Setting the scenefor accelerated growth

Dear shareholders,

2013 and the start of 2014 – an important and eventful period for Zealand 

The launch of Lyxumia® marks key transition to a  durable revenue stream

In 2013, Lyxumia® (lixisenatide) was approved in Europe, Japan and several overseas markets for the treatment of Type 2 diabetes. This first marketed peptide medicine from Zealand’s pipeline is being rolled out country by country by Sanofi, one of the world’s leading diabetes companies, as price and reimbursement negotiations with national health authorities are finalized. Due to the differentiating characteristics of Lyxumia® and Sanofi’s internationally renowned market position, we are confident about future sales. The launch of Lyxumia® marks the key transition to a durable revenue stream for Zealand and constitutes an important foundation for growing Zealand’s peptide expertise and pipeline towards continued value creation.

US regulatory filing in 2015

To avoid the risk of potentially compromising the integrity of ELIXA, the ongoing cardiovascular outcome study of lixisenatide, Sanofi decided in September 2013 to withdraw the New Drug Application (NDA) for lixisenatide in the US, which included interim results from ELIXA. Sanofi’s decision was not related to safey issues with the product or deficiencies in the NDA, and resubmission is planned for 2015, after completion of ELIXA. The study is designed to show cardiovascular benefits from treatment with Lyxumia®, and we believe a positive outcome will expand the entire GLP-1 agonist market and also differentiate this medicine further from its competitors. Despite Sanofi’s decision resulting in a two-year delay in the US launch of Lyxumia® and a negative impact on Zealand’s share price in 2013, we believe it has strengthened the overall prospects for the product. 

Fixed-ratio Lantus®/Lyxumia® combination on clear path towards regulatory filing late 2015

In early 2014, Sanofi initiated the LixiLan clinical Phase III development program for the fixed-ratio single injection combination of Lyxumia® with Lantus®, the most prescribed basal insulin worldwide. This event marked a significant milestone for Zealand, providing a USD 15 million payment, confirming Sanofi’s commitment and setting this important diabetes product on a clear path towards regulatory filings as early as the end of 2015. The LixiLan Phase III program is expected to be completed in the 2nd half of 2015. 

New collaboration with Lilly – 3rd global diabetes company to partner with Zealand

We also signed a new partnership with Lilly in the US to advance novel peptide therapeutics as a new approach in the treatment of diabetes and obesity. Lilly is the third large global diabetes company, beyond Sanofi and Boehringer Ingelheim, to now work with Zealand, and this collaboration is a further validation of our core strengths in designing and developing innovative diabetes medicines for the 21st century. Within our diabetes franchise, we also announced promising results for a late-stage preclinical asset, a liquid formulated glucagon analogue to treat severe hypoglycemia in diabetes.

BI collaboration: New lead replaces ZP2929

Together with Boehringer Ingelheim, we announced a change in the lead development program on novel dual-acting glucagon/GLP-1 agonists to treat Type 2 diabetes and/or obesity. A new lead candidate will replace ZP2929 with unchanged financial conditions, while Zealand has taken over the full control of the continued Phase I development of ZP2929.

Important clinical advances for danegaptide and elsiglutide in Phase II

Zealand’s pipeline of other proprietary and partnered peptide medicines in development also advanced in 2013. With danegaptide, our important new peptide in cardiovascular medicine, we initiated a Phase II Proof-of-Concept study. Under our partnership with Helsinn, a worldwide leader company in cancer supportive care, preparations began for the advancement of elsiglutide into Phase IIb studies following supportive results from a Phase IIa study for the prevention of chemotherapy induced diarrhea in colorectal cancer patients.

2014 and beyond: Short-, mid- and long-term value drivers

Zealand is well-positioned and financed for further advances and value growth

We are confident Zealand is well positioned and financed for further advances and value growth in 2014 and beyond. In 2014, we expect to see incrementally growing sales of Lyxumia® and related royalty revenue. We also look forward to Sanofi advancing the Phase III development of the Lantus®/Lyxumia® combination product towards completion in 2015. For our proprietary diabetes pipeline, we are working to advance ZP2929 in clinical Phase I development and complete pre-clinical development of our glucagon product and proceed into clinical development. This peptide medicine is designed for application in an easy-to-use rescue pen and, we believe, holds the potential to significantly improve the treatment of severe hypoglycemia.

Phase II PoC results for danegaptide expected in the 2nd half 2015

Outside our diabetes franchise, we will continue the enrolment of patients into the clinical Phase II study with danegaptide. The study is designed to show the efficacy of this Zealand peptide medicine in preventing heart damage from myocardial ischemic reperfusion injuries. If positive, results will also show potential for danegaptide in other types of reperfusion injuries, such as organ transplantation and stroke. Study results are expected in the 2nd half 2015. With elsiglutide, Helsinn will begin a Phase IIb study in 2014, which is planned to be completed in 2015. We see both peptide medicines representing potentially significant improvements to patients’ lives. 

Additional partner alliances expected to accelerate pipeline growth

Zealand is a world-leading and recognized expert in the discovery, design and development of peptide-based medicines and patient centric innovation is at our core. Still, we cannot do it alone and we will continue to join forces with leading healthcare companies who have the resources to undertake large clinical studies and to market our medicines globally. In the near future, we intend to establish additional alliances that allow us to develop new, breakthrough medicines in a cost effective manner, thereby sharing the financial risks, whilst being equally rewarded. This will augment Zealand’s skills, provide additional opportunities to accelerate growth in our pipeline and make our innovative treatments available to patients, thereby also rewarding our shareholders. 

Our employees make Zealand successful

It is the significant work of our employees that makes Zealand successful and we thank them for their passion, hard work and innovative ideas as they join us in fulfilling Zealand’s mission to discover and develop peptide medicines that improve people’s lives.

We thank you for your trust in us and look forward to sharing further advances with you 
in 2014.