeling, storage, record keeping, approval, advertising and promotion, distribution, post-approval monitoring and reporting, sampling and export and import of our product candidates.

U.S. Government Regulation

In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act and its implementing regulations. The process of obtaining regulatory approvals and the subsequent compliance with applicable federal, state, local and foreign statutes and regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant to a variety of administrative or judicial sanctions, such as the FDA’s refusal to approve pending NDAs, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties.

The process required by the FDA before a drug may be marketed in the United States generally involves the following:

completion of preclinical laboratory studies, animal studies and formulation studies in compliance with the FDA’s good laboratory practice regulations;
submission to the FDA of an IND, which must become effective before human clinical trials may begin;
approval by the institutional review board, or IRB, at each clinical site before each trial may be initiated;
performance of adequate and well-controlled human clinical trials in accordance with applicable IND and other clinical trial-related regulations, sometimes referred to as good clinical practices to establish the safety and efficacy of the proposed product candidate for its proposed indication;
submission to the FDA of an NDA;
satisfactory completion of an FDA pre-approval inspection of the production facility or facilities where the product is produced to assess compliance with the FDA’s cGMP requirements to assure that the facilities, methods and controls are adequate to preserve the product’s identity, strength, quality, purity and potency;
potential FDA audit of the preclinical and/or clinical trial sites that generated the data in support of the NDA; and
FDA review and approval of the NDA prior to any commercial marketing or sale of the product in the United States.

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Preclinical Studies

Preclinical studies include laboratory evaluation of product chemistry, toxicity and formulation, as well as animal studies to assess potential safety and efficacy. An IND sponsor must submit the results of the preclinical studies, together with manufacturing information, analytical data and any available clinical data or literature, among other things, to the FDA as part of an IND. Some preclinical studies may continue even after the IND is submitted. An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions related to one or more proposed clinical trials and places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, submission of an IND may not result in the FDA allowing clinical trials to commence.

Clinical Trials

Clinical trials involve the administration of the investigational drug to human patients under the supervision of qualified investigators in accordance with GCP requirements, which include the requirement that all research patients provide their informed consent in writing for their participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. In addition, an IRB at each institution participating in the clinical trial must review and approve the plan for any clinical trial before it commences at that institution. Information about certain clinical trials must be submitted within specific timeframes to the National Institutes of Health, or NIH, for public dissemination on their www.clinicaltrials.gov website.

Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined:

Phase 1 clinical trial: the product candidate is initially introduced into healthy human patients or patients with the target disease or condition and tested for safety, dosage tolerability, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness;
Phase 2 clinical trial: the product candidate is administered to a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerability and optimal dosage; and
Phase 3 clinical trial: the product candidate is administered to an expanded patient population, generally at geographically dispersed clinical trial sites, in well-controlled clinical trials to generate enough data to statistically evaluate the efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product, and to provide adequate information for the labeling of the product.

Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse events occur. Each of Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, or at all. Furthermore, the FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients.

Marketing Approval

Assuming successful completion of the required clinical testing, the results of the preclinical studies and clinical trials, together with detailed information relating to the product’s chemistry, manufacture, controls and proposed labeling, among other things, are submitted to the FDA as part of an NDA requesting approval to market the product for one or more indications. In most cases, the submission of an NDA is subject to a substantial application user fee. Under the Prescription Drug User Fee Act, or PDUFA, guidelines that are currently in effect, the FDA has a goal of ten months from the date of “filing” of a standard NDA for a new molecular entity to review and act on the submission. This review typically takes twelve months from the date the NDA is submitted to the FDA because the FDA has approximately two months to make a “filing” decision.

In addition, under the Pediatric Research Equity Act of 2003, or PREA, as amended and reauthorized, certain NDAs or supplements to an NDA must contain data that are adequate to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product

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is safe and effective. The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements.

The FDA also may require submission of a Risk Evaluation and Mitigation Strategies, or REMS, plan to ensure that the benefits of the drug outweigh its risks. The REMS plan could include medication guides, physician communication plans, assessment plans, or elements to assure safe use, such as restricted distribution methods, patient registries, or other risk minimization tools.

The FDA conducts a preliminary review of all NDAs within the first 60 days after submission, before accepting them for filing, to determine whether they are sufficiently complete to permit substantive review. The FDA may request additional information rather than accept an NDA for filing. In this event, the application must be resubmitted with the additional information. The resubmitted application is also subject to review before the FDA accepts it for filing.

Once the submission is accepted for filing, the FDA begins an in-depth substantive review. The FDA reviews an NDA to determine, among other things, whether the drug is safe and effective and whether the facility in which it is manufactured, processed, packaged or held meets standards designed to assure the product’s continued safety, quality and purity.

The FDA may refer an application for a novel drug to an advisory committee. An advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.

Before approving an NDA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving an NDA, the FDA may inspect one or more clinical trial sites to assure compliance with GCP requirements.

After evaluating the NDA and all related information, including the advisory committee recommendation, if any, and inspection reports regarding the manufacturing facilities and clinical trial sites, the FDA may issue an approval letter, or, in some cases, a complete response letter. A complete response letter generally contains a statement of specific conditions that must be met in order to secure final approval of the NDA and may require additional clinical or preclinical testing in order for the FDA to reconsider the application. Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. If and when those conditions have been met to the FDA’s satisfaction, the FDA will typically issue an approval letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications.

Even if the FDA approves a product, it may limit the approved indications for use of the product, require that contraindications, warnings or precautions be included in the product labeling, require that post-approval studies, including Phase 4 clinical trials, be conducted to further assess a drug’s safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution and use restrictions or other risk management mechanisms under a REMS, which can materially affect the potential market and profitability of the product. The FDA may prevent or limit further marketing of a product based on the results of post-marketing studies or surveillance programs. After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes, and additional labeling claims, are subject to further testing requirements and FDA review and approval.

Post-Approval Requirements

Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting of adverse experiences with the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims are subject to prior FDA review and approval. There also are continuing, annual user fee requirements for any marketed products and the establishments at which such products are manufactured, as well as new application fees for supplemental applications with clinical data.

The FDA may impose a number of post-approval requirements as a condition of approval of an NDA. For example, the FDA may require post-marketing testing, including Phase 4 clinical trials, and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization. In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and state agencies, and are subject to periodic unannounced inspections by the FDA and these state agencies for compliance with cGMP requirements. Changes to the manufacturing

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process are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP requirements and impose reporting and documentation requirements upon the sponsor and any third party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance.

Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in mandatory revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS program. Other potential consequences include, among other things:

restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;
fines, warning letters or holds on post-approval clinical trials;
refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product approvals;
product seizure or detention, or refusal to permit the import or export of products; or
injunctions or the imposition of civil or criminal penalties.

The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability.

Combination Products

Certain of our product candidates are designed to be delivered to patients by dedicated medical devices. In the United States, products composed of components that would normally be regulated by different centers at the FDA are known as combination products. Typically, the FDA’s Office of Combination Products assigns a combination product to a specific center as the lead reviewer based upon the product’s primary mode of action. Depending on the type of combination product, its approval, clearance or licensure may usually be obtained through the submission of a single marketing application. However, the FDA sometimes will require separate marketing applications for individual constituent parts of the combination product which may require additional time, effort, and information, For example, delivery devices require Human Factors testing and their manufacture is subject to FDA’s Quality System Regulation. Even when a single marketing application is required for a combination product, such as an NDA for a combination drug and delivery device, both the FDA’s Center for Drug Evaluation and Research and the FDA’s Center for Devices and Radiological Health may participate in the review.

Other U.S. Healthcare Laws

Our current and future operations may directly, or indirectly through our prescribers, customers and purchasers, expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we research, market, sell and distribute our products. Restrictions under applicable U.S. federal, state, local and non-U.S. healthcare laws and regulations include, but are not limited to, the following:

the federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, offering, receiving or providing remuneration, including any kickback, bribe or rebate, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase or lease, order or recommendation of, any item, good, facility or service, for which payment may be made under federal healthcare programs such as Medicare and Medicaid;

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the federal Beneficiary Inducement Statute, which prohibits giving anything of value to a government insurance beneficiary that could influence the choice of provider or reimbursable covered product;
federal civil and criminal false claims laws, including the civil False Claims Act, and civil monetary penalties laws, which impose criminal and civil penalties, including those from civil whistleblower or qui tam actions, against individuals or entities for, among other things, knowingly presenting, or causing to be presented, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;
the anti-inducement law prohibits, among other things, the offering or giving of remuneration, which includes, without limitation, any transfer of items or services for free or for less than fair market value (with limited exceptions), to a Medicare or Medicaid beneficiary that the person knows or should know is likely to influence the beneficiary’s selection of a particular supplier of items or services reimbursable by a federal or state governmental program;
the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created additional federal criminal statutes that impose criminal and civil liability for, among other things, executing or attempting to execute a scheme to defraud any healthcare benefit program or knowingly and willingly falsifying, concealing or covering up a material fact or making false statements relating to healthcare matters;
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, which impose certain requirements on covered entities and their business associates, as well as their covered subcontractors, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;
the federal transparency requirements under the Physician Payments Sunshine Act, enacted as part of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the ACA, that require applicable manufacturers of covered drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program, with specific exceptions, to track and annually report to the Centers for Medicare & Medicaid Services, or CMS, payments and other transfers of value provided to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors), other healthcare professionals (such as physician assistants and nurse practitioners), and teaching hospitals, and certain ownership and investment interests held by physicians or their immediate family members;
analogous state, local and non-U.S. laws and regulations, such as state anti-kickback and false claims laws, which may apply to items or services reimbursed by any third party payor, including commercial insurers; state, local and non-U.S. marketing and/or transparency laws applicable to manufacturers that may be broader in scope than the federal requirements; state laws that require biopharmaceutical companies to comply with the biopharmaceutical industry’s voluntary compliance guidelines, relevant compliance guidance promulgated by the federal government, implementation of compliance programs, and compliance with the state’s code of conduct; state and local laws that require a pharmaceutical company’s sales representatives to be registered or licensed by the state or local governmental entity; and state and non-U.S. laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may be more stringent than HIPAA, thus complicating compliance efforts; and
rules or legislation covering more or less the same subject matter are found in numerous other countries, including in Denmark, which sometimes result in lower or higher exposures in those countries than in the United States.

Additionally, recent healthcare reform legislation has strengthened federal and state healthcare fraud and abuse laws. For example, the ACA amends the intent requirement of the federal Anti-Kickback Statute and criminal healthcare fraud statutes to clarify that liability under these statutes does not require a person or entity to have actual knowledge of the statutes or a specific intent to violate them. Moreover, the ACA provides that the government may assert that a claim that includes items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act. Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws.

Ensuring that our business arrangements with third parties comply with applicable healthcare laws and regulations will likely be costly. It is possible that governmental authorities will conclude that our business practices do not comply with current or future

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statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations were found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, possible exclusion from government funded healthcare programs, such as Medicare and Medicaid, integrity obligations, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which could substantially disrupt our operations. If the physicians or other providers or entities with whom we expect to do business are found not to be in compliance with applicable laws, they may be subject to significant criminal, civil or administrative sanctions, including exclusion from government funded healthcare programs.

Healthcare Reform

Existing regulatory policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. For example, in the United States there have been judicial, Congressional and executive branch challenges to certain aspects of the ACA, including efforts to repeal or “repeal and replace” certain aspects of the ACA. On June 17, 2021 the U.S. Supreme Court dismissed a challenge on procedural grounds that argued the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress. Thus, the ACA will remain in effect in its current form. Prior to the U.S. Supreme Court ruling, on January 28, 2021, President Biden issued an executive order that initiated a special enrollment period for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is possible that the ACA will be subject to judicial or Congressional challenges in the future. It is unclear how such challenges and the healthcare reform measures of the Biden administration will impact the law and the effect such impact could have on coverage and reimbursement for healthcare items and services covered by plans that were authorized by the ACA.

Other legislative changes have been proposed and adopted since the ACA was enacted. These changes included aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, effective April 1, 2013, which, due to subsequent legislative amendments, including the Infrastructure Investment and Jobs Act, will stay in effect through 2031 unless additional Congressional action is taken. However, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and other SARS-CoV-2 relief legislation have suspended the 2% Medicare sequester from May 1, 2020 through March 31, 2022. Under current legislation the actual reduction in Medicare payments will vary from 1% in 2022 to up to 3% in the final fiscal year of this sequester. In January 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments to several providers and increased the statute of limitations period for the U.S. government to recover overpayments to providers from three to five years. The Medicare Access and CHIP Reauthorization Act of 2015, or MACRA, ended the use of the statutory formula and established a quality payment program, also referred to as the Quality Payment Program. The quality payment program has two tracks, one known as the merit based incentive payment system for providers in the fee-for service Medicare program, and the advanced alternative payment model for providers in specific care models, such as accountable care organizations. In November 2019, CMS issued a final rule finalizing the changes to the Quality Payment Program. At this time it is unclear how the introduction of the Quality Payment Program will impact overall physician reimbursement under the Medicare program. These new laws may result in additional reductions in Medicare and other healthcare funding.

There have been several recent U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the cost of drugs under Medicare, and reform government program reimbursement methodologies for drugs. For example, on July 24, 2020 and September 13, 2020, the Trump administration announced several executive orders related to prescription drug pricing that seek to implement several of the administration's proposals. As a result, the FDA concurrently released a final rule and guidance in September 2020 providing pathways for states to build and submit importation plans for drugs from Canada. Further, on November 20, 2020, the U.S. Department of Health and Human Services, or HHS, finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The implementation of the rule has been delayed by the Biden administration from January 1, 2022 to January 1, 2023 in response to ongoing litigation.  The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers, the implementation of which have also been delayed to January 1, 2023. In addition, on November 20, 2020, CMS issued an interim final rule implementing President Trump’s Most Favored Nation executive order, which would tie Medicare Part B payments for certain physician-administered drugs to the lowest price paid in other economically advanced countries, effective January 1, 2021. As a result of litigation challenging the Most Favored Nation model, on December 27, 2021, CMS published a final rule that rescinded the Most Favored Nation model interim final rule. In July 2021, the Biden administration released an executive order, “Promoting

49

Competition in the American Economy,” with multiple provisions aimed at prescription drugs. In response to Biden’s executive order, on September 9, 2021, HHS released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress could pursue as well as potential administrative actions HHS can take to advance these principles. No legislation or administrative actions have been finalized to implement these principles. It is unclear whether these or similar policy initiatives will be implemented in the future. At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, such measures are designed to encourage importation from other countries and bulk purchasing. Further, it is possible that additional governmental action is taken in response to the SARS-CoV-2 pandemic.

Coverage and Reimbursement

Sales of certain of our approved products, out-licensed products and our product candidates, if and when approved for marketing, has and will depend, in part, on the extent to which our products will be covered by third party payors, such as government health care programs like Medicare and Medicaid, commercial insurance and managed healthcare organizations. These third-party payors play an important role in determining the extent to which new drugs, biologics and medical devices will be covered. The Medicare and Medicaid programs increasingly are used as models for how private payors and other governmental payors develop their coverage and reimbursement policies for drugs, biologics and medical devices. It is difficult to predict at this time what third party payors will decide with respect to the coverage and reimbursement for our approved products and product candidates. The primary trend in the U.S. healthcare industry and elsewhere has been cost containment, including price controls, restrictions on coverage and reimbursement and requirements for substitution of generic products and/or biosimilars. Adoption of price controls, cost containment measures and adoption of more restrictive policies in jurisdictions with existing controls and measures, could limit our net revenue and results.

Government authorities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for medical products, drugs and services. Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for drugs. We cannot be sure that coverage will be available for our approved products and any product candidate that we commercialize and, if coverage is available, the level of reimbursement. Because coverage and reimbursement determinations are made on a payor-by-payor basis, obtaining coverage and adequate reimbursement from a third-party payor does not guarantee that we will obtain similar coverage or reimbursement from another third-party payor. Reimbursement may impact the demand for, or the price of, our approved products and any product candidate for which we obtain marketing approval. If reimbursement is not available or is available only to limited levels, we may not be able to successfully commercialize our approved product and any product candidate for which we obtain marketing approval. Decreases in third party reimbursement for our product candidates or a decision by a third-party payor not to cover our product candidates or provide only limited reimbursement for our products and product candidates could reduce physician usage of our products once approved and have a material adverse effect on our sales, results of operations and financial condition. Further, the adoption and implementation of any future governmental cost containment or other health reform initiative may result in additional downward pressure on the price that we may receive for any approved product.

Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe, Canada, and other countries has and will continue to put pressure on the pricing and usage of our product candidates. In many countries, the prices of medical products are subject to varying price control mechanisms as part of national health systems. Other countries allow companies to fix their own prices for medical products, but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our product candidates. Accordingly, in markets outside the United States, the reimbursement for our products may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenue and profits.

C.ORGANIZATIONAL STRUCTURE

For information regarding our organizational structure, please refer to the section ‘Corporate Matters’ on page 26 in our Annual Report 2021.

D.PROPERTY, PLANT AND EQUIPMENT

We lease approximately 7,181 square meters of office and laboratory space at Sydmarken 11, 2860 Søborg, Denmark, where all our activities, including R&D, are currently conducted. The lease is able to be terminated after 13 years for Zealand and 15 years for the landlord, Ejendomsselskabet Sydmarken 5 A/S, from the date when Zealand moved into the facilities, which was September 1, 2019.

50

After said periods Zealand can, without restrictions, and the landlord, subject to certain restrictions under Danish law, terminate the lease upon 12 months written notice.

We also lease (i) approximately 19,247 square feet of office space at 293 Boston Post Road West, Marlborough, Massachusetts, with the initial term of the lease ending in February 2026 and renewal options included; and (ii) 10,588 square feet of office space at 44 Farnsworth Street, Boston, Massachusetts, with the initial term of the lease ending in August 2029 and renewal options included. In addition to rent expense for these office spaces, the Company is obligated to pay costs of insurance, taxes, repairs and maintenance pursuant to the terms of the building leases. The rental payments include the minimum rentals plus common area maintenance charges.

ITEM 4A UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 5 OPERATING AND FINANCIAL REVIEW AND PROSPECTS

New accounting pronouncements

Reference is made to Note 1 ‘Significant accounting policies, and significant accounting estimates and assessments’ to the consolidated financial statements on pages 52-56 in our Annual Report 2021.

A.OPERATING RESULTS

Reference is made to the section ‘Financial review’ contained on pages 36-38 in our Annual Report 2021, the section ‘Financial review’ contained on pages 50-52 in our Annual Report 2020, the section ‘Financial review’ contained on pages 40-42 in our Annual Report 2019 and “Item 3—Key Information—D. Risk Factors”. Reference is further made to ‘Risk management and internal control’ on pages 33-35 in our Annual Report 2021.

The financial condition of the Group and its development is described in our Annual Report 2021, our Annual Report 2020 and our Annual Report 2019. The information in this section is based on, and should be read in conjunction with, our Annual Report 2021, our Annual Report 2020 and our Annual Report 2019. The analysis and discussion included in each of our Annual Report 2021, our Annual Report 2020 and our Annual Report 2019 is primarily based on the consolidated financial statements, which are prepared in accordance with IFRS as issued by the IASB.

2021 compared with 2020

The section ‘Financial review’ contained on pages 36-38 in our Annual Report 2021 constitutes the Board of Directors’ and Executive Management’s discussion and analysis of results of operations.

2020 compared with 2019

The section ‘Financial review’ contained on pages 50-52 in our Annual Report 2020 constitutes the Board of Directors’ and Executive Management’s discussion and analysis of results of operations.

Segment information

The Group is managed by a corporate management team reporting to the Chief Executive Officer. The corporate management team, including the Chief Executive Officer, represents the chief operating decision maker. 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.

Inflation

Inflation for the fiscal years ended December 31, 2021, 2020 and 2019 has not had a material impact on the Group’s revenue or net loss.

51

Foreign currencies

Reference is made to Note 30 ‘Financial risks—Exchange rate risk’ to the consolidated financial statements on page 88 in our Annual Report 2021.

Governmental policies

Please refer to “Item 4—Information on the Company—Government Regulation”.

B.LIQUIDITY AND CAPITAL RESOURCES

It is our aim to have an adequate capital structure in relation to the underlying operating results and research and development projects, so that we have sufficient capital to support operations and our long-term growth targets.

The Board of Directors finds that the current capital and share structure is appropriate for the shareholders and the Group and for the Company’s present requirements.

As of December 31, 2021, we had cash and cash equivalents, which comprise cash and bank balances, of DKK 1,129.1 million. We require cash to meet our operating expenses and capital expenditures. We have funded our cash requirements since our incorporation primarily with equity financing, milestone and royalty payments from our collaboration partners, and sales of future royalty streams.

The overall objectives and policies for our financial risk management are outlined in the Finance Policy, which is approved by the Board of Directors. For further information, reference is made to “Item 11—Qualitative and Quantitative Disclosures about Market Risks”.

Financial resources

Reference is made to ‘Consolidated statements of financial position’ on page 49 and ‘Consolidated statements of cash flows’ on page 50 in our Annual Report 2021.

We believe we will require additional financing to ensure that our financial resources are sufficient to meet our requirements for at least the next 12 months.

Cash flow in 2021, 2020 and 2019

Reference is made to ‘Consolidated statements of cash flows’ on page 50 in our Annual Report 2021, page 64 in our Annual Report 2020, page 52 in our Annual Report 2019.

There are no material restrictions on the ability of subsidiaries with material cash amounts to transfer funds to the parent company Zealand Pharma A/S.

Debt financing

Reference is made to ‘Consolidated financial statements on page 85 in our Annual Report 2021 for information on debt financing. 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.

Financial instruments

Reference is made to Note 30 ‘Financial risks—Contractual maturity (liquidity risk)’ to the consolidated financial statements on pages 89-90 in our Annual Report 2021.

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Commitments for capital expenditure etc.

Contractual obligations for capital expenditure and other contingent liabilities as of December 31, 2021 are shown in Note 29 ‘Contingent assets, liabilities and other contractual obligations and collateral provided’ on page 87 to the consolidated financial statements in our Annual Report 2021.

The Executive Management of the Group believes that the obligations will be covered by the Group’s financial resources, expected future cash flows from operating activities, and additional financing that may be provided by equity, debt or a combination of these.

C.RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.

We currently focus on gastrointestinal, metabolic and other specialty diseases where we believe that the present standard of care is inadequate and where we believe that we have the resources to advance our peptide-based product candidates into the later stages of clinical development, including registration and, potentially, commercialization, while opportunistically considering partnership relationships that may arise. Our R&D organization is structured to enable dynamic collaboration across various functions and project teams at each stage of discovery and development, allowing us to advance promising opportunities quickly and take advantage of our extensive knowledge of peptide design and product development. Our research and development expenses were DKK 588.5 million, DKK 604.1 million and DKK 561.4 million in 2021, 2020 and 2019, respectively.

Information related to selected research and development projects can be found under ‘Peptides platforms’ on page 19 in our Annual Report 2021.

Reference is made to “Item 3—Key Information—D. Risk Factors”.

D.TREND INFORMATION

Information about expectations for the financial year 2022 can be found on page 10 in the subsection ‘2022 Outlook and Objectives’ in our Annual Report 2021.

E.CRITICAL ACCOUNTING ESTIMATES

The preparation of our financial statements requires us to make judgments and estimates that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures. We are required to make judgements and estimates about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The estimates used are based on assumptions assessed to be reasonable by us. However, estimates are inherently uncertain and unpredictable. The assumptions may be incomplete or inaccurate,and unexpected events or circumstances may occur. Furthermore, we are subject to risks and uncertainties that may result in deviations in actual results compared with estimates. We have identified the following areas without prejudice to the generality to the issue of the nature of estimates and judgements:

Revenue recognition (management estimate and judgement)

Revenue comprises license payments, upfront and milestone payments, product revenue and royalty income. License payments which provide the buyer with the right to use the license as it exists at the date of transfer are recognized upon transfer of the associated licensing rights at the point at which the buyer obtains the right to use the license. Upon entering into agreements with multiple components, we determine whether individual components are distinct, which is the case if the buyer can obtain benefits from the goods or service and the promise is distinct within the context of the contract. If no individual components are distinct, the contract is treated as a single performance obligation. When entering into licensing and development agreements, a critical judgment relates to whether the customer could continue development of the Intellectual Property (IP) to the stage promised by Zealand under the promise to provide R&D services. If this is not the case, the IP and the R&D services are considered a single performance obligation.

53

Milestone payments are related to the collaborative research agreements with commercial partners and are recognized when it is highly probable that Zealand Pharma will become entitled to the milestone which is generally when the milestone is achieved. Royalty income from licenses is based on third-party sales of licensed products and is recognized in accordance with contract terms in the period in which the sales occur. Revenue from transactions involving the rendering of services which are consumed by the customer simultaneously with delivery is recognized along with delivery of the services.

Employee incentive programs (management estimates)

In accordance with IFRS 2, Share-based Payment, the fair value of the warrants classified as equity settled is measured at the grant date and recognized as an expense in the income statement over the vesting period. The fair value of each warrant granted during the year is estimated using the Black– Scholes option pricing model. This requires the input of subjective assumptions such as:

The expected stock price volatility, which is based on the historical volatility of Zealand’s share price
The selection of the risk-free interest rate, which is determined as the interest rate on Danish government bonds with a maturity equal to the expected term
The duration of the warrants, which is assumed to be until the middle of the exercise period

The total fair value of the warrants is recognized in the income statement over the vesting period. An adjustment is made to reflect an expected attrition rate during the vesting period. The attrition rate is re-estimated at year-end based on the historical attrition rate resulting in recognition of an expense equal to grant date fair value of the number of warrants which actually vest.

Rebate and product return liabilities (management estimate and judgement)

Liabilities regarding sales rebates and discounts granted to government agencies, wholesalers, retail pharmacies, managed care and other customers are recorded at the time the related revenues are recorded or when the incentives are offered. For both managed care rebates and the Medicare part D rebates, the key assumptions relate to the rebate percentages by each pharmacy as determined in each pharmacy’s contract with the Company and forecasted number of prescriptions that will be filled by each pharmacy (referred to as payor mix). For co-pay card redemptions, the key assumptions relate to expected settlement rate for sales units remaining in the channel that have yet to be presented under co-pay terms. These assumptions are made based on historical actuals, which are used to estimate forecasted trends, including payor mix and settlement rates, which are used to estimate the expected settlement of managed care rebates and Medicare part D rebates, and co-pay card redemption, and the specific terms in the individual agreements. Unsettled rebates are recognized as liabilities when the timing or amount is uncertain. Where absolute amounts are known, the rebates are recognized as accruals.

ITEM 6 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.DIRECTORS AND SENIOR MANAGEMENT

Reference is made to ‘Board of Directors and Corporate Management’ on pages 41-44 in our Annual Report 2021 for information about the members of our Board of Directors and Corporate Management, as well as their activities outside of the Company.

The Board of Directors has the overall responsibility for the affairs of the Company.

There are no family relationships between the members of our Board of Directors and corporate management team. No director or member of corporate management has been elected according to an arrangement or understanding with shareholders, customers, suppliers or others.

As required by the Danish Companies Act, directors are elected at General Meetings by simple majority vote. In addition, four employee representatives are elected for four-year terms by the employees of Zealand Pharma A/S.

54

Diversity of the Board of Directors.

Board Diversity Matrix (As of March 1, 2022)

 

Country of Principal Executive Offices

Denmark

Foreign Private Issuer

Yes

Disclosure Prohibited under Home Country Law

No

Total Number of Directors

11

    

Female

    

Male

    

Non-Binary

    

Did Not Disclose
Gender

Part I: Gender Identity

Directors

4

7

0

0

Part II: Demographic Background

Underrepresented Individual in Home Country Jurisdiction

LGBTQ+

Did Not Disclose Demographic Background

11

B.COMPENSATION

Reference is made to Note 7 ‘Information on staff and remuneration’ to the consolidated financial statements on pages 63-68 in our Annual Report 2021.

C.BOARD PRACTICES

Reference is made to ‘Corporate Matters’ on pages 26-44 in our Annual Report 2021 regarding board practices. The year of election for each member of the Board of Directors and the year of appointment for each member of our corporate management team is included in ‘Board of Directors and Corporate Management’ on pages 41-44 in our Annual Report 2021.

The terms of office of all the members of our Board of Directors elected by the general meeting expire at the next annual general meeting to be held in on 6 April 2022. All members of the Board of Directors elected by the general meeting are eligible for re-election. Employee elected board members are elected for a period of four years.

D.EMPLOYEES

At December 31, 2021, 2020 and 2019 we had 355, 329 and 179 full-time employees, and during 2021, 2020 and 2019 we had an average of 346, 297 and 173 full-time employees. Labor unions currently representing our employees in Denmark include HK it, medie & Industri Hovedstaden. We negotiate a collective agreement in good faith every three years, with the next negotiation scheduled to take place in 2023.

E.SHARE OWNERSHIP

For information on the Board of Directors’ and corporate management’s individual holdings of shares and warrants as of December 31, 2021 and change in these holdings during 2021, reference is made to the sections ‘Board of Directors and Corporate Management’ on pages 41-45, and Note 7 ‘Information on staff and remuneration’ to the consolidated financial statements on pages 63-68 in our Annual Report 2021. The members of our Board of Directors and corporate management team in the aggregate hold 952,875 shares, representing less than 1% of the beneficial ownership of the Company.

In the period from January 1, 2020 until March 31, 2021, our Chief Executive Officer acquired 7,692 ordinary shares and our Chief Financial Officer acquired 841 ordinary shares. The internal rules on trading in our shares by members of the Board of Directors and the corporate management team only permit trading in the four-week period commencing at the beginning of the third trading day following the date of public disclosure of interim financial reports or the annual report. Under special circumstances, the trading window may be derogated from.

55

We granted warrants to our executive management and selected employees of the company in 2005, 2007 and in each of the years between 2009 and 2021. Since our Annual General Meeting in 2012, it has been part of our remuneration policy that members of the Board of Directors are not permitted to participate in the warrant incentive program in their capacity as board members.

Warrants are, and have been, granted pursuant to shareholder authorizations provided to our Board of Directors under our Articles of Association. The detailed terms of the warrants, including the exact exercise price and the size of the grants, have been set our Board of Directors. Warrants are granted for employee services and will typically become exercisable between approximately one to five years after the date of grant and may be exercised in a pre-defined exercise period to subscribe for shares in a number of pre-defined exercise windows against payment of the exercise price. Unexercised warrants will lapse. Granted warrants are generally subject to provisions which allow for the forfeiture of unexercised warrants if the grantee separates from the company or one of our subsidiaries under circumstances in which the warrant holder is considered a “bad-leaver,” understood as, for example, being dismissed for cause or resigning without us having materially breached the employment contract. Warrant holders may generally maintain all granted warrants if they separate from the company or one of our subsidiaries under circumstances where they are considered as “good-leavers,” such as dismissal without cause, leaving us pursuant to an agreed severance agreement or retirement, warrant holder’s resignation due to our material breach of contract or the warrant holder’s death.

Reference is made to Note 7 ‘Information on staff and remuneration’ to the consolidated financial statements on pages 63-68 in our Annual Report 2021.

ITEM 7 MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.MAJOR SHAREHOLDERS

We have one class of shares. As of December 31, 2021, our registered, issued and outstanding share capital was DKK 43,634,142 distributed into 43,634,142 shares of nominal value DKK 1 each.

56

Below is information as of December 31, 2021 with respect to (a) any shareholder who is known to the Company to be the owner of more than 5% of the Company’s shares and (b) the total amount of any class owned by Zealand Pharma A/S and its affiliates (treasury shares) and by the Board of Directors and executive management team:

  

  

Percent

    

Percent

 

 

Shares

 

of total

 

of total

Name of beneficial owner

owned

share capital

 

votes

5% Shareholders:

Van Herk Investments B.V.(1)

7,238,424

16.6%

16.6%

Credit Suisse Group AG(2)

2,705,447

6.2%

6.2%

Capital Group Companies Inc.(3)

0*

0%

5.6%

SMALLCAP Worlf Fund, Inc.(4)

2,449,778

5.6%

0%

Directors and Executive Officers:

Martin Nicklasson(5)

10,570

*

*

Kirsten A. Drejer(6)

4,800

*

*

Jeffrey Berkowitz(7)

4,200

*

*

Bernadette Connaughton(8)

4,500

*

*

Leonard Kruimer(9)

9,500

*

*

Alain Munoz(10)

9,750

*

*

Michael John Owen(11)

4,800

*

*

Frederik Barfoed Beck(12)

14,098

*

*

Anneline Nansen(13)

7,946

*

*

Louise Gjelstrup(14)

4,505

*

*

Jens Peter Stenvang(15)

8,800

*

*

Emmanuel Dulac(16)

290,064

*

*

Matthew Dallas(17)

102,204

*

*

Adam Steensberg(18)

243,666

*

*

Ivan Møller(19)

133,566

*

*

Frank Sanders(20)

95,406

*

*

Christina Sonnenborg Bredal(21)

4,500

*

*

All directors and executive officers as a group (17 persons)

952,875

2.2%

2.2%

(1)

Consists of 7,238,424 ordinary shares.  The principal business address for Van Herk Investments B.V. is Lichtenauerlaan 30, 3062 ME Rotterda, The Netherlands.

(2)

Consists of 2,705,447 ordinary shares.  The principal business address for Credit Suisse Group AG is Kalandergasse 8070 Zurich.

(3)

Consists of 2,449,778 ordinary shares.  The principal business address for Capital Group Companies Inc. is 333 So Hope St 55th Fl Los Angeles Ca 90071.

(4)

Consists of 2,449,778 ordinary shares.  The principal business address for SMALLCAP World Fund, Inc. is 6455 Irvine Center Drive Irvine Ca 92618

(5)

Consists of 2,570 ordinary shares and 8,000 RSUs exercisable within 60 days of March 1, 2022.

(6)

Consists of 800 ordinary shares and 4,000 RSUs exercisable within 60 days of March 1, 2022.

(7)

Consists of 200 ordinary shares and 4,000 RSUs exercisable within 60 days of March 1, 2022.

(8)

Consists of 500 ordinary shares and 4,000 RSUs exercisable within 60 days of March 1, 2022.

(9)

Consists of 4,000 ordinary shares and 5,500 RSUs exercisable within 60 days of March 1, 2022.

(10)

Consists of 5,250 ordinary shares and 4,500 RSUs exercisable within 60 days of March 1, 2022.

(11)

Consists of 300 ordinary shares and 4,500 RSUs exercisable within 60 days of March 1, 2022.

(12)

Consists of 4,798 ordinary shares, as well as 7,200 warrants and 2,100 RSUs exercisable within 60 days of March 1, 2022.

(13)

Consists of 1,571 ordinary shares, as well as 5,500 warrants and 875 RSUs exercisable within 60 days of March 1, 2022.

(14)

Consists of 1,255 ordinary shares, as well as 1,500 warrants and 1,750 RSUs exercisable within 60 days of March 1, 2022.

(15)

Consists of 6,300 ordinary shares, as well as 7,200 warrants and 1,750 RSUs exercisable within 60 days of March 1, 2022.

(16)

Consists of 7,692 ordinary shares, as well as 113,848 warrants, 123,609 PSUs and 44,915 RSUs exercisable within 60 days of March 1, 2022.

(17)

Consists of 841 ordinary shares, as well as 51,275 warrants, 34,552 PSUs and 15,536 RSUs exercisable within 60 days of March 1, 2022.

57

(18)

Consists of 188,286 warrants, 39,809 PSUs and 15,571 RSUs exercisable within 60 days of March 1, 2022.

(19)

Consists of 81,420 warrants, 37,547 PSUs and 14,599 RSUs exercisable within 60 days of March 1, 2022.

(20)

Consists of 43,217 warrants, 34,744 PSUs and 17,445 RSUs exercisable within 60 days of March 1, 2022.

(21)

Consists of 2,500 warrants, 1,500 PSUs and 500 RSUs exercisable within 60 days of March 1, 2022.

*

The Capital Group Companies, Inc. (“CGC”) is the parent company of Capital Research and Management Company (“CRMC”) and Capital Bank & Trust Company (“CB&T”). CRMC is a U.S.-based investment management company that serves as investment manager to the American Funds family of mutual funds, other pooled investment vehicles, as well as individual and institutional clients.  CRMC and its investment manager affiliates manage equity assets for various investment companies through three divisions, Capital Research Global Investors, Capital International Investors and Capital World Investors.  CRMC is the parent company of Capital Group International, Inc. (“CGII”), which in turn is the parent company of five investment management companies (“CGII management companies”): Capital International, Inc., Capital International Limited, Capital International Sàrl, Capital International K.K., and Capital Group Private Client Services, Inc.  CGII management companies and CB&T primarily serve as investment managers to institutional and high net worth clients.  CB&T is a U.S.-based investment management company that is a registered investment adviser and an affiliated federally chartered bank.

Neither CGC nor any of its affiliates, own shares in Zealand Pharma for its own account.  Rather, the shares reported on this Notification are owned by accounts under the discretionary investment management of one or more of the investment management companies described above.

SMALLCAP World Fund, Inc. is a mutual fund registered in the United States under the Investment Company Act of 1940. SMALLCAP World Fund, Inc. is the legal owner of shares in Zealand Pharma A/S.

SMALLCAP World Fund, Inc. has granted proxy voting authority to CRMC, its investment adviser.

As of December 31, 2021, approximately 41% of our share capital was held in Denmark and approximately 28% of our share capital was held in United States.

Since August 9, 2017, which is the date that ADSs representing our ordinary shares were first listed on The Nasdaq Global Select Market, there has been no significant change in the percentage ownership held by any major shareholder except as described below.

No shareholders of the Company have different voting rights from any other shareholder.

For further information reference is made to ‘Shareholder information’ on pages 39-40 in our Annual Report 2021.

B.RELATED PARTY TRANSACTIONS

We have no related parties with a controlling interest other than the major shareholders listed under Item 7A.

Our other related parties are the members of our Board of Directors and corporate management team.

For further information, reference is made to Note 32 ‘Related parties’ to the consolidated financial statements on page 93 in our Annual Report 2021 and Note 30 ‘Related parties’ to the consolidated financial statements on page 99 in our Annual Report 2020.

There have not been and there are no outstanding loans to members of the Board of Directors or corporate management team in 2021, 2020 or 2019.

C.INTERESTS OF EXPERTS AND COUNSEL

Not applicable.

ITEM 8 FINANCIAL INFORMATION

A.CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

The consolidated financial statements required by this item are incorporated by reference into this Annual Report on Form 20-F in the form of our Annual Report 2021 (see Exhibit 15.1).

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Legal proceedings

On December 18, 2020 Amyndas Pharmaceuticals S.A. and Amyndas Pharmaceuticals LLC filed a complai