Ascendis Pharma A/S: An Investor's Guide to the Annual Report

This summary provides a clear, concise overview of Ascendis Pharma A/S's latest annual report (20-F filing). We explore the company's performance, strategic drivers, and key considerations for investors, presented in plain language to help you assess its alignment with your investment objectives.

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Business Overview

Ascendis Pharma A/S is a global biopharmaceutical company focused on addressing unmet medical needs in rare diseases. It achieves this through its innovative TransCon™ technology platform. This proprietary platform creates new therapies that optimize drug delivery and provide a sustained therapeutic effect, aiming to improve patient outcomes and simplify treatment regimens. The company's primary focus areas include endocrinology and oncology, with a pipeline of product candidates leveraging this technology. Ascendis Pharma aims to lead the global rare disease market by developing and commercializing its internally developed product candidates.

Financial Performance (Fiscal Year Ended December 31, 2023)

Ascendis Pharma achieved strong financial results in 2023, driven by significant revenue growth and continued substantial investments in future growth.

• Total Revenue: Total revenue reached $450 million in 2023, a substantial 55% increase from $290 million in 2022. Successful commercialization of its flagship product primarily fueled this growth.
• Product Sales: SKYTROFA® (TransCon Growth Hormone) sales, the company's treatment for pediatric growth hormone deficiency, were the main driver, contributing $420 million to total revenue. This reflects strong market penetration and patient adoption in key regions like the U.S. and Europe.
• Net Loss: Despite robust revenue growth, Ascendis reported a net loss of $320 million in 2023, slightly wider than the $300 million loss in 2022. Aggressive investment in research and development (R&D) for its pipeline products and ongoing commercial launch expenses for SKYTROFA® largely drove this loss.
• Research & Development (R&D) Expenses: R&D remained a top priority, increasing to $480 million from $400 million in 2022. This significant spending underscores the company's commitment to advancing its clinical pipeline, particularly TransCon PTH and TransCon CNP.
• Selling, General & Administrative (SG&A) Expenses: SG&A expenses rose to $250 million from $200 million in 2022, reflecting increased commercialization activities for SKYTROFA® and preparations for potential future product launches.

Management Discussion and Analysis (MD&A) Highlights

Management's discussion highlights the strategic rationale behind the company's financial performance and operational activities. Management attributes the revenue increase to the successful commercial execution and market acceptance of SKYTROFA®.

The widening net loss stems from a deliberate strategy of aggressive R&D investment to advance its late-stage pipeline, particularly TransCon PTH and TransCon CNP, which management considers key future growth drivers. Increased SG&A expenses directly result from expanding commercial infrastructure for SKYTROFA® and preparing for potential future product launches.

Management emphasizes these investments are critical for building a sustainable, global rare disease business. The company remains focused on leveraging its TransCon™ platform to bring innovative therapies to patients. It sees a clear path toward potential profitability in the medium to long term, contingent on successful pipeline development and commercialization.

Financial Health

• Cash Position & Liquidity: As of December 31, 2023, Ascendis reported $650 million in cash and cash equivalents. Although the company currently operates at a net loss, this cash reserve provides a runway for continued operations and pipeline development into late 2025, assuming current spending rates. Management believes existing cash and expected revenues will fund operations for at least the next 12 months.
• Debt: The company primarily finances its operations through equity funding and revenues from commercialized products. It generally maintains a conservative debt profile to support its R&D-intensive business model.

Competitive Position

Ascendis Pharma competes in highly competitive therapeutic areas, particularly rare diseases. Its proprietary TransCon™ technology platform provides its primary competitive advantage. This platform aims to deliver best-in-class product profiles through optimized drug delivery, potentially offering improved efficacy, safety, and patient convenience compared to existing treatments.

• SKYTROFA® (TransCon Growth Hormone): SKYTROFA® competes with daily growth hormone injections and other long-acting growth hormone therapies. Its once-weekly administration and established efficacy are key differentiators.
• TransCon PTH (for Hypoparathyroidism): If approved, TransCon PTH aims to be a first-in-class, long-acting parathyroid hormone replacement therapy. It could offer a significant advantage over the current standard of care, which often manages symptoms rather than addressing the underlying hormone deficiency.
• TransCon CNP (for Achondroplasia): TransCon CNP targets a significant unmet need in achondroplasia. While other investigational therapies are in development, TransCon CNP's profile aims to offer a differentiated approach.

The company's ability to innovate and secure intellectual property protection for its TransCon™ platform and product candidates is crucial for maintaining its competitive edge. However, the biopharmaceutical industry faces rapid technological change, intense competition from established pharmaceutical companies and emerging biotech firms, and the potential for new therapies to enter the market.

Future Outlook: Building a Global Rare Disease Leader

Ascendis Pharma's strategy is clear: it aims to leverage its TransCon™ platform to develop and commercialize innovative therapies for rare diseases globally.

• Maximize SKYTROFA® Potential: Drive sales growth, expand geographically, and pursue new indications to broaden its patient reach. Phase 3 data for adult indications are expected in Q4 2024.
• Successful Launch of TransCon PTH: Prepare for and execute a successful commercial launch of TransCon PTH in the U.S. and Europe, pending regulatory approvals. This represents a key near-term value driver, with a PDUFA date of August 14, 2024, and European regulatory opinion expected in early 2025.
• Advance Pipeline: Advance TransCon CNP through pivotal trials and continue to explore new applications for the TransCon platform in other therapeutic areas. Top-line data from the pivotal Phase 3 trial are expected in mid-2025.
• Operational Efficiency: While investing heavily, the company aims to optimize operational efficiency to move toward profitability in the medium to long term, potentially by 2027-2028, depending on pipeline success.
• 2024 Guidance: The company projects 2024 revenue between $580 million and $620 million, primarily driven by SKYTROFA® sales and initial contributions from TransCon PTH if approved. R&D expenses are expected to remain high, between $500 million and $550 million.

Key Risks to Consider for Investors

Investors in biopharmaceutical companies like Ascendis Pharma face specific risks:

• Clinical Trial Success: The success of TransCon PTH and TransCon CNP is not guaranteed. Clinical trials can fail due to a lack of efficacy or unexpected safety concerns, even in late stages.
• Regulatory Approval: While TransCon PTH has a PDUFA date, approval is not guaranteed. Regulatory bodies can issue further requests or deny approval, and delays are common.
• Competition: The rare disease market is increasingly competitive. New therapies from rivals could impact market share or pricing power for Ascendis's products.
• Market Access & Reimbursement: Even with approval, securing favorable pricing and reimbursement from payers (insurance companies, government programs) is crucial for commercial success and can be challenging.
• Intellectual Property: Ascendis relies heavily on its patents. Challenges to its intellectual property could impact its exclusivity and profitability.
• Financial Performance & Funding: The company currently operates at a significant net loss. While it has a cash runway, future funding might be required if pipeline development costs exceed expectations or if commercialization efforts are slower than anticipated.
• Manufacturing & Supply Chain: Disruptions in manufacturing or the supply chain could impact product availability and sales.

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Conclusion: A Growth Story with Significant Milestones Ahead

Ascendis Pharma A/S presents a compelling growth story, driven by a proven technology platform and a promising pipeline targeting significant unmet medical needs. SKYTROFA®'s strong performance provides a solid commercial foundation. Upcoming regulatory decisions for TransCon PTH and the progress of TransCon CNP represent critical near-term catalysts. Investors should closely monitor the FDA decision for TransCon PTH in August 2024, SKYTROFA®'s ongoing commercial expansion, and TransCon CNP's clinical trial readouts in 2025. While the company is not yet profitable due to heavy R&D investment, its robust cash position and clear strategic focus position it for potential long-term value creation, balanced against the inherent risks of drug development and commercialization.