Ascendis Pharma A/S — 2018 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2018; this is an annual report, not a standalone fourth-quarter filing. Financial statements are prepared under IFRS and reported in euros. Ascendis is a clinical-stage biopharmaceutical company with no approved products or product-sales revenue.
Financial results and position
| Metric | 2018 | 2017 | Change |
|---|---|---|---|
| Revenue | €10.6 million | €1.5 million | +592% |
| Research and development expense | €140.3 million | €99.6 million | +41% |
| General and administrative expense | €25.1 million | €13.5 million | +86% |
| Operating loss | €154.8 million | €111.5 million | Loss increased 39% |
| Net loss | €130.1 million | €123.9 million | Loss increased 5% |
| Operating cash used | €138.8 million | €95.1 million | Use increased 46% |
| Cash and cash equivalents at year-end | €277.9 million | €195.4 million | +42% |
| Total assets / total liabilities | €319.0 million / €38.9 million | €211.0 million / €23.8 million | |
| Total equity | €280.1 million | €187.2 million | +50% |
Revenue consisted of €9.4 million of point-in-time “right-to-use” license income and €1.2 million for services. The Visen license income was primarily non-cash consideration in the form of an equity interest. The company reported €6.9 million of deferred income at year-end. No interest-bearing third-party debt was outstanding. The current ratio was approximately 7.5, based on reported current assets of €292.9 million and current liabilities of €38.9 million.
Finance income was €24.7 million, largely reflecting €20.7 million of foreign-exchange gains and €4.0 million of interest income. This materially offset operating losses; 2017, by contrast, included €13.7 million of foreign-exchange losses within finance expenses. The company reported no product gross margin because it had no product sales.
Material changes and unusual items
- Revenue rose sharply from 2017, mainly due to €9.4 million of license income associated with granting Visen rights in Greater China. Ascendis received a 50% interest in Visen; affiliated investors contributed $40 million in cash to Visen. Ascendis recognized €10.5 million of license income in 2018 and carried €6.9 million as deferred income.
- Research and development spending increased with continued development of TransCon hGH, PTH and CNP, including clinical trials, manufacturing preparation and delivery devices. Share-based payment expense rose to €19.7 million from €9.7 million.
- Financing activities provided €203.3 million, principally from the February 2018 equity offering. The company had 42.1 million ordinary shares outstanding at year-end, versus 37.0 million a year earlier; 5.6 million warrants were outstanding.
- After year-end, the March 2019 offering generated approximately €476.9 million of net proceeds. This is a subsequent event, not 2018 operating cash flow.
Outlook, commentary and principal risks
- Management expected substantial future spending and projected that year-end 2018 cash would cover at least 12 months from the report date, subject to changes in plans and development costs. The March 2019 offering subsequently added significant capital.
- Management’s stated development milestones included completing the TransCon hGH Phase 3 database lock in the third quarter of 2019 and targeting a U.S. BLA filing in the first half of 2020. A Phase 2 TransCon PTH study had begun in early 2019; a Phase 2 TransCon CNP study was planned for the third quarter of 2019. These are forward-looking plans, not assured outcomes.
- After the reporting period, Ascendis reported March 2019 top-line Phase 3 heiGHt results: weekly TransCon hGH showed greater annualized height velocity than daily hGH (11.2 versus 10.3 cm/year; p=0.0088) and was described as generally safe and well tolerated. These results were not available at December 31, 2018 and remain subject to full data review and regulatory assessment.
- Ascendis is dependent on successful clinical development, regulatory approvals, partners and third-party manufacturers. Key risks include trial delays or failure, safety findings, uncertain reimbursement and commercialization, single-source supply dependencies, intellectual-property challenges and the need for continued capital.
- Revenue and results may vary significantly with collaboration milestones and license accounting. Foreign-exchange movements can also materially affect reported earnings: the filing estimates that a 10% U.S. dollar strengthening against the euro would increase pre-tax profit or loss and equity by about €17.8 million, with a comparable adverse impact from a weakening.
- The company reported no material legal proceedings, no off-balance-sheet arrangements and no dividends planned. The audited financial statements received an unqualified opinion; management and the auditor reported effective internal control over financial reporting at year-end.
Important facts for investors to verify
- How much of 2018 revenue reflects non-cash Visen license consideration, and how and when the €6.9 million deferred balance will be recognized.
- Full Phase 3 heiGHt and fliGHt results, longer-term safety data, and the actual timing and regulatory requirements for a TransCon hGH filing.
- Actual cash burn and development spending relative to management’s runway assessment, including the effect of the March 2019 financing and potential dilution.
- Progress and funding responsibilities under the Visen, Sanofi and Genentech arrangements, including whether development or sales milestones are achieved and any resulting payments.
- Manufacturing readiness, supplier concentration and whether the planned clinical and commercial supply chain can meet regulatory requirements.
- Currency exposure and the extent to which foreign-exchange gains or losses, rather than operating performance, affect reported results.