Company registration no.: 32266355
ANNUAL REPORT
2021
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Contents
Introduction ............................................................................................................................................................ 3
Management Report ............................................................................................................................................... 6
2021 Financial Review ........................................................................................................................................... 8
Outlook ................................................................................................................................................................... 9
Shareholder Information ....................................................................................................................................... 10
Corporate Governance .......................................................................................................................................... 12
Risk Management ................................................................................................................................................. 16
Corporate Social Responsibility ........................................................................................................................... 18
Board of Directors and Executive Management ................................................................................................... 23
Corporate information .......................................................................................................................................... 25
2021 Consolidated Financial Statements .............................................................................................................. 26
Notes to Financial Statements .............................................................................................................................. 30
2021 Parent Financial Statements ......................................................................................................................... 72
Statements and Signatures .................................................................................................................................... 84
Independent Auditors’ Report .............................................................................................................................. 85
3
Introduction
In February 2022, Orphazyme announced that it had been notified by the Committee for Medicinal Products for
Human Use (CHMP) of the European Medicines Agency (EMA) of a negative trend vote as part of the ongoing
review of the Marketing Authorisation Application (MAA) for its investigational product candidate,
arimoclomol, for the treatment of Niemann-Pick disease type C (NPC) following an oral explanation.
In light of the negative trend vote and considering Orphazyme’s financial situation at the time, the Board of
Directors of Orphazyme filed a petition for an in-court restructuring of Orphazyme, which commenced in March
2022.
In May 2022, as part of the in-court restructuring proceedings, Orphazyme sold substantially all of its assets and
business activities to KemPharm Denmark A/S (KemPharm), a wholly owned subsidiary of KemPharm Inc., a
specialty pharmaceutical company focused on the discovery and development of novel treatments for rare
central nervous system diseases, and KemPharm retained all of Orphazyme’s remaining Danish employees. The
in-court restructuring proceedings were discontinued on May 30, 2022.
As of the date of publication of this annual report, Orphazyme has limited ongoing operational business
activities and only two employees.
Disclaimer
This annual report may contain certain forward-looking statements, including in respect of the company’s outlook for full-year 2022 and
financial position as of year-end 2022. Although the Company believes its expectations are based on reasonable assumptions, all statements
other than statements of historical fact included in this company announcement about future events are subject to (i) change without notice
and (ii) factors beyond the Company’s control. These statements may include, without limitation, any statements preceded by, followed by,
or including words such as “target,” “believe,” “expect,” “aim,” “intend,” “may,” “anticipate,” “estimate,” “plan,” “project,” “will,” “can
have,” “likely,” “should,” “would,” “could”, and other words and terms of similar meaning or the negative thereof. Forward-looking
statements are subject to inherent risks and uncertainties beyond the Company’s control that could cause the Company’s actual results,
performance, or achievements to be materially different from the expected results, performance, or achievements expressed or implied by
such forward-looking statements, including the risks and uncertainties that are described in the Risk Management section of this report.
Except as required by law, the Company assumes no obligation to update these forward-looking statements publicly, or to update the
reasons actual results could differ materially from those anticipated in the forward-looking statements, even if new information becomes
available in the future.
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Key Figures & Ratios
(1) Market cap is calculated as the share price multiplied with the total outstanding shares as of the balance sheet date
(2) Equity ratio is calculated as the equity divided by the total assets as of the balance sheet date
(3) Equity per share is calculated as the total equity divided by the total outstanding shares as of the balance sheet date
TDKK
2021 2020 2019 2018 2017
Statement of Profit and Loss and other
comprehensive income
Net revenue 36,193 0 0 0 0
Research and development expenses
(329,980) (361,284) (285,413) (196,525) (99,048)
General and administrative expenses
(339,516) (247,250) (50,541) (35,127) (31,994)
Operating Loss
(633,303) (608,534) (335,954) (231,652) (131,042)
Net Financial items
1,823 (26,627) (7,043) (3,448) (662)
Loss Before Tax
(631,480) (635,161) (342,997) (235,100) (131,704)
Income tax benefit
4,941 1,915 5,500 5,500 5,500
Net Loss for the period
(626,539) (633,246) (337,497) (229,600) (126,204)
Total comprehensive loss
(626,841) (632,641) (337,430) (229,558) (126,204)
loss per share, basic (DKK) -17.94 -22.32 -16.87* -11.5* -10.43
* adjusted retrospectively, see Note 4.3 in consolidated financial statements.
Statement of financial position
Intangible Assets 2,152 12,454 10,539 10,744 9,853
Right-of-use assets 5,434 14,859 13,903 0 0
Property, plant, and equipment 2,985 4,687 3,685 1,940 1,851
Other non-current assets 3,714 6,829
Total non-current assets 14,285 38,829 32,529 17,965 14,864
Cash 102,255 726,929 123,588 394,706 631,735
Other current assets 56,689 56,735 19,137 28,678 16,218
Total assets 173,229 822,493 180,754 441,349 662,817
Share capital 34,952 34,698 19,984 19,939 19,928
Total equity 9,339 620,525 52,969 388,249 615,702
Non-current borrowings 2,482 23,830 51,606 0 0
Non-current lease liabilities 3,925 9,877 9,813 0 0
Other non-current assets 28,391 1,634 0 0 0
Total current liabilities 129,092 166,627 65,988 52,995 47,115
Cash flow statement
Cash flow from operating activities
(602,571) (539,076) (326,818) (234,764) (54,724)
Cash flow from investing activities
46 (5,101) (3,285) (2,346) (238)
Cash flow from financing activities
(30,344) 1,159,422 58,939 0 1,300
Other
Share Price (DKK) 17.16 67.10 72.40 43.35 76.00
Total outstanding shares 34,952,241 28,514,047 19,984,799 19,939,564 19,928,184
Market captalilazation (MDKK)(1) 599.8 1,913.3 1,446.9 864.4 1,514.5
Equity ratio (2) 5% 75% 29% 88.0% 92.9%
Equity per share (DKK)(3) 0.27 21.76 2.65 19.47 30.90
Average number of employees 130 117 74 46 26
Number of employees at the end of the year 62 141 86 57 34
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Management Report
In 2021, and until recently, the primary focus of Orphazyme was on seeking marketing authorization in
the United States and Europe for its investigational product candidate arimoclomol for the treatment of
Niemann-Pick disease type-C (NPC), preparing to commercialize arimoclomol in NPC, if approved, and
completing two late-stage clinical studies – a Phase 2/3 trial evaluating arimoclomol in Amyotrophic Lateral
Sclerosis (ALS) and a Phase 2/3 trial evaluating arimoclomol in inclusion body myositis (IBM).
Unfortunately, a number of unfavorable events occurred during 2021 and early 2022, which
significantly impacted our business.
In March 2021, we announced that our Phase 2/3 trial in IBM did not meet its primary and secondary
endpoints, and in May 2021 we announced that our Phase 3 trial in ALS did not meet its primary and secondary
endpoints. As a result, we ceased development in these indications. These clinical trials were some of the
largest and longest performed in these indications and we believe the data will contribute meaningfully to the
scientific dialogue in these diseases.
In June 2021, we received a Complete Response Letter (CRL) from the U.S. Food and Drug
Administration (FDA) for our New Drug Application (NDA) for arimoclomol in NPC. The CRL outlined the
need for additional qualitative and quantitative evidence to further substantiate the validity and interpretation of
the 5-domain NPC Clinical Severity Scale (NPCCSS) and, in particular, the swallow domain, in the context of
the FDA’s preferred and recommended statistical approach. Further, the FDA noted that additional data would
be needed to supplement confirmatory evidence beyond the single Phase 2/3 trial for NPC.
Following the CRL, we took swift and decisive action and in June 2021 we announced a restructuring
plan. We re-focused our activities and obligations on gaining approval for arimoclomol in NPC in Europe and
evaluating the regulatory path forward in the U.S. We significantly scaled back our global organization,
including teams based in the U.S. and Europe, with the purpose of reducing the number of employees to those
supporting essential activities including the regulatory processes in U.S. and Europe and our Early Access
Program (EAP).
Through the remainder of 2021, our team continued to work tirelessly despite the setbacks, building the
profile of arimoclomol with the scientific community In June 2021 we announced presentation of 24-month
interim results from the open-label extension (OLE) trial, providing efficacy and safety data for arimoclomol in
NPC for up to 36 months, at the Parseghian Scientific Conference for NPC Research and in August 2021 we
announced publication of data from the 12-month double-blind portion of the Phase 2/3 NPC-002 trial in the
Journal of Inherited Metabolic Disease (JIMD). Further, we held a Type A meeting with the FDA in October
2021, where the FDA recommended we submit additional data, information and analyses and engage in further
interactions to identify a pathway to resubmission of the NDA. In addition, we continued to engage with
European regulators as they evaluated our Marketing Authorisation Application (MAA).
We ended 2021 with DKK 102 million in cash and cash equivalents.
In January 2022, Christophe Bourdon, our Chief Executive Officer (CEO), resigned from his position
as CEO of Orphazyme to take on the role of CEO at another company. I was appointed CEO of Orphazyme,
effective March 1, 2022, in addition to my position as Chief Financial Officer (CFO).
In February 2022, we were notified of a negative trend vote by the European Medicine’s Agency
(EMA) Committee for Medicinal Products for Human Use (CHMP) relating to our MAA for arimoclomol in
NPC in Europe. We withdrew our MAA in March 2022, ahead of the CHMP’s final vote.
In light of our financial situation at the time and the negative trend vote from the CHMP, the Board of
Directors initiated in-court restructuring proceedings of Orphazyme under the Danish Insolvency Act, which
commenced on March 11, 2022. In accordance with the in-court restructuring proceedings, we published a
statutory restructuring plan on March 31, 2022, which was adopted by Orphazyme’s creditors on April 7, 2022
(the Statutory Restructuring Plan). The aim of the in-court restructuring proceedings was to explore whether a
basis could be established for all or part of our operations to continue, including a basis for injecting further
capital, and/or a basis for a sale of all or parts of our assets.
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Following initiation of the in-court restructuring proceedings, we voluntarily delisted our American
Depositary Shares (ADSs) representing Orphazyme’s ordinary shares from Nasdaq Global Select Market in the
U.S. and filed a Form 25 with the Securities and Exchange Commission (SEC) on March 21, 2022. The
delisting became effective on March 31, 2022 and deregistration of the ADSs is expected to become effective
approximately 90 days after the filing of the Form 25 with the SEC.
In accordance with the Statutory Restructuring Plan, in April 2022 we announced that we had received
certain non-binding offers to purchase all of our assets and operations. We subsequently entered into exclusive
negotiations with a selected potential buyer.
In May 2022, we announced that we had signed an agreement to sell substantially all of the Company’s
assets and business activities, including those relating to the development and approval of arimoclomol and the
full claw back liability related to the French early access program, to KemPharm Denmark A/S (KemPharm), a
wholly owned subsidiary of KemPharm Inc. for a total of USD 12.8 million in cash and assumed liabilities
estimated to equal approximately USD 5.2 million (the Sale of Assets). KemPharm is a specialty pharmaceutical
company focused on the discovery and development of novel treatments for rare central nervous system
diseases. Under the terms of the agreement, KemPharm agreed to acquire substantially all of Orphazyme’s
assets and business activities, including those relating to the development and approval of arimoclomol, retain a
majority of Orphazyme’s remaining Danish employees, continue the early access programs with arimoclomol
and pursue the potential approval of arimoclomol as a treatment option for NPC.
Following the signing of the agreement with KemPharm, we submitted a restructuring proposal to the
Danish Maritime and Commercial High Court and Orphazyme’s known creditors, which amongst other things,
included a proposal to complete the Sale of Assets to KemPharm. The restructuring proposal was approved on
May 30, 2022 by Orphazyme’s known creditors and affirmed by the Danish Maritime and Commercial High
Court. Following the approval of the restructuring proposal, the in-court restructuring proceedings were
discontinued with immediate effect on May 30, 2022 and the Sale of Assets was completed on May 31, 2022.
Completion of the Sale of Assets is expected to provide full coverage to creditors with undisputed claims based
on the claims filed during the restructuring. All (undisputed and unconditional) debts related to the time prior to
restructuring have been or will be paid in full, including all obligations outstanding under the Company’s debt
facility with Kreos Capital.
As substantially all of our assets and business activities have been sold to KemPharm, we have limited
ongoing operational business activities. Considering this, we announced that Stephanie Okey, Carrolee Barlow
and Martin Bonde stepped down from their positions as members of the Board of Directors as of May 23, 2022
with the view to reduce the number of members on our Board of Directors.
I would like to extend my sincere thanks to our stakeholders, including our shareholders, partners,
collaborators, employees, patients and the NPC community, who have helped us make important scientific
advances in neurodegenerative rare diseases and in developing arimoclomol. I am delighted that KemPharm
will continue to move arimoclomol forward in the hope of making it available for NPC patients, and I wish
them, and the Orphazyme colleagues joining the company, every success in their mission to bring a new
therapeutic option to people living with NPC.
Anders Vadsholt
Chief Executive Officer & Chief Financial Officer
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2021 Financial Review
Income statement
The net loss for the financial year ended December 31, 2021 was DKK 626.5 million compared to DKK 633.2
million for the same period in 2020. The slight decrease in net loss was primarily driven by a restructuring of the
group during the year, with employee redundancies and termination of onerous contracts.
Net revenue
Net revenue for the year ended December 31, 2021 was DKK 36.2 million compared to DKK 0 million for the
year ended December 31, 2020. The increase was driven by the sale of arimoclomol under the remunerated early
access compassionate use program (former nATU) in France, that the Group entered during 2021.
R&D expenses
Research and development expenses for the year ended December 31, 2021 were DKK 330.0 million compared
to DKK 361.3 million for the year ended December 31, 2020. The decrease of DKK 31.3 million was primarily
driven by a restructuring of the group during the year, with employee redundancies and termination of onerous
contracts.
G&A expenses
General and administrative (G&A) expenses for the year ended December 31, 2021 were DKK 339.5 million
compared to DKK 247.3 million for the year ended December 31, 2020. The increase of DKK 92.2 million was
primarily due to the build-up of our commercial organization the first half of 2021 in preparation for potential
approval of arimoclomol for the treatment of NPC, as well as expenses related to increased costs for being a
listed company in the U.S. In the second half of 2021 the increase was primarily due to costs related to
restructuring activities.
Net financial items
Net financial income for the year ended December 31, 2021 was DKK 1.8 million compared to net financial
expense DKK 26.6 million for the year ended December 31, 2020. The increase of financial income DKK 28.4
million was mainly related to an increase in net foreign currency exchange gains of DKK 23.6 million primarily
due to an increase in the US dollar versus DKK.
Income tax benefit
Income tax benefit for the year ended December 31, 2021 was DKK 4.9 million compared to DKK 1.9 million
for the year ended December 31, 2020. Income tax benefit for the two periods include a tax credit for research
and development costs at the applicable tax rate under the Danish Corporate Income Tax Act. The amount of the
tax benefit in the year 2021 was reduced by an income tax expense in our subsidiaries in the U.S. and
Switzerland. Our corporate income tax rate in Denmark was 22%. However, for the year ended December 31,
2021 and 2020, we did not recognize any deferred tax assets in Denmark considering uncertainties surrounding
their potential utilization.
Statement of financial position
Cash: As of December 31, 2021, Orphazyme had cash of DKK 102.3 million compared to DKK 726.9 million
as of December 31, 2020. The decrease in cash was primarily due to the negative cash flow from the operating
activities in 2021.
Equity: As of December 31, 2021, total equity amounted to DKK 9.3 million compared to DKK 620.5 million
as of December 31, 2020. The decrease mainly reflects the net loss in 2021.
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Cash flows
Cash flow from operating activities:
Net cash used in operating activities for the period ended December 31, 2021 was DKK 602.6 million compared
to DKK 539.1 million in the year ended December 31, 2020. The increased use of cash was primarily
attributable to the payments for the clinical activities and termination of the onerous contracts.
Cash flow from investing activities:
Net cash provided from investing activities for the period ended December 31, 2021 was DKK 46 thousand
compared to net cash used of DKK 5.1 million in the year ended December 31, 2020. The decrease in use of
cash in 2021 was mainly due to the high investment in the acquisition of the ERP system in 2020.
Cash flow from financing activities:
Net cash used by financing activities for the period ended December 31, 2021 was DKK 30.3 million compared
to net cash provided of DKK 1,159.4 for the year ended December 31, 2020. The decrease of net cash provided
DKK 1,189.8 million reflects the net proceeds from our directed issue and private placement in February 2020
and from our global offering and U.S. listing in October 2020.
Outlook
For the full-year 2022 we anticipate an operating profit in the range DKK 10 – 30 million. We expect to end
2022 with more than DKK 30 million in cash and equivalents. Following completion of the sale of substantially
all the Company’s assets and business activities to KemPharm in May 2022, Orphazyme has limited ongoing
operational business activities and only two employees. There are inherent risks and uncertainties in our
Outlook for 2022 given the recent closing of the KemPharm transaction, transfer of operating activities from
Orphazyme to KemPharm and our future prospects.
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Shareholder Information
The share
Orphazyme’s shares are listed on Nasdaq Copenhagen (since November 16, 2017) under the ticker symbol
ORPHA. Orphazyme previously had ADSs listed on Nasdaq Global Select Market under the ticker symbol
ORPH until the Company’s voluntary delisting of the ADSs, which became effective on March 31, 2022. In
addition, deregistration of the ADSs is expected to become effective approximately 90 days after the filing of
the Form 25 with the SEC, which occurred on March 21, 2022.
We conduct our communications in accordance with the applicable rules and regulations required under Danish,
EU and U.S. law, including as set forth by the Danish Financial Supervisory Authority, and the U.S. Securities
and Exchange Commission (“SEC”).
Ownership and share capital
As of December 31, 2021, the number of registered Shareholders totaled 12,191 shareholders holding a total of
33,142,640 shares, representing 94.82% of the total share capital of 34,952,241. As of December 31, 2021,
19,886,184 shares were represented by American Depositary Shares (ADS).
On November 4, 2021, Orphazyme established a U.S. At-the-Market Offering Program (ATM Program) with
Cowen and Company, LLC, pursuant to which Orphazyme may issue and sell ADSs having an aggregate
offering price of up to USD 50,000,000, each ADS representing one ordinary share of Orphazyme, to be sold in
the United States at market price, from time to time, at its option, in “at the market” transactions on Nasdaq
Global Select Market. On February 11, 2022, Orphazyme issued and sold a total of 360,000 shares of nominally
DKK 1 each, represented by ADSs, under the ATM Program entailing an increase of the share capital of a total
of 360,000 shares of nominally DKK 1 each. Following the share capital increase, Orphazyme’s share capital
amounts to a nominal value of DKK 35,312,241 divided into 35,312,241 ordinary shares of DKK 1 per share.
Reference is made to company announcements as published by Orphazyme on November 4, 2021 and February
18, 2022.
As of December 31, 2021 the Company has lost more than 50% of its share capital. At the Annual General
Meeting to be held on June 29, 2022, the Board of Directors will give an account of the Group’s financial
position. Please refer to note 1.6 for further information.
Shareholders rights and ADS holders
All ordinary shareholders have the same rights, including in respect of eligibility to receive dividends under the
Danish Companies Act.
Holders of ADSs evidenced by American Depositary Receipts (“ADRs”) do not have shareholder rights and
may not be able to exercise their right to vote the shares underlying the ADSs.
ADS holders have the contractual rights of an ADS holder, as provided in the deposit agreement among the
Company, the depositary and holders and beneficial owners of ADSs from time to time. As a result, ADS
holders may only exercise voting rights with respect to the shares underlying the ADSs in accordance with the
provisions of the de- posit agreement.
Orphazyme voluntarily delisted the Company’s ADSs representing its shares from Nasdaq Global Select Market
in the US, effective March 31, 2021. In addition, deregistration of the ADSs is expected to become effective
approximately 90 days after the filing of the Form 25 with the SEC, which occurred on March 21, 2022.
In connection with Orphazyme’s delisting of the ADSs representing its ordinary shares on Nasdaq Global Select
Market in the US, the Bank of New York Mellon, as depositary, has notified holders of ADSs evidenced by
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American Depositary Receipts (ADRs) that the Deposit Agreement will be terminated and as a result, the
existing ADR facility will be terminated effective at 5:00 PM (Eastern Time) on July 6, 2022. Under the terms
of the Deposit Agreement, ADR Holders have until at least July 11, 2022 to surrender their Orphazyme ADRs
for delivery of the underlying shares. If ADR Holders surrender ADRs for delivery of the underlying shares,
ADR Holders must pay a cable fee of $17.50, a cancellation fee of up to $0.05 per ADRs surrendered and any
applicable U.S. or local taxes or governmental charges. Payment should be made payable to the Depositary.
Subsequent to July 11, 2022 under the terms of the Deposit Agreement, the Depositary may attempt to sell the
underlying shares. If the Depositary has sold such shares, ADR Holders must surrender their ADRs to obtain
payment of the sale proceeds, net of the expenses of sale, any applicable U.S. or local taxes or government
charges and a cancellation fee of up to $0.05 per ADRs.
Dividend policy
Orphazyme has not declared or made any dividend payments for the last two financial years. The Company has
limited ongoing operational business activities and, as of the date of this annual report, does not expect to make
dividend payments within the foreseeable future.
Major Shareholders (>5% share capital)
LSP V Cooperatieve U.A., Johannes Vermeer, Plein 9, 1071 DV Amsterdam, Netherlands.
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Corporate Governance
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Risk Management
Our financial situation and risks are assessed on an ongoing basis and reported to the Audit Committee and the
Board of Directors. The risks presented below relate to the limited ongoing business operations of Orphazyme
following the sale of substantially all its assets and business activities to KemPharm Denmark A/S (KemPharm),
a wholly owned subsidiary of KemPharm Inc.
Pervasive risk: Lack of sufficient funding, business operations and human resources could impact our future
prospects.
Risks: Following the sale of substantially all our assets and business activities to KemPharm, which completed
on May 31, 2022, we have limited operating business activities and only two employees. As such our future
prospects are uncertain.
Pervasive risk: Non-compliance with legislation and industry standards.
Risks: We are subject to regulatory and legislative obligations in order to conduct business. These requirements
are subject to change and if we do not remain abreast of the regulations and actively work to comply, we are at
risk of receiving penalties or fines. There is also a risk that cybersecurity attacks could compromise data privacy
or cause interruption to our limited operations.
Our actions to mitigate the risks: In recent years, we have strengthened our IT-security procedures in order to
reduce the risk of cybercrime. We have in the past had internal training requirements for all employees and
contracting external suppliers, to ensure they have adequate measures in place to comply with relevant
regulatory requirements.
Pervasive risk: Retention of key personnel.
Risks: We may not be able to retain or attract key personnel and advisors to enable us to operate our business.
Specifically, we rely on the efforts of our Chief Executive Officer and Chief Financial Officer, Anders Vadsholt.
The loss of key personnel and advisors could require us to incur additional costs to recruit replacements, which
could have a material adverse effect on our business. While we have entered into an employment agreement
with our executive officer, Anders Vadsholt, we can make no assurances that he will continue to be employed.
Our actions to mitigate the risks: There are measures in our employment contracts designed to give us time
and flexibility to seek alternative solutions in the event of an executive departure. Anders Vadsholt has an
employment agreement which includes a six month notice period if Mr. Vadsholt wishes to end his employment
with us, and we can terminate his employment by giving 12 months’ notice.
Risks Related to the Sale of Assets
In May 2022, we sold substantially all of Orphazyme’s assets and business activities to KemPharm (the “Sale of
Assets”) on an “as-is” basis and we have not given any substantial representations or warranties in favor of
KemPharm. While we are not aware of any outstanding matters that would reasonably form a basis for a claim
related to the Sale of Assets, if we become subject to liability based upon our contractual obligations to
KemPharm or otherwise, it could have a material adverse effect on our financial position.
Risks related to securities litigation.
Risks: We have been and may in the future be the target of securities litigation which could result in substantial
costs and divert our management’s attention from other business concerns, which could seriously harm our
business.
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Our actions to mitigate the risks: On July 9, 2021, a putative class action lawsuit was filed against the
Company and certain of its current and former directors and officers in the United States District Court for the
Northern District of Illinois. This lawsuit alleges that certain representations about arimoclomol in the
Company’s U.S. IPO offering documents and in subsequent public statements were false and misleading, in
violations of U.S. securities. Orphazyme does not believe these claims have merit and intends to vigorously
defend itself against the lawsuit.
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Corporate Social Responsibility
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Social / Employees
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Data Ethics
Diversity metrics
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Covid-19
The COVID-19 pandemic continued to restrict the world’s activities during 2021. We supported our employees
with work-from-home and hybrid-working, IT support, COVID-19 testing, and various other initiatives aimed at
keeping our business operating successfully and our team healthy and engaged. There was no material impact
directly related to COVID-19 on the Group’s consolidated financial statements, including the judgements and
estimates applied.
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Board of Directors and Executive
Management
Board of Directors
Georges Gemayel, Chairman of the Board
• Member since: 2012 (Chairman, 2014)
• Born in: 1960
• Nationality: American
• Committees: Audit; Remuneration; Nomination
Special competencies: Dr Gemayel has significant management and executive experience from the global
pharmaceutical industry. He holds a Master's and PhD in Pharmacology from Paris-Sud University and a
Docteur d’Exercice en Pharmacie, St. Joseph University.
Current positions: Interim CEO and Chairman of the Board of Gemini Therapeutics, Chairman of the Board of
Dynacure, Enterome SA, and OxThera AB, and a member of the Board of Directors of Supernus
Pharmaceuticals Inc. (publ).
Bo Jesper Hansen, Deputy Chairman of the Board
• Member since: 2010 (Deputy Chairman, 2017)
• Born in: 1958
• Nationality: Danish
• Committees: Remuneration (Chair); Nomination (Chair); Audit
Special competencies: Dr Hansen has extensive experience in orphan drugs, both from the operations and
supervisory point of view and has broad and current know-how of the biotechnology environment. He holds an
MD and a PhD in Medicine from the University of Copenhagen.
Current positions: Chairman of the Board of Laborie Inc., Deputy Chairman of SOBI AB, member of the
Board of directors Innoventa Medica ApS, and Reapplix A/S. Venture Partner at Wellington Partners; Advisory
Consultant for Aescap 2.0, Nordic Capital, EQT AB and Broad Street Principal Investments Europe Ltd. &
senior business advisor for HBM Ventures Ltd.
Andrew Mercieca
• Member since: 2022
• Born in: 1966
• Nationality: British
• Committees: Audit (Chair), Remuneration
Special competencies: Andrew has extensive experience in International Finance and across Life Science and
Technology sectors in corporate, private and non-profit organizations. He has an exceptional track record of
driving business performance, changing and optimizing finance functions, leveraging the use of technology,
building strong teams, and ensuring agile and effective risk management. He holds a BA in Accounting and
Finance from the University of Portsmouth and is a fellow of the Institute of Chartered Accountants in England
& Wales.
Current positions: Director of Octant Limited, providing Financial Consultancy services.
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Executive Management
Anders Vadsholt, Chief Executive Officer, Chief Financial Officer
• Born in: 1969
• Nationality: Danish
Anders joined Orphazyme in May 2016 as Chief Financial Officer, and took the position of Chief Executive
Officer, in addition to his role as Chief Financial Officer, March 1, 2022.
Anders has 25+ years’ experience from biotech and corporate finance. Previously he was at Topotarget,
BankInvest Biomedical Venture and Carnegie Investment Bank.
Anders is currently owner of Alpha Healthcare Investments ApS.
Anders holds a BSc in Corporate Law from the University of Aalborg, an MBA in Finance and Strategy from
the University of Melbourne, and an MSc in Corporate Law and Economics from Copenhagen Business School.
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Corporate information
Commercial bankers
Danske Bank
Holmens Kanal 2-12
DK-1092 Copenhagen K
Nordea
Vesterbrogade 8
DK-1620 Copenhagen
BNY Mellon
240 Greenwich St New York, NY
10286 USA
Annual Report
This annual report will be available on www.orphazym e.com and printed copies are available upon request.
Annual General Meeting
Information about our Annual General Meeting can be found in the section for Investors & Media at
www.orphazyme.com under Events & Presentations and General Meetings.
26
2021 Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
For the years ended December 31,
DKK 000, except per share and share data
Note
2021
2020
2019
Net revenue
2.1
Research and development expenses
2.2, 2.3
(329,980
)
(361,284
)
(285,413
)
General and administrative expenses
2.4
(339,516
)
(247,250
)
(50,541
)
Operating loss
(633,303
)
(608,534
)
(335,954
)
Financial income
2.7
Financial expenses
2.7
(10,609
)
(29,071
)
(7,359
)
Loss before tax
(631,480
)
(635,161
)
(342,997
)
Income tax benefit
2.8
Net loss for the year
(626,539
)
(633,246
)
(337,497
)
Items that will be reclassified subsequently to the
Statement of Profit or Loss:
Exchange difference from translation of foreign
operations
(302
)
Total comprehensive loss
(626,841
)
(632,641
)
(337,430
)
Weighted-average shares outstanding
Loss per share, basic and diluted (DKK)
4.3
(17.94
)
(22.32
)
(16.87
)
The accompanying notes form an integral part of these consolidated financial statements.
27
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As of December 31,
DKK 000
ASSETS
Note
2021
2020
Non-current assets
Intangible assets
3.1
Right-of-use assets
3.2
Property, plant, and equipment
3.3
Corporation tax receivable
2.8
Deferred tax assets
2.8
Prepayments and deposits
3.4
Total non-currents assets
Current assets
Corporation tax receivable
2.8
Trade receivables
3.5
Prepayments and other receivables
3.4
Inventory
3.6
Cash
3.8
Total current assets
Total assets
EQUITY AND LIABILITIES
Note
2021
2020
Equity
Share capital
4.2
Share premium
Other reserves
Accumulated deficit
(2,110,998
)
(1,502,921
)
Total equity
Non-current liabilities
Borrowings
3.7
Lease liabilities
3.2
Discount and rebate liabilities
3.7
—
Other non-current liabilities
3.7
Total non-current liabilities
Current liabilities
Provisions
Borrowings
3.7
Lease liabilities
3.2
Trade payables and accruals
3.7
Tax payables
2.8
Discount and rebate liabilities
3.7
—
Other liabilities
3.7
Total current liabilities
Total equity and liabilities
The accompanying notes form an integral part of these consolidated financial statements.
28
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
DKK 000
Other reserves
Notes
Share
capital
Share
premium
Foreign
currency
translation
reserve
Share-based
compensation
– acquisition
of intangible
assets
Accumulated
deficit
Total
Balance as of December 31, 2018
(564,823
)
Net loss for the year
(337,497
)
(337,497
)
Other comprehensive income (loss)
Total other comprehensive income (loss)
(337,497
)
(337,430
)
Transactions with owners:
Capital increase in connection with issuance of bonus shares
3.1
(1,197
)
Issuance of Matching Shares, net of costs
2.6
Share-based compensation expense
2.6
Total transactions with owners
(1,197
)
Balance as of December 31, 2019
(899,018
)
Net loss for the year
(633,246
)
(633,246
)
Other comprehensive income
Total other comprehensive income (loss)
(633,246
)
(632,641
)
Transactions with owners:
Capital increase in connection with issuance of bonus shares
3.1
(2,094
)
Capital increase in connection with exercise of RSUs
4.2
Capital increase related to directed issue and private placement
4.2
Transaction costs related to directed issue and private placement
(51,243
)
(51,243
)
Capital increase in connection with US listing
4.2
Transaction costs related to the US listing
(56,616
)
(56,616
)
Issuance of Matching Shares, net of costs
2.6
Share-based compensation expense
2.6
Total transactions with owners
(2,094
)
Balance as of December 31, 2020
(1,502,921
)
Net loss for the year
(626,539
)
(626,539
)
Other comprehensive income
(302
)
(302
)
Total other comprehensive income (loss)
(302
)
(626,539
)
(626,841
)
Transactions with owners:
Capital increase, issuance of Matching Shares, net of costs
4.2
Capital increase, Bonus Shares
3.1
(1,645
)
Cash settlement of Bonus Shares
3.1
(1,648
)
(1,648
)
Capital increase, issuance of sign-on bonus shares to former CEO
4.2
Capital increase, exercise of RSUs
4.2
Share-based compensation expense
2.6
Total transactions with owners
(3,293
)
Balance as of December 31, 2021
(2,110,998
)
The accompanying notes form an integral part of these consolidated financial statements.
29
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31,
DKK 000
Note
2021
2020
2019
Net loss
(626,539
)
(633,246
)
(337,497
)
Reversal of non-cash items:
Equity-settled share-based compensation expense
2.6
Depreciation and amortization
2.2, 2.4
Financial income
(12,432
)
(2,444
)
(316
)
Financial expenses
Income tax benefit
(4,941
)
(1,915
)
(5,500
)
Exchange rate adjustments
Change in working capital:
Change in prepayments, deposits, and other receivables
3.4, 3.5
(33,662
)
Change in trade payables, accruals, and other liabilities
3.7
(3,758
)
(2,844
)
Corporation taxes received
Corporation taxes paid
(1,738
)
(1,431
)
Interest received
Interest paid
(6,263
)
(10,723
)
(5,181
)
Net cash used in operating activities
(602,571
)
(539,076
)
(326,818
)
Investing activities
Purchase of intangible assets
3.1
(902
)
(2,736
)
(508
)
Purchase of property, plant, and equipment
3.3
(92
)
(2,365
)
(2,777
)
Proceeds from sale of property, plant and equipment
Net cash used in investing activities
(5,101
)
(3,285
)
Financing activities
Proceeds from borrowings
3.7
Repayment of borrowings
(25,657
)
(10,535
)
Repayment of lease obligations
3.2
(3,503
)
(2,970
)
(3,838
)
Proceeds from issuance of shares
Cash settlement of Bonus Shares
(1,648
)
Transaction costs related to issuance of shares
(107,859
)
Net cash provided by financing activities
(30,344
)
Net change in cash
(632,869
)
(271,164
)
Effects of changes in exchange rates
(11,904
)
Cash at the beginning of the year
Cash at the end of the year
The accompanying notes form an integral part of these consolidated financial statements.
30
Notes to Financial Statements
SECTION 1 Basis of preparation and significant accounting policies
1.1 CORPORATE INFORMATION
Orphazyme A/S (the “Company”) was, as of December 31, 2021 and until recently, involved in the
research and development of novel therapeutics for the treatment of neurodegenerative rare diseases, including
Niemann-Pick disease type C, or NPC.
The Company is headquartered in Copenhagen , Denmark and is publicly traded on Nasdaq
Copenhagen. In September 2020, the Company listed American Depositary Shares (ADSs) on the Nasdaq
Global Select Market. In March 2022, Orphazyme A/S initiated voluntary delisting of the ADSs representing its
shares from Nasdaq Global Select Market in the US. It is expected that deregistration of the ADSs will become
effective approximately 90 days after the filing of the Form 25 with the SEC, which occurred on March 21,
2022.
In April 2018, a wholly-owned subsidiary, Orphazyme U.S., Inc., was incorporated in Delaware, USA
and in March 2020, a wholly-owned subsidiary, Orphazyme Schweiz GmbH, was incorporated in Zug,
Switzerland (together with Orphazyme A/S, “Orphazyme” or “the Group”).
In February 2022, Orphazyme announced that it had been notified by the Committee for Medicinal
Products for Human Use (CHMP) of the European Medicines Agency (EMA) of a negative trend vote as part of
the ongoing review of the Marketing Authorisation Application (MAA) for its investigational product candidate,
arimoclomol, for the treatment of Niemann-Pick disease type C (NPC) following an oral explanation.
In light of the negative trend vote and considering Orphazyme’s financial situation at the time, the
Board of Directors of Orphazyme filed a petition for an in-court restructuring of Orphazyme, which commenced
in March 2022.
In May 2022, as part of the in-court restructuring proceedings, Orphazyme sold substantially all of its
assets and business activities to KemPharm Denmark A/S (KemPharm), a wholly owned subsidiary of
KemPharm Inc., a specialty pharmaceu tical company focused on the disco very and development of novel
Danish employees. The in-court restructuring proceedings were discontinued on May 30, 2022.
As of the date of publication of this annual report, Orphazyme has limited ongoing operational business
activities and only two employees.
These consolidated financial statements were approved and authorized for issuance by the Board of
Directors on June 7, 2022.
Information on COVID-19
As of 31 December 2021 and as of the date of publication of the annual report, there is no material impact
directly related to COVID-19 on the Group’s consolidated financial statements, including the judgements and
estimates applied. Specifically, following the sale of substantially all of its assets and business activities to
KemPharm, Orphazyme is no longer involved in the conduct of clinical trials and has limited operational
business activities and employees. Other parts of the business and operations may be adversely impacted by the
effects of COVID-19, for example: the productivity of our staff; our relationships with vendors and other parties
and significant disruption of global financial markets. We will continue to monitor the COVID-19 pandemic and
its potential impact on our business and financials.
1.2 BASIS OF PREPARATION
The consolidated financial statements of the Group and parent company financial statements have been
prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International
Accounting Standards Board (IASB) and in conformity with IFRS as adopted by the European Union (EU). All
entities in the Orphazyme Group follow the same Group accounting policies.
31
The consolidated financial statements and parent company financial statements have been prepared on
a going concern basis and are presented in Danish Kroner, or DKK, which is both the functional and
presentation currency of the Company. The functional currency of Orphazyme US, Inc. is the US dollar (USD)
and the functional currency of Orphazyme Schweiz GmbH is the Swiss Franc (CHF). Where indicated, amounts
are rounded to the nearest thousand.
Materiality
The consolidated financial statements and parent company financial statements are prepared based on
the concept of materiality, which considers both quantitative and qualitative factors. Items that are considered
individually significant or are required under the minimum presentation requirements of IFRS are presented
separately. If items are individually immaterial, they are aggregated with other items of similar nature in the
financial statements or in the notes.
1.3 SIGNIFICANT ACCOUNTING POLICIES
A detailed description of accounting policies and significant accounting estimates and judgements
related to specific financial statement line items is presented in each note to the relevant line item. The
consolidated financial statements and parent company financial statements have been prepared on a historical
cost basis except for share-based compensation and the embedded derivative in our borrowings, which is
measured at fair value.
Principles of consolidation
The consolidated financial statements of the Group include the financial statements of the parent
company, Orphazyme A/S (the “Parent Company”), Orphazyme US, Inc. and Orphazyme Schweiz GmbH,
fully-owned subsidiaries over which the Parent Company has control. A company controls an entity when the
company (i) is exposed to, or has rights to, variable returns from its involvement with the entity, (ii) has power
over the entity (i.e. existing rights that give it the current ability to direct the activities of the entity), and (iii) has
the ability to use its power to affect the returns of the entity. The Parent Company reassesses whether it controls
an entity if facts and circumstances indicate that there are changes to one or more of the three elements of
control. Consolidation of an entity begins when the Parent Company obtains control and ceases when the Parent
Company has lost control of the entity. On consolidation, intercompany income and expenses, intercompany
receivables, and payables, and unrealized gains and losses on transactions between the consolidated companies
are eliminated.
Translation of foreign currencies
Items included in the financial statements of each of the Orphazyme entities are measured using the
currency of the primary economic environment in which the entity operates, or functional currency. On initial
recognition, transactions denominated in foreign currencies are recorded using the foreign exchange spot rate at
the transaction date. For monetary assets and liabilities, differences arising between the foreign exchange spot
rates at the transaction date and the date of settlement or period-end exchange rates are recognized in the
Statement of Profit or Loss as financial income or financial expenses. On consolidation, the assets and liabilities
of Orphazyme US, Inc. and Orphazyme Schweiz GmbH are translated from the subsidiary’s functional currency
to DKK at the exchange rate in effect at the balance sheet date and the Statement of Profit or Loss and Other
Comprehensive Income is translated from the subsidiary’s functional currency to DKK at the date of the
underlying transaction or average exchange rate of the period if there are no significant fluctuations in exchange
rate throughout the period. The exchange rate differences arising on translation for consolidation are recognized
in other comprehensive income (loss).
Statement of cash flows
The statement of cash flows is presented using the indirect method and shows cash flows resulting
from operating activities, investing activities, financing activities, and the Group’s cash at the beginning and end
of the year, including any effects of exchange rate changes.
Cash flows used in operating activities converts items in the Statement of Profit or Loss from the
accrual basis of accounting to the cash basis of accounting. Non-cash items such as foreign exchange gains and
losses, depreciation, amortization, and changes in working capital are reversed from the net loss for the year and
actual cash receipts and payments are included.
32
Cash flows from investing activities shows payments related primarily to the purchase of licenses and
property, plant, and equipment.
Cash flows from financing activities shows proceeds from share issuance, borrowings, net of
transaction costs, repayment of debt, and lease payments.
Segment information
Although Orphazyme established a US subsidiary in 2018 and a Swiss subsidiary in 2020, the Group is
managed and operated as one business unit that is reflected in the internal reporting. No separate lines of
business or separate business entities have been identified with respect to any product candidate or geographical
market and no segment information is currently disclosed in the Group’s internal reporting. For the years ended
December 31, 2020 and 2019, the Group generated no revenue and for the year ended December 31, 2021 the
Danish entity generated revenue which is disclosed in a separate note. For the years ended December 31, 2021,
2020 and 2019 all material non-current assets are located in Denmark.
1.4 SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS
The use of reasonable estimates and judgements is an essential part of the preparation of the
consolidated financial statements and parent company financial statements. Given the uncertainties inherent in
the Group’s business activities, Management must make certain significant accounting estimates and
judgements, which affect the application of accounting policies and therefore the reported amounts of assets,
liabilities, expenses, and disclosures in the consolidated financial statements and parent company financial
statements. The significant accounting estimates and judgements identified are those that have a significant risk
of resulting in a material adjustment to the consolidated financial statements. Management bases its estimates on
historical experience, assumptions, and information currently available and deemed to be reasonable at the time
the consolidated financial statements are prepared. However, actual amounts may differ from the estimated
amounts as more detailed information becomes available. Estimates and assumptions are reviewed on an
ongoing basis and, if necessary, changes are recognized in the period in which the estimate is revised.
Management has made significant accounting estimates and judgements in the following areas, which are
further presented in each note to the relevant financial statement line items:
• Estimate of net revenue and clawback liability recognized using the ‘expected value’ method
(Note 2.1)
• Estimate of research and development expenses associated with clinical trials (Note 2.3) and
related prepayments (Note 3.4) and accruals (Note 3.6)
• Estimate of inputs and assumptions used in share-based compensation valuation models (Note 2.6)
• Estimate of the fair value of licenses (Note 3.1)
• Estimate relating to the incremental borrowing rate to measure lease liabilities (Note 3.2)
• Judgement and estimate relating to pre-launch drug product inventory (Note 3.5)
• Judgement regarding the recognition of deferred tax assets related to taxable losses to be carried
forward (Note 2.8)
• Judgement regarding management’s assessment of the company’s ability to continue as a going
concern (Note 4.1)
Please refer to the specific referenced notes for further information on the significant accounting
estimates and judgements as well as assumptions applied.
1.5 NEW IFRS STANDARDS APPLICABLE TO THE GROUP
The Group applied for the first-time certain standards and amendments, which are effective for annual
periods beginning on or after 1 January 2021 (unless otherwise stated). The Group has not early adopted any
other standard, interpretation or amendment that has been issued but is not yet effective.
33
Interest Rate Benchmark Reform – Phase 2: Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
The amendments provide temporary reliefs which address the financial reporting effects when an
interbank offered rate (IBOR) is replaced with an alternative nearly risk-free interest rate (RFR). The
amendments include the following practical expedients:
• A practical expedient to require contractual changes, or changes to cash flows that are directly
required by the reform, to be treated as changes to a floating interest rate, equivalent to a
movement in a market rate of interest
• Permit changes required by IBOR reform to be made to hedge designations and hedge
documentation without the hedging relationship being discontinued
• Provide temporary relief to entities from having to meet the separately identifiable requirement
when an RFR instrument is designated as a hedge of a risk component
These amendments had no impact on the consolidated financial statements of the Group. The Group
intends to use the practical expedients in future periods if they become applicable.
Covid-19-Related Rent Concessions beyond 30 June 2021 Amendments to IFRS 16
On 28 May 2020, the IASB issued Covid-19-Related Rent Concessions - amendment to IFRS 16
Leases. The amendments provide relief to lessees from applying IFRS 16 guidance on lease modification
accounting for rent concessions arising as a direct consequence of the Covid-19 pandemic. As a practical
expedient, a lessee may elect not to assess whether a Covid-19 related rent concession from a lessor is a lease
modification. A lessee that makes this election accounts for any change in lease payments resulting
from the Covid-19 related rent concession the same way it would account for the change under IFRS 16 if the
change were not a lease modification.
The amendment was intended to apply until 30 June 2021, but as the impact of the Covid-19 pandemic
is continuing, on 31 March 2021, the IASB extended the period of application of the practical expedient to 30
June 2022. The amendment applies to annual reporting periods beginning on or after 1 April 2021. However, the
Group has not received Covid-19-related rent concessions, but plans to apply the practical expedient if it
becomes applicable within the allowed period of application.
New IFRS Standards not yet effective
The IASB has issued a number of new standards and updated some existing standards, which are effective for
accounting periods beginning January 1, 2022 or later. Therefore, they are not incorporated in these
consolidated financial statements and parent company financial statements. There are no standards presently
known that are not yet effective and that would be expected to have a material impact on our current or future
reporting periods.
1.6 SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD
In January 2022, Christophe Bourdon resigned his position Chief Executive Officer of Orphazyme, to
take on the role of CEO at another company. Anders Vadsholt was appointed CEO of Orphazyme, effective
March 1, 2022 in addition to his position as Chief Financial Officer.
In February 2022, the Company issued new shares as a result of the utilization of the Company’s U.S.
At-the-Market Offering Program with Cowen and Company, LLC (“Cowen”). On February 11, 2022, a total of
360,000 ordinary shares of nominally DKK 1 each, represented by American Depositary Shares (“ADSs”), were
issued by the Company and sold in the market by Cowen as the sales agent at market price as determined by the
Company’s Board of Directors in accordance with the authorization in article 3.1 of the Company’s Articles of
Association. Gross proceeds from the issue of new shares was USD835,668.00.
In February 2022, Andrew Mercieca was elected as new member of the Board of Directors at the
Extraordinary General Meeting.
34
In February 2022, the Company was notified of a negative trend vote by the European Medicines
Agency’s (EMA) Committee for Medicinal Products for Human Use (CHMP), for its Marketing Authorisation
Application (MAA) for arimoclomol for NPC, causing the Company to initiate in-court restructuring
proceedings in March 2022.
During the restructuring proceedings, mass redundancies took place and employees were released from
their duties to reduce payroll costs. The MAA filed with EMA was withdrawn in March 2022. In addition, the
Company initiated voluntary delisting of the ADSs representing its ordinary shares from Nasdaq Global Select
Market in the US, which became effective in March 2022. It is expected that deregistration of the ADSs will
become effective approximately 90 days after the filing of the Form 25 (Notification of Removal From Listing
and/or Registration under Section 12(b) of the Securities Exchange Act of 1934) with the SEC, which occurred
on March 21, 2022.
In May 2022, the Company announced that it had signed an agreement to sell substantially all of the
Company’s assets and business activities, including those relating to the development and approval of
arimoclomol and the full claw back liability related to the French early access program, to KemPharm Denmark
A/S (KemPharm), a wholly owned subsidiary of KemPharm Inc., for a total of USD 12.8 million in cash and
assumed liabilities estimated to equal approximately USD 5.2 million (the Sale of Assets). KemPharm is a
specialty pharmaceutical company focused on the discovery and development of novel treatments for rare
central nervous system diseases. Under the terms of the agreement, KemPharm agreed to acquire substantially
all of Orphazyme’s assets and business activities, including those relating to the development and approval of
arimoclomol, retain a majority of Orphazyme’s remaining Danish employees, continue the early access
programs with arimoclomol and pursue the potential approval of arimoclomol as a treatment option for NPC.
The transaction has been considered a non-adjusting event and did not indicate any impairment of assets for the
year ending December 31, 2021.
The Restructuring Proposal was adopted by the creditors and affirmed by the Danish Maritime and
Commercial High Court May 30
th
2022. The restructuring proceedings were discontinued on May 30, 2022 and
by completing the Sale of Assets to KemPharm Denmark A/S on May 31, 2022. Orphazyme will pay its debts to
the creditors in accordance with the Restructuring Proposal.
In May 2022, Stephanie Okey, Carrolee Barlow and Martin Bonde stepped down from their positions
as members of the Board of Directors, with the view to reduce the number of members of the Board of Directors
to three members.
In June 2022, Orphazyme A/S repaid the full remaining loan to Kreos Capital VI (UK) Ltd. At the
repayment all pledges and securities withdrew. All (undisputed and unconditional) debts related to the time prior
to restructuring have been or will be paid in full in the coming months.
Orphazyme’s current share-based compensation programs are expected to have a limited value, due to
the decreasing share price and the disclosed Sale of Assets.
SECTION 2 Result of the Year
2.1 NET REVENUE
§ ACCOUNTING POLICIES
Orphazyme recognizes revenue when fulfilling its performance obligation by transferring control of
promised goods or services to its customer, in an amount that reflects the consideration that the entity expects to
receive in exchange for those goods or services. Revenue is recognized net of sales deductions, including
discounts and rebates and revenue based taxes. Orphazyme recognizes revenue in accordance with IFRS 15
Revenue from Contracts with Customers and, as a result, follows the five-step model when recognizing revenue:
1) identifying a contract; 2) identifying the performance obligations; 3) determining the transaction price; 4)
35
allocating the price to the performance obligations; and 5) recognizing revenue when the performance
obligations have been fulfilled.
Net revenue comprises revenue from the sale of arimoclomol for the treatment of NPC under the
remunerated early access compassionate use program (“nATU”) in France. An early access compassionate use
program is a program giving specific patients access to a drug, which is not yet approved for commercial sale.
Only drugs targeting serious or rare indications and for which there is currently no appropriate treatment are
considered for early access compassionate use programs. Further, to be considered for the early access
compassionate use program, the drug must have proven efficacy and safety and must either be undergoing price
negotiations or seeking marketing approval.
Revenue is recognized when the drug products are sold to the customer, i.e., at the time when control
over the drug product is transferred to the third-party customer. Under the French nATU, the manufacturer can
set its own price for the drug products until a price agreement with the authorities is in place. Any excess in the
price charged by the manufacturer compared to the price agreed with the health authorities once the drug
product is approved in France must be repaid. The repayment is considered in the clawback liability. The
liability is disclosed in note 3.7, which also explains the net to gross revenue.
All sales and distributions of arimoclomol are included in the service agreement with Clinigen Health
Limited, who keep Orphazyme goods on a consignment stock until it is transferred to third-party customer.
The following table presents net revenue for the years ended December 31:
DKK 000
2021
2020
2019
Revenue by type
Revenue from sale of goods
36,193
—
—
Revenue by partner
Clinigen Health Limited
36,193
—
—
Geographical areas
France
36,193
—
—
Estimate of net revenue and clawback liability recognized using the ‘expected value’ method
Accounting for net revenue and clawback liability requires determination of the most appropriate
method for the expected final transaction price, which depends on the terms and conditions in the contracts with
the French Health Authorities, and is subject to price negotiations with the French Health Authorities, following
a market approval. This estimate also requires assumptions in respect inputs to the method, including current
pricing of comparable marketed products within the rare decease area in France. Management has considered
the expected final sales price as well as the price of similar drug products.
Management has based their initial sales prices on comparable drug products for arimoclomol, and
the estimate of the clawback liability on the basis of the average cost of treatment which the Authorities are
expected to cover.
In the estimate for clawback liability, Management have applied relevant available market data.
Management’s assumptions are based on available relevant market information regarding average treatment
cost of the most comparable drugs possible in the rare disease area in Europe. The Company is operating
within rare disease therapeutic area where there is unmet treatment need and hence a limited number of
comparable commercialized drugs products. The limited available relevant market information for directly
comparable commercialized drugs within rare deceases increases the uncertainty in managements estimate.
However, as mentioned in note 1.6 and 3.7, the clawback liability has been transferred to Kempharm at the
carrying amount subsequently to the balance sheet date and on the basis of the amounts estimated by
management.
2.2 RESEARCH AND DEVELOPMENT EXPENSES
§ ACCOUNTING POLICIES
Research expenses comprise of costs incurred during the very early stages of the drug development
cycle from initial drug discovery until the drug is ready for administration to humans. The activities initially
focus on identifying a single drug candidate with a profile that will support a decision to initiate development
activities. Before selection of the final drug candidate, it is tested in animals to gather efficacy, toxicity and
pharmacokinetic information.
36
Development expenses comprise costs incurred during the different phases of clinical drug
development starting in phase 1, when the drug is administered to humans for the first time, through phases 2
and 3, and subsequent activities to obtain marketing authorizations, which will permit Orphazyme to eventually
market and sell the drug products.
In line with industry practice, Orphazyme expenses all research costs. Development costs that do not
meet the definition of an asset are also expensed as incurred. Due to regulatory and other uncertainties inherent
in the development of new products, development costs do not qualify for capitalization as intangible assets
until marketing approval by a regulatory authority is obtained or highly probable. In addition, pre-launch
inventory costs are recognized under Research and Development (see Note 3.6). Cost of goods sold relating to
products sold are included in the cost recognized under Research and Development.
Clinical trial costs are a significant component of research and development expenses. The Group’s
clinical trials are performed by third-party Contract Research Organizations (CROs) and in order to estimate the
amount of costs to charge to expense Management has developed expense models for each clinical trial based on
estimates and assumptions.
The clinical trials generally have three distinctive stages.
• Start-up stage: initial setting up of the trial
• Treatment stage: site and trial management during the dosing period
• Wrap-up stage: close down and reporting of the trial
For each clinical trial for which information about the actual services delivered by the CRO are not
provided on a regular current basis, the Group reviews the approved budgets for the clinical trial from the
original executed agreements and categorizes the individual costs according to the three stages described above.
The start-up activities, which include site recruitment, regulatory applications and investigator meetings, usually
are performed reasonably uniformly throughout the start-up stage and the related costs are expensed ratably over
this stage, which reflects the manner in which related services are rendered by the CRO.
The start-up stage is followed by the treatment stage, during which patients are dosed with the drug
under study and results are monitored and measured. The costs incurred in this stage of the trial, which
comprises the major portion of the total cost of the clinical trial, is mainly driven by the number of enrolled
patients undergoing treatment. The Group estimates the costs attributable to activities performed in this stage of
the trial on a per-patient basis. These costs are expensed over the treatment stage as patients are enrolled and
undergo treatment, as reported by the CRO. After the last patient has been treated, the trial begins to be closed
down and activities are performed related to data quality assurance and analysis. These activities are performed
reasonably uniformly throughout the wrap-up stage and are expensed ratably over this last stage. Other costs,
such as central laboratory costs and drug supply costs, are expensed as incurred, which is typically when the
service has been rendered or the goods delivered.
CROs invoice the Group upon the occurrence of predetermined milestones (such as the enrollment of
patients); however, the timing of these invoices and the Group’s related payments often do not correspond
directly to the level of performance of contracted activities. To the extent payments are made by the Group in
advance of the related activities performed by the CROs, they are included in prepayments to vendors (see Note
3.4) and expensed in accordance with the expense model discussed above. To the extent that the payments are
made by the Group following the performance of the related activities, the expense is reflected as an accrual (see
Note 3.7) in accordance with the expense model.
Research and development expenses include costs arising from research and clinical development
activities including employee costs for research and development personnel (i.e. salaries, bonuses, employer
contributions to pension schemes, share-based compensation), legal expenses related to the protection, defense
and enforcement of the Group’s intellectual property, depreciation of right-of-use assets associated with
facilities and equipment used for research and development purposes, as well as close down and restructuring
37
costs for clinical trial close-out costs and employee redundancies. The following table presents research and
development expenses recognized for the years ended December 31:
DKK 000
2021
2020
2019
External costs
229,942
261,136
218,143
Employee costs (Note 2.5)
86,329
96,108
64,167
Depreciation, amortization and impairment (Notes 3.1, 3.2, 3.3)
13,709
4,040
3,103
Total research and development expenses
329,980
361,284
285,413
External costs comprise mainly expenses related to third party vendors providing services related to our
research and development activities and facility costs. External costs in 2021 include expense from write-down
of pre-launch inventory of DKK 80.2m (Note 3.6). Further, research and development expenses include costs
relating to products sold under the French early access compassionate use program.
Included in total research and development expenses is an amount of DKK 34.5 million attributable to
restructuring activities, i.e. clinical trial close-out costs and impairment of intangible assets (DKK 33.1 million)
and employee redundancies (DKK 1.4 million).
Estimate of research and development expenses associated with clinical trials
Accounting for clinical trial costs related to activities performed by Contract Research Organizations
(CROs) and other external vendors requires Management to make significant estimates regarding the timing of
the expense recognition of these costs. The diverse nature of services being provided by CROs, the different
compensation arrangements that exist for each type of service, and the limitation in the availability of
information related to when certain clinical activities are performed add complexity to the estimation of the
timing of expense recognition for services rendered by CROs and other vendors in connection with clinical
trials. In addition, the COVID-19 pandemic has increased the estimation uncertainty of clinical trial costs, in
particular the timing of the expense recognition due to potential delays in services being performed.
2.3 GOVERNMENT GRANTS
§ ACCOUNTING POLICIES
Government grants are recognized when there is reasonable assurance that the funding will be
received, and all underlying conditions will be fulfilled. Income from grants is recognized in the Statement of
Profit or Loss as a reduction of the related expenses being reimbursed in the period when the related expenses
are incurred.
Government grants comprise research funding from the Danish government and the European Union.
The grants received by Orphazyme provide reimbursement for certain project-specific research and
development expenses, including wages and salaries. During the year ended December 31, 2020, Orphazyme
was awarded a new government grant that provides for the reimbursement of one-third of research costs
incurred in connection with the new molecular entity project over the next two years. The maximum amount to
be reimbursed under this grant is DKK 5 million, which is to be reimbursed on a quarterly basis. During 2021,
Orphazyme has received grant and other funding of DKK 1.4 million (2020: DKK 0.0 million; 2019: 0.1
million).
As of the year ended December 31, 2021, the total amount receivable under government grants is DKK
0.0 million (2020: DKK 0.1 million) and is classified as Current Other Receivables in the Statement of Financial
Position, as all remaining funding from grants is receivable within the next year (Note 3.4). One grant had been
paid to Orphazyme in advance in a previous year and income related to this grant had been deferred in 2020
(DKK 0.0 million) and 2019 (DKK 0.1 million). The deferred income was presented in the Statement of
Financial Position as current other liabilities (Note 3.7). As of December 31, 2021, all income related to that
grant has been recognized.
All the grants received are subject to repayment clauses upon breach of conditions to maintain the
terms under which the grant was awarded. Orphazyme has complied with and anticipates continuing to fully
comply with all such terms.
38
With reference to note 1.6, significant events have occurred after the reporting period, which is relevant
in the understanding of this item. The events disclosed in note 1.6 have not been taking into account in the
current reporting period.
2.4 GENERAL AND ADMINISTRATIVE EXPENSES
§ ACCOUNTING POLICIES
General and administrative expenses include salaries for our employees working on pre-launch
preparation activities as well as administrative employees and Executive Management; remuneration to the
Board of Directors; share-based compensation costs related to such employees and the Board; depreciation of
right-of-use assets associated with facilities not used for research and development purposes, investor relations,
and accounting and legal fees. In addition, we include costs incurred in pre-launch preparation activities such
as market access, marketing, and medical affairs in general and administrative expenses, including the costs
associated with the Early Access Program for NPC in the U.S., tradename costs, market and pricing studies and
related costs.
The following table presents general and administrative expenses for the years ended December 31:
DKK 000
2021
2020
2019
External costs
192,913
118,971
23,847
Employee costs (Note 2.5)
142,201
127,120
25,995
Depreciation (Notes 3.2 and 3.3)
4,402
1,159
699
Total general and administrative expenses
339,516
247,250
50,541
External costs comprise expenses related to third party vendors providing assistance with establishing a
commercial organization and the escalation of launch preparation activities, including hiring a commercial team
in our subsidiaries in the U.S. and Switzerland, market access activities, and medical affairs activities to further
engage with the scientific community through communication and education programs. In addition, external
costs comprise expenses related to administrative services such as legal and accounting support, IT, and investor
relations. In 2021 costs as well comprise expenses related to restructuring activities, i.e. employee redundancies
and termination of onerous contracts.
Included in these amounts is DKK 12.1 million attributable to restructuring activities, i.e. employee
redundancies (DKK 11.4 million) and termination of onerous contracts (DKK 0.7 million).
2.5 EMPLOYEE COSTS
§ ACCOUNTING POLICIES
Employee costs primarily comprise salaries, bonuses, social security contributions, share-based
compensation, vacation and sick leave as well as the employer portion of pension contributions. In addition,
severance payments or termination benefits are also included under Employee Costs. The cost of these benefits
is recognized as an expense as services are received. All employee pension plans are defined contribution plans
and not defined benefit plans.
Employees are eligible to receive a discretionary bonus subject to certain predefined and individual
goals as determined by the Board of Directors. Employees are also eligible to receive an extraordinary bonus at
the discretion of the Board of Directors.
39
The following table presents Employee Costs, including remuneration to the Board of Directors and
Executive Management, for the years ended December 31, 2021, 2020 and 2019. Refer to note 4.5 for more
discussion on remuneration of Board of Directors and Executive Management.
DKK 000
Employee costs
2021
2020
2019
Salaries
167,316
131,606
68,719
Cash bonus
16,663
40,481
8,707
Share-based compensation (Note 2.6)
15,576
27,258
2,405
Pension
12,963
11,313
5,561
Other social security contributions
4,113
5,172
875
Other staff costs
8,066
3,083
862
Total employee costs excluding board remuneration
224,696
218,913
87,129
Board remuneration (Note 4.5)
3,391
3,469
2,888
Board share-based compensation (Note 2.6 and Note 4.5)
443
846
145
Total employee costs
228,530
223,228
90,162
Recognized as follows in the statement of Profit or Loss
Research and development expenses
86,329
96,108
64,167
General and administrative expenses
142,201
127,120
25,995
Total employee costs
228,530
223,228
90,162
Average number of full-time employees
Year-end number of full-time employees
62
141
86
2.6 SHARE-BASED COMPENSATION COSTS
§ ACCOUNTING POLICIES
Equity-settled awards
Shares awarded under the long-term incentive program (“LTIP”) are equity-settled awards. The fair
value of these awards is determined at the date of grant, resulting in a fixed fair value at grant date that is not
adjusted for future changes in the fair value of the awards that may occur over the service period. The fair value
of the LTIP awards has been determined using the Monte-Carlo model. Further details of the valuation models
are presented below.
The fair value of equity-settled awards with service conditions and non-market performance conditions
is recognized as compensation expense pro rata over the service period to the extent such awards are estimated
to vest. The compensation expense is recognized together with a corresponding increase in equity over the
period in which the performance and/or service conditions are fulfilled. The cumulative expense for the Group’s
share-based compensation awards recognized at each reporting date until the vesting date reflects the extent to
which the vesting period has expired and Management’s best estimate of the number of instruments that will
ultimately vest. The expense or credit in the Statement of Profit or Loss for a period represents the movement in
cumulative expense recognized as at the beginning and end of that period.
In the event that equity instruments are granted conditionally upon an equal number of equity
instruments granted in prior periods not being exercised, they are treated as a new grant for the current period
and a modification of the equity instruments granted in the prior period.
When the terms of an equity-settled award are modified, the minimum expense recognized is the grant
date fair value of the unmodified award, provided that the original terms of the award are met. An additional
expense, measured as at the date of modification, is recognized for any modification that increases the total fair
value of the share-based payment transaction, or is otherwise beneficial to the employee. Where an award is
cancelled by the entity or by the counterparty, any remaining fair value of the award is expensed immediately in
the Statement of Profit or Loss.
40
Cash-settled awards
The phantom share-based incentive programs established by the Group are settled in cash and are
treated as cash-settled awards. Similarly, as the Restricted Share Units (RSU) awards to the board of directors
may be settled in cash or in shares at the choice of the participant, they are also treated as cash-settled awards.
If the RSUs are ultimately exercised by the holder and settled in equity, the amount accrued as a liability is
settled by reversing it into equity.
A liability is recognized for the fair value of cash-settled awards, measured initially and at each
reporting date up to and including the settlement date, with changes recognized through profit or loss at each
reporting date. The fair value is expensed over the period until vesting date with recognition of a corresponding
liability. The fair value is determined using the Monte-Carlo model, further details of which are presented
below. The fair value of the cash-settled awards, which vest subject to obtaining a specified share price (i.e.
market condition), is reported as compensation expense regardless of whether the share price condition is met if
all other vesting conditions are met. For these awards, fair value is determined taking into account the
probability of meeting the share price target. No expense is recognized for awards that do not ultimately vest. If
the RSUs are finally exercised, the related liability is reclassified as equity.
Estimate of inputs and assumptions used in share-based compensation valuation models
Estimating the fair value of the Group’s share-based compensation programs requires determination
of the most appropriate valuation model, which depends on the terms and conditions of the respective award.
This estimate also requires making assumptions to determine the most appropriate inputs to the valuation
model, including the expected life of the award, expected volatility, dividend pay-out ratio, and risk-free interest
rate.
With reference to note 1.6, significant events have occurred after the reporting period, which is relevant
in the understanding of this item. The events disclosed in note 1.6 have not been taking into account in the
current reporting period.
All references to share price relate to the Company’s share price on Nasdaq Copenhagen.
a) Long-term incentive program (equity-settled)
In connection with the completion of the Company’s initial public offering (IPO) on Nasdaq
Copenhagen in November 2017, the Executive Management and Key Employees were offered to subscribe for
Offer Shares (“Investment Shares”) at the Offer Price for a maximum amount corresponding to approximately
15% (CMO) and 20% (CEO, CFO, and CSO) of their respective current annual base salaries.
Under the post-IPO long-term incentive program (2017 LTIP), the Executive Management as well as
certain Key Employees of Orphazyme have subscribed to 14,875 ordinary shares (Investment Shares) at the
offer price of DKK 80. In April 2018, a Key Employee subscribed to 4,300 Investment Shares at the then-
current market price of DKK 67.5.
The participants in the 2017 LTIP may be allocated a number of shares in Orphazyme (“Performance
Shares”) at a price per Performance Share of DKK 1 at the end of a vesting period of four years from
Orphazyme’s first day of trading and official listing on Nasdaq Copenhagen. The number of Performance
Shares should be proportional to the potential increase in the price of Orphazyme’s shares at the time of exercise
compared to the offer price. The potential increase in the price of Orphazyme’s shares was calculated as the
volume-weighted average share price as quoted on Nasdaq Copenhagen during the 10 trading days preceding
the vesting date. The maximum allocation of Performance Shares was six shares for the CEO and four shares for
the other participants multiplied by the number of Investment Shares subscribed for in connection with the IPO.
Performance Shares was allocated on a linear scale with maximum allocation triggered by an 80% increase in
share price, whereas no Performance Shares would be allocated if the price of Orphazyme’s shares has increased
20% or less at the end of the vesting period. Among other things, vesting was also subject to the participants
having maintained ownership of their Investment Shares and continued employment. Based on the number of
Investment Shares subscribed for, a total maximum of 86,700 Performance Shares could be issued at the end of
the vesting period. The vesting period ended in November 2021 with no performance shares granted as the
minimum increase of 20% over the vesting period was not met.
41
In addition, the participants were allocated a number of shares in Orphazyme (“Matching Shares”) at a
price per Matching Share of DKK 1 in connection with the first anniversary of the subscription date of the
Investment Shares. The number of Matching Shares was equal to the number of Investment Shares subscribed
for and vesting was subject to the participants having maintained ownership of their Investment Shares and
continued employment during the one-year vesting period. By March 2019, all 19,175 Matching Shares under
the 2017 LTIP vested in full and were issued against a nominal payment of DKK 1 per share.
In July 2019, the Company initiated a 2019 long-term investment program (2019 LTIP) for the
Executive Management and certain Key Employees with the same terms and conditions as the 2017 LTIP, i.e.
Matching Shares vesting over one year and Performance Shares vesting over four years. In July 2020, 31,250
matching shares fully vested and were issued against a nominal payment of DKK 1 per share. The maximum
number of Performance Shares that can vest in July 2023 as part of the 2019 LTIP is 125,000.
In July 2020, the Company initiated a 2020 long-term investment program (2020 LTIP) for the
Executive Management and certain other employees with the same terms and conditions as the 2017 LTIP and
the 2019 LTIP. However, in case of termination of a participant’s employment and designation as a Good
Leaver, the right to receive Matching Shares and Performance Shares will be prorated and calculated through
the date of notice of termination. During 2020, awards were granted on four different grant dates shown in the
table below. Matching Shares for all awards granted under the 2020 LTIP was fully vested on January 1, 2021.
The maximum number of Performance Shares that can vest in January 2024 as part of the 2020 LTIP is 489,757.
In April 2021, the Group initiated a 2021 new long-term share-based incentive program (original 2021
LTIP) for the Executive Management and other employees. The LTIP grants comprise Restricted Share Units
(“RSUs”) and Performance Share Units (“PSUs”) which entitle the participants, subject to vesting occurring, to
be allocated a number of shares in the Company, equivalent to the number of vested RSUs and/or PSUs, against
payment of the par value of each share. The RSUs will have a total vesting period of three years (beginning on
January 1 or July 1 in 2021) and with one third of the granted RSUs vesting on each January 1 or July 1 in the
following three financial years. The PSUs will have a total vesting period of three years (beginning on January 1
or July 1 in 2021) and with the granted PSUs vesting, in whole or in part, on January 1 or July 1 in the third
year. Vesting of RSUs is not conditional upon achieving any financial or non-financial targets, whereas vesting
of PSUs is conditional upon an increase in the quoted share price of the Company’s shares, while vesting of
both RSUs and PSUs is conditional upon the participant remaining employed with a group member throughout
the total vesting period. However, in case of termination of a participant’s employment and designation as a
Good Leaver, the right to receive vested RSUs or PSUs will be prorated and calculated through the date of
release of the Participant’s work obligations. The vested RSUs and PSUs can only be exercised within four
months after the expiration of the total vesting period. However, the delivery period may be extended to the next
open trading window in certain circumstances. The original LTIP were expected to comprise up to 607,460
shares in total.
In October 2021, the Group initiated a modified 2021 long-term share-based incentive program
(modified 2021 LTIP) for the Executive Management and other employees. The terms of the modified LTIP are
the same as the LTIP that was implemented in April 2021, however, the number of RSUs and PSUs and the
applicable performance target for the PSUs were reset, calculated based on a share price equal to DKK 31.94
per share, corresponding to the volume weighted average share price of the Company’s shares as quoted on
Nasdaq Copenhagen during the ten (10) trading days from September 1, 2021. The exercise of the RSUs and
PSUs to be granted under the modified LTIP is conditional upon the participant not exercising his or her RSUs
or PSUs granted in April 2021, which will subsequently lapse and no longer be exercisable, and are therefore
considered replacement equity instruments for the cancelled equity instruments. The fair value of the originally
granted RSUs and PSUs at the date of the modification was determined to be DKK 24.72 and DKK 7.70,
respectively. The incremental fair value, calculated based on the number of modified awards granted multiplied
with the modified unit fair value less the fair value of the original LTIP granted remeasured at the modification
date, will be recognised as an expense over the period from the modification date to the end of the vesting
period. The expense for the original LTIP grant will continue to be recognised as if the terms had not been
modified. In connection with the modified LTIP, the members of Executive Management received an
extraordinary grant of RSUs and PSUs corresponding to 100% of the grant under the modified LTIP and on the
same terms as the modified LTIP, and the sign-on RSUs granted to the CEO in April 2021 were also reset after
the same principles as the modified LTIP but with immediate vesting upon grant. The modified LTIP including
the other share-based retention grants to the Executive Management are expected to comprise up to 595,916
shares in total.
42
The fair value of RSU awards was estimated using a Black Scholes option valuation model, whereas all
other LTIP awards were estimated using a Monte-Carlo simulation model at the respective grant dates,
considering the terms and conditions on which the awards were granted.
The risk-free interest rate has been estimated based on Danish government bonds with similar
maturities. Since November 2020, expected volatility has been determined based on the Group’s own historical
volatility, as the Company has been publicly traded for three years. Before November 2020, expected volatility
was determined based on the historical volatility of comparable listed companies. The Group does not plan to
pay out dividends in the foreseeable future.
The following table presents the fair value of the shares granted in the last three years under each
program and the inputs used in the valuation models at the respective grant dates:
Program
2021 RSU
2021 PSU
2021 RSU
2021 PSU
Oct 2021
Oct 2021
Apr 2021
Apr 2021
Grant date
(modified)
(modified)
(original)
(original)
Fair value at the measurement date (DKK 000)
24.72
12.56
58.04
20.02
Dividend yield (%)
-
-
-
-
Expected volatility (%)
98.6
%
98.6
%
55.6
%
55.6
%
Risk-free interest rate (%)
(0.61%)
(0.61%)
(0.53%)
(0.53%)
Expected life of awards (years)
0.23-2.23
2.23
0.69-2.69
2.69
Weighted average share price (DKK)
25.70
25.70
59.05
59.05
Program
2020 LTIP
2020 LTIP
2020 LTIP
2020 LTIP
Grant date
Dec 2020
Oct 2020
Sep 2020
Aug 2020
Fair value at the measurement date (DKK 000)
446
4,464
1,482
44,126
Dividend yield (%)
-
-
-
-
Expected volatility (%)
45.9%
56.5%
56.1%
55.4%
Risk-free interest rate (%)
(0.66%)
(0.60%)
(0.59%)
(0.54%)
Expected life of awards (years)
3.06
3.24
3.24
3.35
Weighted average share price (DKK)
56.30
68.50
83.50
90.10
Program
2019 LTIP
Grant date
Aug 2019
Fair value at the measurement date (DKK 000)
6,214
Dividend yield (%)
—
Expected volatility (%)
51.8
%
Risk-free interest rate (%)
(0.70
%)
Expected life of awards (years)
3.42
Weighted average share price (DKK)
62.6
The following table presents the weighted average remaining contractual life in years of the
Performance Shares of the LTIP awards outstanding at December 31 for the respective year presented.
Matching Shares under all of the LTIP programs were fully vested as of January 1, 2021 :
2021
2020
Program
2020 LTIP
2.0
3.0
2019 LTIP
1.7
2.7
The exercise price for each LTIP award outstanding as of December 31, 2020 was DKK 1 (2019: DKK
1; 2018: DKK 1).
43
The table below summarizes the activity related to the LTIP awards for the years ended December 31:
Executive
Key
Total
Awards
DKK 000
Management
Employees
Awards
exercisable
Outstanding at December 31, 2019
6,250
25,000
31,250
Granted
52,865
119,623
172,488
Exercised
(6,250
)
(25,000
)
(31,250
)
Expired
—
—
—
Forfeited
—
(937
)
—
Outstanding at December 31, 2020
52,865
118,686
172,488
172,488
Granted
Exercised
(52,865
)
(118,686
)
(172,488
)
Expired
—
—
—
Forfeited
—
—
—
Outstanding at December 31, 2021
For the year ended December 31, 2021, DKK 17.1 million (2020: DKK 17.9 million; 2019: DKK 2.1
million) was recognized as compensation expense related to the LTIP awards. Of the total expense, DKK 6.8
million (2020: DKK 8.2 million; 2019: DKK 0.7 million) is attributed to the Executive Management.
b) Phantom share-based incentive program (cash-settled)
In June 2018, Orphazyme introduced a four-year phantom share-based incentive program (the “2018
Phantom Shares Program”) for all employees other than the Executive Management and Key Employees under
the LTIP. Programs with similar terms and conditions were initiated in August 2019 (2019 Phantom Shares
Program) and December 2020 (2020 Phantom Shares Program), respectively.
The Phantom Shares Programs are based on the share price of the Company and entitles the
participants to a cash bonus if there has been an increase of at least 20% in Orphazyme’s share price compared
to the entry price at the grant date. The Phantom Shares Programs will not have any dilutive effect on the
shareholders of Orphazyme as the phantom shares do not constitute or qualify for actual shares in Orphazyme.
The overall objectives of the Phantom Shares Programs are (i) to retain qualified employees, (ii) to
create long-term incentive for the participants, and (iii) to align the interests of the employees with those of
Orphazyme’s shareholders. Each employee participating in the program earns the right to a certain number of
phantom shares per month, depending on the employee’s position. Subject to any adjustments to the Phantom
Shares Programs made by the Board of Directors due to, for example, changes in Orphazyme’s share capital
structure or other significant events, each employee will be eligible to receive up to a total of 144 or 288
phantom shares under the program. By the end of each calendar year of the four-year program, the participants
will have earned phantom shares free of charge.
The entry price per phantom share for the 2018 and 2019 Phantom Programs was DKK 61 and for the
2020 Phantom Program was DKK 71.2. The entry prices were calculated on the basis of the volume-weighted
average closing price of Orphazyme’s share on Nasdaq Copenhagen during a period of 10 trading days prior to
the introduction of the respective Phantom Shares Program. The phantom shares will automatically be settled in
cash at the end of January 2023 for the 2018 Phantom Shares Program, at the end of January 2024 for the 2019
Phantom Shares Program and at the end of January 2024 for the 2020 Phantom Shares Program by subtracting
the entry price per share from the market price per share and multiplying the change by the total number of
granted phantom shares, presuming the market-based condition (share price increase by 20%) is met . The
market price per share will be based on the volume-weighted average closing price of Orphazyme’s shares on
Nasdaq Copenhagen during a period of 10 trading days prior to the settlement of the phantom shares.
The employee’s cash award for each program is capped and cannot exceed a gross amount of DKK
37,500 or DKK 75,000 per employee per program, depending on the number of phantom shares allocated to the
respective employee under the program. Based on the number of participants in the Phantom Shares Programs
as of December 31, 2021 and 2020, the programs are expected to consist of up to a total of 41,351 phantom
shares.
44
As of December 31, 2020, all phantom shares granted under the Phantom Shares Program were only
granted to employees of Orphazyme. No phantom shares were forfeited or expired, and none of the phantom
shares were eligible for exercise.
As the Phantom Shares Programs are cash-settled, the fair value of the phantom shares granted as part
of the program is estimated at each reporting date. For the year ended December 31, 2021, an aggregate amount
of DKK (0.3) million (2020: DKK 0.1 million; 2019: DKK 0.3 thousand) was recognized as compensation
expense related to the Phantom Shares Programs, with a corresponding amount recognized as a non-current
liability as the earliest settlement is in January 2023 (Note 3.7).The risk-free interest rate has been estimated
based on Danish government bonds with similar maturities. Since November 2020, expected volatility has been
determined based on the Company’s own historical volatility, as the Company has been publicly traded for three
years. Before November 2020, expected volatility was determined based on the historical volatility of
comparable listed companies.
The following table presents the inputs to the Monte-Carlo model used to estimate the fair values of the
phantom shares as of year-end, when the cash-settled programs are re-valued:
Valuation date:
December 31, 2021
December 31, 2020
Program:
2020
Program
2019
Program
2018
Program
2020
Program
2019
Program
2018
Program
Fair value at valuation date
(DKK 000)
40
48
12
406
293
160
Dividend yield (%)
—
—
—
—
—
—
Expected volatility (%)
77.4%
101.1%
101.1%
47.1%
47.3%
54.3
%
Risk-free interest rate (%)
(0.48%)
(0.60%)
(0.60%)
(0.59%)
(0.61%)
(0.61%)
Expected life of awards (years)
3.08
2.08
1.08
4.08
3.08
2.08
Weighted average share price
(DKK)
17.16
17.16
17.16
67.10
67.10
67.10
c) Restricted Share Units (cash-settled)
According to the terms and conditions of the Restricted Share Units program (RSU), directors may
annually be granted a number of RSUs with a value corresponding to up to 50% of the participant’s fixed annual
base fee as member of the Board of Directors, not including committee membership fees. The value is
calculated on the basis of the volume-weighted average share price of Orphazyme’s shares as quoted on Nasdaq
Copenhagen during the ten trading days preceding the grant date. The RSUs vest from the grant date to the date
of the next annual general meeting. Upon vesting, RSUs may be exercised within a period of twelve months
from vesting (Exercise Period) at a price corresponding to the volume-weighted average share price during the
ten trading days preceding the grant date (Exercise Price). In the event of a participant’s resignation from the
Board of Directors, any unvested RSUs will lapse without any rights of compensation. A decision not to be re-
elected is not a resignation from the Board of Directors.
The RSUs are classified as a cash-settled program, as the Board of Directors may choose to settle any
vested RSUs in cash. In such event, the cash settlement amount is based on the difference between the Exercise
Price and the volume-weighted average share price as quoted on Nasdaq Copenhagen during the ten trading
days preceding the first day of the Exercise Period.
In August 2019, Restricted Share Units (2019 RSUs) were granted to members of the Board of
Directors. During 2021 and 2020 certain board members exercised their RSUs. As these RSUs were not cash-
settled, the corresponding liability of DKK 35 thousand and DKK 156 thousand, respectively, was reversed into
equity and treated as equity-settled. The remaining 1,927 RSUs expired in March 2021 resulting a positive
impact on the Statement of Profit or Loss of DKK 38 thousands.
In March 2020, the 2020 RSU program was announced, granting the Board of Directors an aggregate
of 15,177 RSUs under similar terms and conditions as the 2019 RSUs. The RSUs fully vests on the date of the
general meeting in the following year.
45
In September 2020, a new RSU incentive program was announced (2020-2 RSU program), which
comprised 22,993 RSUs in total, including an on-boarding grant to a new board member in accordance with the
Group’s remuneration policy. The 2020-2 RSU program runs in parallel with the 2020 RSU program and board
members can only exercise RSUs under one of the programs.
In December 2020, 4,351 RSUs (2020-3 RSU program) were granted to the Chairman of the Board as
part of a consultancy agreement (see Note 4.6).
In May 2021, the 2021 RSU program was announced, granting the Board of Directors an aggregate of
30,450 RSUs under similar terms and conditions as the 2020-1 RSUs.
The fair value of all RSUs was calculated using a Black-Scholes valuation model with the inputs
shown in the following table. As the RSUs may be settled in cash, we have re-valued them as of year-end with
updated inputs and recognized a cumulative share-based compensation expense in the amount of DKK (0.7)
million (2020: 0.8 million; 2019: 0.1) and a corresponding short-term liability as of December 31, 2020. The
Exercise Period for all 2020 RSUs is one year following full vesting and for valuation purposes we have
assumed exercise three months upon full vesting.
As of December 31, 2021, 1,927 RSUs were expired, and 1,927 RSUs were eligible for exercise.
The following table presents the inputs to the Black-Scholes model used to estimate the fair value of
the 2020 RSUs at year-end, as they are classified as cash-settled:
Program
December 31,
2021
2021 RSUs
December 31,
2020
2020 RSUs
Fair value at valuation date (DKK 000)
16
1,913
Dividend yield (%)
—
—
Expected volatility (%)
146,9%
45.9%
Risk-free interest rate (%)
(0.63%)
(0.57%)
Expected life of awards (years)
0,75
0.50
Weighted average share price (DKK)
17.16
67.10
d) Sign-on bonus shares to former CEO
As part of the former CEO service agreement, Kim Stratton was granted 58,000 ordinary shares, which
would vest if the Company’s share price increased to DKK 125 per share within three years from the date of
employment. The total award consisted of (i) 6,000 shares provided that our share price increased to DKK 75
per share, (ii) 12,000 shares provided that our share price increased to DKK 100 per share, and (iii) 40,000
shares provided that our share price increased to DKK 125 per share. The target prices were achieved and the
58,000 ordinary shares were issued to Ms. Stratton in February 2021 (see Note 4.8).
The shares were valued at grant date, October 2019, using a Monte Carlo model due to the market
conditions for vesting. The risk-free interest rate used in the model has been estimated based on Danish
government bonds with similar maturities; expected volatility has been determined based on the historic
volatility of comparable listed companies; the expected life of the award was 3 years, equal to the term of the
award; the estimated dividend yield was zero; and the weighted average share price was DKK 55.60. The total
valuation of the award at grant date was DKK 1.9 million. The total share-based compensation expense was
classified as administrative and it was recognized in full during 2020, as the target prices were achieved in 2020.
e) Sign-on bonus shares to new CEO
As part of the new CEO service agreement, Christophe Bourdon was granted 34,941 RSUs in
connection with the on-boarding, which will have a total vesting period of three years (beginning on January 1,
2021) and with one third of the granted RSUs vesting on each January 1 in the following three financial years.
Vesting is not conditional upon achieving any financial or non-financial targets. However, in case of termination
of employment and designation as a Good Leaver, the right to receive vested RSUs will be prorated and
calculated through the date of release of the Participant’s work obligations. The vested RSUs can only be
exercised after the expiration of the total vesting period. However, the delivery period may be extended to the
46
next open trading window in certain circumstances. The RSUs were valued at grant date, April 2021, using a
Black Scholes option valuation model similar to the original 2021 LTIP. The valuation of the award at grant
date was DKK 2.0 million. The share-based compensation expense was classified as administrative and with
recognition from January 2021.
In October 2021, the grant of onboarding RSUs to was modified similar to the other long-term
incentive programs for 2021. The terms of the modified grant are unchanged except for the immediate vesting
upon grant and number of RSUs calculated based on a share price equal to DKK 31.94 per share, corresponding
to the volume weighted average share price of the Company’s shares as quoted on Nasdaq Copenhagen during
the ten (10) trading days from September 1, 2021. The exercise of the RSUs to be granted under the modified
LTIP is conditional upon the participant not exercising the RSUs granted in April 2021, which will subsequently
lapse and no longer be exercisable, and are therefore considered replacement equity instruments for the
cancelled equity instruments. The fair value of the originally granted RSUs at the date of the modification was
determined to be DKK 24.72. The incremental fair value, calculated as the number of modified awards granted
multiplied with the modified unit fair value less the fair value of the original LTIP granted remeasured at the
modification date. The remaining expenses related to the original LTIP grant were similar recognised at the
modification date. The incremental fair value of the modified award was DKK 0.9 million. The share-based
compensation expense was classified as administrative recognised in October 2021.
f) Bonus shares issued to KLSDC and UCL in connection with the license agreement
Please see Note 3.1.
Summary of share-based compensation
The following amounts were recognized as share-based compensation for the years ended December 31
DKK 000
2021
2020
2019
Share-based compensation included in R&D
3,879
7,260
635
Share-based compensation included in G&A
12,140
20,845
1,914
Total share-based compensation expense recognized
16,019
28,105
2,549
2.7 FINANCIAL INCOME AND FINANCIAL EXPENSES
§ ACCOUNTING POLICIES
Financial income and expenses include interest income and expense, gains and losses due to changes
in foreign exchange rates, interest expense related to the right-of-use assets, interest expense related to the Loan
Agreement and other immaterial miscellaneous items.
47
The following table presents the various items of financial income and expense recognized for the
years end December 31:
DKK 000
2021
2020
2019
Interest income on cash balances
37
45
316
Foreign currency exchange gains
11,849
1,649
—
Gain on embedded call option (Note 3.7)
546
750
—
Total financial income
12,432
2,444
316
Interest expense on Loan Agreement (Note 3.7)
7,350
9,921
3,239
Write-off of transaction costs for Loan Agreement tranche 2
(Note 3.7)
—
—
1,678
Loss on embedded call option (Note 3.7)
—
—
354
Interest expense on lease liabilities (Note 3.2)
624
567
351
Loss on lease modification (Note 3.2)
(365)
—
216
Interest expense on cash balances
1,484
3,626
1,213
Foreign currency exchange loss
1,369
14,805
229
Bank fees and other charges
147
152
79
Total financial expenses
10,609
29,071
7,359
2.8 INCOME TAXES
§ ACCOUNTING POLICIES
Income tax benefit includes the current benefit due from the current period’s taxable loss and deferred
tax adjustments. The benefit is comprised primarily of refundable tax credits for costs incurred in connection
with research and development activities under the Danish Tax Credit Regime. Income tax expense relates to
tax imposed on income recognized in our subsidiaries in the United States and Switzerland as a result of our
transfer pricing agreements.
Corporation tax receivable is recognized in the balance sheet as the tax benefit computed on the
taxable loss for the year, adjusted for any changes to the prior year benefit due to changes in the taxable loss of
prior years and for any taxes already paid or refunded.
Deferred tax is measured using the balance sheet liability method on all temporary differences between
the carrying amount and the tax value of assets and liabilities, with the exception of temporary differences
occurring at the time of acquisition and liabilities neither affecting the result of operation nor the taxable
income.
As of December 31, 2021, 2020 and 2019, there were no tax audits in process nor has management
been notified of any pending tax audit.
Judgement regarding the recognition of the deferred tax assets related to taxable losses to be carried forward
Orphazyme is subject to income taxes in Denmark, Switzerland and the U.S.A. The Group recognizes
deferred income tax assets if it is probable that sufficient taxable income will be available in the future against
which the temporary differences and unused tax losses can be utilized. Significant judgment is required to
determine the amount of deferred tax assets that may be recognized, based upon the likely timing and the level
of future taxable profits together with future tax planning strategies. This judgment is made periodically after
considering current facts and circumstances, budgets and business plans as well as the risks and uncertainty
associated with the Group’s ability to successfully commercialize and defend its intellectual property. After
consideration of these factors, Management has concluded that as regulatory approval has not yet been
obtained as of December 31, 2021, the deferred income tax assets related to taxable losses carried forward in
Denmark do not meet the criteria for being recognized as assets in the Statement of Financial Position.
The Company’s tax losses can be carried forward infinitely subject to the general rules on limited
deductibility due to ownership changes. In Denmark, the Company’s ability to use tax loss carry forwards in any
one year is limited to 100% of the first DKK 8.4 million of taxable income plus 60% of taxable income above
DKK 8.8 million.
48
For the years ended December 31, 2021, 2020 and 2019, the Company has unrecognized net tax loss
carry-forwards in the Danish entity in the amount of DKK 1,454 million, DKK 877 million, and DKK 425
million, respectively.
Management periodically evaluates positions taken in tax returns with respect to situations in which
applicable tax regulations are subject to interpretation or uncertainty and establishes provisions, where
appropriate. To date, there have not been any provisions established for uncertain tax positions.
The following table presents the total income tax benefit for the years ended December 31:
DKK 000
2021
2020
2019
Current tax benefit on net loss
144,379
136,845
75,459
Adjustments prior years
(385
)
(1,065
)
—
Tax credit research and development expenses
5,500
5,500
5,500
Change in unrecognized deferred tax before tax credit
(155,700
)
(142,115
)
(74,961
)
Permanent differences
11,147
2,750
(498
)
Total income tax benefit for the year
4,941
1,915
5,500
The following table presents the reconciliation of the effective tax rate to the statutory corporate
income tax rate in Denmark.
DKK 000
2021
2020
2019
Net loss before tax
(631,480
)
(635,161
)
(342,997
)
Corporate income tax rate in Denmark
22
%
22
%
22
%
Computed income tax benefit
138,926
139,735
75,459
Tax effect of:
Adjustments prior years
(385
)
(1,065
)
—
Other non-deductible expenses, including US listing-related
costs and share-based compensation
11,147
2,750
(498
)
Effect of different tax rate
892
(673
)
—
Deferred tax asset not recognized after tax credit
(145,639
)
(138,832
)
(69,461
)
Total income tax benefit for the year
4,941
1,915
5,500
The following table presents the carrying amount of deferred tax in the Statement of Financial Position:
DKK 000
2021
2020
2019
Tax deductible losses
319,811
192,837
93,484
Deferred tax on intangible assets
132,310
112,192
74,050
Other temporary differences
6,069
8,174
758
458,190
313,203
168,292
Deferred tax asset not recognized
458,190
311,138
168,292
Carrying amount included in the Statement of Financial
Position
—
2,065
—
SECTION 3 Assets and liabilities
3.1 INTANGIBLE ASSETS
§ ACCOUNTING POLICIES
Intangible assets comprise software development costs and license rights to develop and commercialize
products and are acquired separately and measured on initial recognition at cost. Software assets consist of
implementation costs to get cloud computing arrangements ready for use, as long as they meet the requirements
49
of IAS 38, Intangible Assets. These cloud computing arrangements begin to be amortized when they are ready
for intended use and are amortized over seven years.
For acquisition of intangible rights involving equity-settled share-based payment transactions,
Management measures the fair value of the rights received and the corresponding increase in equity by
reference to the fair value of the rights received, unless that fair value cannot be estimated reliably. If
Management cannot estimate reliably the fair value of the rights received, it measures the fair value and the
corresponding increase in equity by reference to the fair value of the equity instruments granted.
Following initial recognition, intangible assets are carried at cost less any accumulated amortization
and accumulated impairment losses. The useful lives of intangible assets are assessed as either finite or
indefinite. Intangible assets with finite lives such as software and license rights to develop and commercialize
products are amortized over the useful economic life and assessed for impairment whenever there is an
indication that the intangible asset may be impaired.
The amortization period and the amortization method for an intangible asset with a finite useful life are
reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern
of consumption of future economic benefits embodied in the asset are considered to modify the amortization
period or method, as appropriate, and are treated as changes in accounting estimates. The amortization
expense on intangible assets with finite lives is recognized in the Statement of Profit or Loss in the expense
category that is consistent with the function of the intangible assets.
Assets with finite useful lifetime are assessed for impairment indicators. Each year, the assets are
reviewed in order to assess whether there are indications of impairment. If such indications exist, the
recoverable amount, determined as the higher amount of the fair value of the asset adjusted for expected costs
to sell and the value in use of the asset, is calculated. The impairment expense on intangible assets with finite
lives is recognized in the Statement of Profit or Loss in the expense category that is consistent with the function
of the intangible assets.
Estimate of the fair value of licenses
Licenses contains an agreement entered into with the University of Kansas and University College
London, in which the Company will obtain access to data and knowhow generated in the course of research in
connection with the IBM trial. Consideration for the license is to be paid out by issuing new shares to the
contract partners for a value corresponding to the costs incurred during the preceding calendar year. The
valuation of the license upon the execution of the agreement involves uncertainty and was estimated by
Management based on the expected costs over the contract period. In addition, the estimation of the duration of
a license agreement at times involves uncertainty if termination is dependent on a time limit after successful
commercialization. Management has considered potential commercialization dates and will re-assess this
estimate on an ongoing basis.
Estimate related to recoverable amounts
Through the assessment of impairment indicators and impairment tests, Management identifies the
recoverable amount. This is determined based on a value in use calculation, using cash flow and projections for
subsequent years, equivalent to the expected useful life of the intangible asset.
With reference to note 1.6, significant events have occurred after the reporting period, which is relevant
in the understanding of this item. The events disclosed in note 1.6 have not been considered in the current
reporting period.
CytRx Asset Purchase Agreement
In May 2011, Orphazyme entered into an Asset Purchase Agreement with the US biopharmaceutical
company CytRx. Pursuant to this agreement, CytRx sold and transferred certain preclinical and clinical data,
patents and other intellectual property rights, and other assets, including contractual rights and obligations
relating to a portfolio of chemical compounds, including arimoclomol, to Orphazyme. Under the terms of the
Asset Purchase Agreement, Orphazyme agreed to make future payments to CytRx that were contingent upon the
achievement of specified clinical, regulatory, and sales milestones. These payments are further disclosed in
Note 3.9.
50
In 2016, the Company paid CytRx USD 0.1 million (DKK 0.6 million) for achievement of a clinical
milestone for the first product candidate. In August 2018, the Company made a milestone payment of USD
250,000 (DKK 1.6 million) upon the enrollment of the first patient in the ALS clinical trial. The Company
capitalizes amounts paid to CytRx as an acquired license right if the recognition criteria under IAS 38 is met.
Management assesses that the consideration paid reflects market expectations about the probability that future
economic benefits will flow to the Company. The acquired license is not being amortized until approval of the
underlying asset has been received from regulatory authorities.
The Asset Purchase Agreement further includes sales milestones and royalty payments to be made by
Orphazyme based on a specified percentage of any eventual net sales of products containing one of the
compounds purchased. In addition, under the terms of the Asset Purchase Agreement, the Company was
assigned and became party to a royalty agreement with ALS Charitable Remainder Trust pursuant to which the
Company is obliged to pay a 1% royalty to the ALS Charitable Remainder Trust on global net sales of products
to treat ALS. Orphazyme has no liabilities prior to the occurrence of future sales of products and accordingly
neither such liabilities nor contingent consideration have been recognized as part of the license agreement.
Remaining life for this intangible asset is not possible to determine until approval of the underlying asset has
been received from regulatory authorities.
License Agreement with KLSDC and UCL
In 2017, the Company entered into a license agreement with KU Center for Technology
Commercialization Inc., University of Kansas, Kansas Life Sciences Development Company, Inc., (“KLSDC”)
and UCL Business PLC (“UCL”) granting Orphazyme the right to develop and commercialize products under
all data generated in the course of the on-going Phase 2/3 clinical trial on arimoclomol for the treatment of IBM
worldwide. The total consideration for the license is to be paid out in bonus shares to KLSDC and UCL up to an
aggregate value of USD 2.5 million (DKK 15.8 million), depending on the amount of grants awarded to KLSDC
and UCL for use in the trial. At the time the license agreement was executed, Management estimated the
aggregate amount of the funding to be received by KLSDC and UCL to be USD 1.6 million (DKK 10 million),
which has been recognized as an intangible asset (License) with a corresponding increase in equity reserves
(Share-based compensation - acquisition of intangible assets).
Consideration to KLSDC and UCL is payable in shares of the Company (“Bonus Shares”) each
January and is based on incurred costs reported by KLSDC and UCL for the previous year. In January 2020,
20,650 (2019: 26,060) Bonus Shares were issued to KLSDC and UCL based on aggregate costs incurred by
KLSDC and UCL in the amount of USD 0.3 million (DKK 2.2 million) (2018: USD 0.2 million (DKK 1,197
million)). The Bonus Shares were derived based on the average 30-day closing price of Orphazyme’s shares at
the date of issuance. At the time of the share issuance the equity reserve was decreased by DKK 2.1 million,
which represents the market value of the shares issued. See Note 4.8 for Bonus Shares to be issued in 2021
related to the incurred costs reported by KLSDC and UCL for the year 2020.
Under the terms of the license agreement, Orphazyme shall furthermore pay an aggregate royalty of a
low single-digit percentage of net sales of products sold for the treatment of IBM. Orphazyme expects to
generate income from such products sold for the treatment of IBM which will exceed any royalty payments due.
Orphazyme has no liabilities prior to the occurrence of future sales of products sold for the treatment of IBM
and accordingly, neither such liabilities nor contingent considerations have been recognized as part of the rights
acquired.
The license is being amortized over the duration of the license agreement, which has been estimated to
be approximately 14 years. Amortization expense for the years ended December 31, 2020, 2019 amounts to
DKK 0.7 million each year and is recognized within research and development expenses.
In March 2021, it was announced, that the phase 2/3 trial evaluating arimoclomol for the treatment of
inclusion body myositis (IBM), a progressively debilitating muscle-wasting disease, did not meet its primary
and secondary endpoints. As a result, Orphazyme has recognized an impairment loss of DKK 7.6 million
corresponding to the remaining carrying amount of the license agreement. The impairment loss was recognized
under research and development expenses.
License Agreement with the University of Miami
In September 2019, the Company entered into an exclusive license agreement with the University of
Miami. Pursuant to the exclusive license agreement, the Company was granted a global royalty-bearing,
51
exclusive license to all data, know-how, inventions and technology generated by the University of Miami and
certain other institutions in a Phase 2 clinical trial of arimoclomol in ALS with the A4V SOD1 mutation to
research, develop, make, use or sell certain pharmaceutical products or processes containing arimoclomol.
Under the terms of the exclusive license agreement, the Company made an up-front cash payment of
$75,000 (DKK 0.5 million) and further agreed to make certain future payments, including (i) a development
milestone payment of $1,150,000 (DKK 7.7 million) upon receiving regulatory approval for a pharmaceutical
product containing arimoclomol for which the intended indication is ALS if the institution’s Phase 2 clinical
trial results were used in support of such regulatory approval, (ii) annual license fees from 2023 until the earlier
of 2033 or termination of the agreement for a maximum aggregate amount of $570,000 (DKK 3.8 million), and,
(iii) beginning on the date of first commercial sale by the Company, its affiliates or sublicensees of a licensed
product or licensed process in a country, a low single-digit royalty on net sales of licensed products or licensed
processes on a product-by-product and country-by-country basis for a period of ten years thereafter unless the
agreement is terminated earlier. Any annual license fees will be creditable against other payments due in the
same calendar year.
In May 2021, it was announced, the ORARIALS-01 pivotal trial of arimoclomol in amyotrophic lateral
sclerosis (ALS) did not meet its primary and secondary endpoints to show benefit in people living with ALS. As
a result, Orphazyme has recognized an impairment loss of DKK 0.5 million corresponding to the remaining
carrying amount of the license agreement. The impairment loss was recognized under research and development
activities.
Orphazyme has no liabilities prior to the occurrence of future sales of products and accordingly neither
such liabilities nor contingent consideration have been recognized as part of the license agreement.
The up-front cash payment was capitalized as an acquired license right, which is not being amortized
until approval of the underlying asset has been received from regulatory authorities.
The following table presents the cost and respective amortization of software and licenses held by
Orphazyme. The foreign currency effect is immaterial:
DKK 000
Software
Licenses
Total
Cost at December 31, 2019
—
12,083
12,083
Additions
2,736
—
2,736
Cost at December 31, 2020
2,736
12,083
14,819
Additions
902
902
Cost at December 31, 2021
3,638
12,083
15,721
Accumulated amortization at December 31, 2019
—
1,544
1,544
Amortization expense
109
712
821
Accumulated amortization at December 31, 2020
109
2,256
2,365
Amortization expense
322
119
441
Impairment expense
2,658
8,105
10,763
Accumulated amortization at December 31, 2021
3,089
10,480
13,569
Net carrying value at
December 31, 2020
2,627
9,827
12,454
December 31, 2021
549
1,603
2,152
3.2 LEASES
§ ACCOUNTING POLICIES
On January 1, 2019, Orphazyme adopted IFRS 16, Leases, using the modified retrospective method. At
contract inception, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a
lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange
for consideration. The Group is party to lease agreements only in which it is a lessee and not a lessor.
52
As a lessee, the Group applies a single recognition and measurement approach for all leases, except
for short-term leases and leases of low-value assets. At inception or on reassessment of a contract that contains
a lease component, the Group allocates the consideration in the contract to each lease component on the basis
of their relative stand-alone prices.
The Group recognizes lease liabilities to make lease payments and right-of-use assets representing the
right to use the underlying assets.
Right-of-use assets
The Group recognizes right-of-use assets at the commencement date of the lease (i.e., the date the
underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated
depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-
of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease
payments made at or before the commencement date less any lease incentives received.
Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the
estimated useful life of the underlying asset. If ownership of the leased asset transfers to the Group at the end of
the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the
estimated useful life of the asset, which for the operating equipment under lease is ten years. The right-of-use
assets are also subject to impairment.
Lease liabilities
At the commencement date of the lease, the Group recognizes lease liabilities measured at the present
value of lease payments to be made over the lease term. The lease payments include fixed payments less any
lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to
be paid under residual value guarantees. The lease payments also include the exercise price of a purchase
option reasonably certain to be exercised by the Group and payments of penalties for terminating the lease, if
the lease term reflects the Group exercising the option to terminate. Variable lease payments that do not depend
on an index or a rate are recognized as expenses in the period in which the event or condition that triggers the
payment occurs. In calculating the present value of lease payments, the Group uses its incremental borrowing
rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable.
After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and
reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there
is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments
resulting from a change in an index or rate used to determine such lease payments) or a change in the
assessment of an option to purchase the underlying asset. The Group’s non-current lease liabilities are included
as a separate line item on the Group’s consolidated balance sheet and the current portion of lease liabilities is
included in Other current liabilities.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases of machinery
and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and
do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases
of office equipment that are considered to be low value. Lease payments on short-term leases and leases of low-
value assets are recognized as expense on a straight-line basis over the lease term.
Lease modifications
Lease modifications are accounted for at the effective date of modification, which is the date when both
parties agree to the lease modification. Modifications are accounted for either as a separate lease or as a
remeasurement of the initial lease. A modification is accounted for as a separate lease if both of the following
conditions are met: (a) the modification increases the scope of the lease by adding the right to use one or more
underlying assets; and (b) the consideration for the lease increases by an amount equivalent to the stand-alone
price for the underlying asset. For a modification that is not a separate lease, the lease liability is remeasured
using a discount rate determined at the effective date of the modification.
53
Estimate relating to the incremental borrowing rate
The Group cannot readily determine the interest rate implicit in its leases, therefore it uses its
incremental borrowing rate to measure lease liabilities. This is the rate of interest that the Group would have to
pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a
similar value to the right-of-use asset in a similar economic environment. As there are no observable rates
available for such a rate, the Group estimates its incremental borrowing rate using observable inputs, such as
market interest rates, and is required to make certain entity-specific estimates.
With reference to note 1.6, significant events have occurred after the reporting period, which is relevant
in the understanding of this item. The events disclosed in note 1.6 have not been considered in the current
reporting period.
The Group has lease contracts for its headquarters in Copenhagen, for its office in Chicago and for
machinery used in its operations. The lease terms range from three to five years. During 2020, the lease contract
in Copenhagen was modified to include additional space, which was accounted for as a separate lease addition.
Furthermore, in June 2020 the Company entered a new lease contract for its US office premises in Chicago that
expires September 2025.
During 2021, the lease contract in Copenhagen was modified to downscale the space, a significant
change in the lease terms. The modification was accounted for as a change in the scope of the existing lease and
therefore the initial lease was remeasured on the effective date of the modification at the weighted average
incremental borrowing rate of 8.6%. The effect on the right-of-use assets, lease liabilities and the Statement of
Profit or Loss is disclosed in the tables below. Furthermore during 2021 Orphazyme has impaired leased
laboratory equipment in the amount of DKK 3.2 million. This amount is recognized under research and
development activities. The following table presents the carrying amounts of right-of-use assets recognized and
the movements during the period:
Office
Operating
DKK 000
buildings
equipment
Total
At December 31, 2019
10,095
3,808
13,903
Additions
3,963
—
3,963
Depreciation expense
(2,606
)
(401
)
(3,007
)
Modifications
0
—
0
At December 31, 2020
11,452
3,407
14,859
Additions
—
—
—
Disposals
(1,177
)
—
(1,177
)
Depreciation expense
(2,824
)
(167
)
(2,991
)
Impairment expense
—
(3,239
)
(3,239
)
Modifications
(2,166
)
—
(2,166
)
Exchange rate adjustments
149
(1
)
148
At December 31, 2021
5,434
—
5,434
The following table presents the carrying amounts of lease liabilities and the movements during the
period:
DKK 000
2021
2020
At January 1
13,534
12,689
Additions
—
3,963
Accretion of interest
624
567
Disposals
(1,212
)
Payments
(4,127
)
(3,678
)
Exchange rate adjustments
180
(7
)
Modifications
(2,496
)
—
At December 31
6,503
13,534
Current
2,578
3,657
Non-current
3,925
9,877
The maturity analysis of lease liabilities is disclosed in Note 3.7.
54
The following amounts are recognized in the Statement of Profit or Loss:
DKK 000
2021
2020
2019
Depreciation and impairment expense of right-of-use assets
(R&D)
5,386
2,441
1,847
Depreciation and impairment expense of right-of-use assets
(G&A)
844
566
211
Interest expense on lease liabilities
624
567
351
Gain on lease modification and disposals
(365
)
—
216
Total amount recognized in the Statement of Profit or Loss
6,489
3,574
2,625
3.3 PROPERTY, PLANT, AND EQUIPMENT
§ ACCOUNTING POLICIES
Property, plant, and equipment includes IT, lab and other equipment, furniture and leasehold
improvements that are measured at cost less accumulated depreciation and impairment losses. Cost includes the
acquisition price and costs directly related to the acquisition until the time the asset is ready for use. The
residual value of equipment is not material. Depreciation is calculated on a straight-line basis over the expected
useful life of the asset, being 3-5 for equipment and furniture. Leasehold improvements are depreciated over the
shorter of the useful life of the improvement or the remaining lease term. The useful life of assets and method of
depreciation are reviewed by management at least each year-end or more often based on changes in facts and
circumstances. Changes in useful lives or residual values are adjusted prospectively as changes in accounting
estimates. In addition, the Company has fully depreciated equipment still in use.
Property, plant, and equipment is required to be tested for impairment when there are impairment
indicators present. Impairment tests are conducted at the individual asset level, or at the lowest level for which
separately identifiable cash flows for groups of assets exist. Impaired assets or asset groups are written down to
their recoverable amount, which is the higher of the value in use and the net realizable value of the asset or
asset group, with impairment charges allocated proportionately to the assets within the impaired asset group.
With reference to note 1.6, significant events have occurred after the reporting period, which is relevant
in the understanding of this item. The events disclosed in note 1.6 have not been considered in the current
reporting period.
Gross carrying amount of any fully depreciated property, plant and equipment that is still in use is
DKK 3.7 million.
55
The following table presents the Company’s Property, plant and equipment as of the years presented:
Furniture
and
Leasehold
DKK 000
equipment
improvements
Total
Cost at December 31, 2019
5,532
2,066
7,598
Additions
1,840
525
2,365
Disposals
—
—
—
Cost at December 31, 2020
7,372
2,591
9,963
Additions
48
44
92
Disposals
(597
)
—
(597
)
Cost at December 31, 2021
6,823
2,635
9,458
Accumulated depreciation at December 31, 2019
3,613
300
3,913
Depreciation expense
1,004
367
1,371
Exchange rate adjustments
(8
)
0
(8
)
Accumulated depreciation at December 31, 2020
4,609
667
5,276
Depreciation expense
1,156
429
1,585
Depreciation reversed on disposals during the year
(389
)
0
(389
)
Exchange rate adjustments
1
0
1
Accumulated depreciation at December 31, 2021
5,377
1,096
6,473
Net carrying value at
December 31, 2020
2,763
1,924
4,687
December 31, 2021
1,446
1,539
2,985
There has been no impairment of property, plant and equipment for the years ended December 31,
2021 and 2020. Depreciation expense is included within operating loss as follows:
DKK 000
2021
2020
2019
Research and development expenses
1,301
887
544
General and administrative expenses
285
484
489
Total depreciation expense
1,585
1,371
1,033
3.4 PREPAYMENTS, DEPOSITS, AND OTHER RECEIVABLES
§ ACCOUNTING POLICIES
Prepayments
Prepayments include advance payments made to vendors that will be incurred and expensed in
subsequent financial reporting periods. When the period for full expense recognition is longer than one year
from the balance sheet date, the portion to be expensed subsequent to one year is classified as non-current.
Deposits
Deposits include advance payments made to vendors to be settled upon completion of the underlying
contract. When the contract term is longer than one year from the balance sheet date, the deposit is classified as
non-current.
Other receivables
Other receivables include current and non-current amounts due to the Company.
Sales tax
Expenses and assets are recognized net of the amount of sales tax, except:
• when the sales tax incurred on a purchase of assets or services is not recoverable from the
taxation authority, in which case, the sales tax is recognized as part of the cost of acquisition of
the asset or as part of the expense item, as applicable
56
• when receivables and payables are stated with the amount of sales tax included
The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part
of receivables or payables in the Statement of Financial Position.
Estimate of prepayments related to clinical trial development costs
As explained in Note 2.2, Orphazyme incurs substantial costs associated with clinical trials related to
its development programs and there is a high degree of estimation involved in accounting for clinical trial
development costs. In particular, certain CROs and vendors are paid upfront in connection with clinical
activities and Management is required to estimate the timing of the prepayment release to expense. This expense
for the year is estimated by using an expense model, as described in Note 2.2.
With reference to note 1.6, significant events have occurred after the reporting period, which is relevant
in the understanding of this item. The events disclosed in note 1.6 have not been considered in the current
reporting period.
The following items comprised non-current prepayments and deposits as of December 31:
DKK 000
2021
2020
Deposits with vendors
215
500
Prepayments to vendors
749
280
Leasehold deposit
—
1,234
Total non-current prepayments and deposits
964
2,014
Non-current prepayments and deposits mainly includes a deposit with a CRO for advance payment of
pass-through costs in connection with a clinical trial, prepaid insurance, and the lease deposit on our
headquarters in Copenhagen.
Current prepayments and other receivables are specified below:
DKK 000
2021
2020
Prepayments to vendors
12,872
38,281
Grant income receivable
0
81
VAT receivable, net
2,903
10,333
Foreign VAT receivable
1,627
1,304
Other current receivables
2,790
1,236
Total current prepayments and other receivables
20,192
51,235
Current prepayments to vendors include prepayments made to CROs for clinical trial costs of DKK 2.4
million (2020: DKK 5.2 million).
3.5 TRADE RECEIVABLES
§ ACCOUNTING POLICIES
Trade receivables are recognized and derecognized on a settlement date basis. They are measured at
nominal value less expected credit losses based on historical experience. Orphazyme applies the simplified
approach for determining expected credit losses.
At December 31, 2021 trade receivables in the amount of DKK 29.3 million are recognized in the
balance sheet at the total invoiced amount less any expected credit losses. Due to the nature of the revenue
transactions, expected credit losses are very limited.
There are no overdue receivables and the write-down for expected credit losses is not material.
57
3.6 PRE-LAUNCH INVENTORY
§ ACCOUNTING POLICIES
The Company may scale-up and make commercial quantities of its product candidate prior to the date
it anticipates that such product will receive final regulatory approval. The scale-up and commercial production
of pre-launch inventory involves the risk that such products may not be approved for marketing on a timely
basis, or ever. This risk notwithstanding, the Company may scale-up and build pre-launch inventory of product
that have not yet received final regulatory approval when the Company believes that such action is appropriate
in relation to the commercial value of the product launch opportunity.
Inventory manufactured prior to regulatory approval (pre-launch inventory) is capitalized but
immediately provided for, until regulatory approval for the product is obtained. A write-down is made against
inventory, and the cost is recognized in the statement of profit or loss and other comprehensive loss as research
and development costs. Once regulatory approval is obtained, the write-down is reversed, up to no more than
the original cost.
With reference to note 1.6, significant events have occurred after the reporting period, which is relevant
in the understanding of this item. The events disclosed in note 1.6 have not been considered in the current
reporting period.
Pre-launch inventory intended for commercial sale
As of December 31, 2021 and 2020, the Company did not have pre-launch inventory that qualified for
capitalization. As of December 31, 2021, the Company had pre-launch inventory of approximately DKK 92.6m
(2020: DKK 12.4m) intended for commercial sale following regulatory approval of arimoclomol for the
treatment of Niemann-Pick Disease Type C (NPC). This amount is fully provided for and recognized under
research and development expenses in the statement of profit or loss and other comprehensive loss along with
the production costs for drug substance and drug products used in clinical trials and early access programs that
are not eligible for reversal at a later time. As the nATU sale in France is not commercial sale, cost for the
related inventory has not been recognized on inventory.
3.7 FINANCIAL ASSETS AND LIABILITIES
§ ACCOUNTING POLICIES
Financial assets
Initial recognition and measurement
Financial assets that meet certain criteria are classified at initial recognition as subsequently
measured at amortized cost, fair value through other comprehensive income (OCI), or fair value through profit
or loss. The Group does not hold any financial assets meeting these classification criteria except cash and
certain types of other receivables, which are valued at amortized cost. Generally, the Company’s financial
assets are available to support current operations and amounts expected to be realized within the next twelve
months are classified in the Statement of Financial Position as current assets.
The Group’s financial assets are recognized initially at fair value plus, in the case of financial assets
not carried at fair value through profit and loss, transaction costs that are attributable to the acquisition of the
financial asset, if any. Financial instruments recognized at fair value are allocated to one of the following
valuation hierarchy levels:
• Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities.
• Level 2: Other techniques for which all inputs that have a significant effect on the recorded fair
value are observable, either directly or indirectly.
• Level 3: Techniques that use inputs that have a significant effect on the recorded fair value that
are not based on observable market data.
58
Subsequent measurement
Historically, the Group’s receivables are due within a twelve-month period and therefore the impact of
using the effective interest rate method on the Group’s financial statements has been immaterial.
Financial asset impairment
The Group assesses at the end of each reporting period whether there has been objective evidence that
a financial asset may be impaired. Impairment losses are recognized if there is objective evidence of impairment
and the evidence indicates that estimated future cash flows will be negatively impacted. The Group did not
assess an impairment of a financial asset for either of the years ended December 31, 2021 or 2020.
Financial liabilities
Borrowings
Financial liabilities, including borrowings, are initially measured at fair value less transaction costs
incurred. Subsequently, borrowings are measured at amortized cost. Amortized cost is calculated as original
cost less instalments plus/less the accumulated amortization of the difference between cost and nominal value,
so that the effective interest rate is recognized in the income statement over the loan period. Financial liabilities
are derecognized when settled.
The Facilitation Fee in our Loan Agreement, defined below, is accounted for as an embedded
derivative. The variability arising from the change in Orphazyme’s share price is not closely related to the host
debt instrument characterized mainly by interest rate and credit risk. Therefore, the embedded equity-linked
amount is separated from the host debt instrument and accounted for as an embedded written call option at fair
value through profit and loss.
The portion of the debt maturing after one year is presented as non-current debt and the remainder as
current debt.
Trade payables and accruals
Trade payables and accruals relate to the Group’s purchase of products and services from various
vendors in the normal course of business.
Other liabilities
Other payables are measured at amortized cost. The amount payable to employees for the Phantom
Shares Program (Note 2.6) is classified as non-current and is measured at fair value, at Level 2 in the fair value
hierarchy.
Discount and rebate liabilities
Discount and rebate liabilities is classified as both current and non-current liabilities based on an
existing legal or constructive obligation as a result of events occurring prior to or on the balance sheet date,
and it is probable that the utilization of economic resources will be required to settle the obligation and is
measured at management’s best estimate of the expenses required to settle the obligation.
Estimate of accruals related to clinical trial development costs
As explained in Note 2.2, Orphazyme incurs substantial costs associated with clinical trials related to
its development programs and there is a high degree of estimation involved in accounting for clinical trial
development costs. As described in Note 2.2, Management uses an expense model to estimate the timing of
expenses recognition in each period and related accruals at the end of the year.
With reference to note 1.6, significant events have occurred after the reporting period, which is relevant
in the understanding of this item. The events disclosed in note 1.6 have not been considered in the current
reporting period.
The Group’s financial assets include mainly cash (Note 3.8). The Group has no derivative financial
assets nor has there been a change in classification of a financial asset after initial recognition and measurements
59
as discussed herein. Financial assets are not acquired for trading or speculative purposes, nor has the Group
placed any assets as security for loans at either December 31, 2021 or 2020.
The Group’s financial liabilities comprise the following as of the years ended December 31:
DKK 000
2021
2020
Borrowings
33,465
57,180
Lease liabilities (Note 3.2)
6,503
13,534
Trade payables
41,780
29,937
Accruals
15,743
42,198
Total liabilities measured at amortized cost
97,491
142,849
Kreos Debt Facility
In August 2019, Orphazyme entered into a structured debt facility (“Loan Agreement”) with Kreos
Capital to secure funding of €9 million (Tranche 1”) to be repaid over forty-two months (“Loan Term”), with
the first twelve months requiring interest only payments at nominal annual fixed interest rate of 9.75% and the
remaining thirty months requiring equal installments comprising principal and interest. Early repayment of the
borrowed amounts may be made in whole but not in part, with the repayment amount being equal to the
principal outstanding plus the sum of all the interest repayments that would have been paid throughout the
remainder of the loan discounted at an annual rate of 4.0%.
In addition, the lender may, at any time in its sole discretion in eight years, depending on certain events
defined in the Loan Agreement, notify the Company that a Facilitation Fee is due and payable (“Notification”).
The Facilitation Fee is an amount equal to the greater of (i) 10% of the aggregate amount of the amount
borrowed and (ii) the percentage increase in the Company’s share price on Nasdaq Copenhagen between the 30-
day volume-weighted average share price on the date of the Loan Agreement and the closing share price on the
day immediately preceding the date of the notification applied to the aggregate amount of amounts borrowed.
The variability arising from the change in Orphazyme’s share price is not closely related to the host debt
instrument characterized mainly by interest rate and credit risk. Therefore, the embedded equity-linked amount
is separated from the host debt instrument and accounted for as an embedded written call option at fair value
through profit and loss.
Fair value on inception of the Loan Agreement is included as part of the transaction costs. The call
option is measured at fair value at level 2 in the fair value hierarchy.
The written call option is measured at fair value using a Black-Scholes option valuation model. In
measuring the fair value, various observable and unobservable inputs are required. Observable input mainly
relates to the market price of Orphazyme’s shares, and risk-free interest rate. Unobservable inputs mainly relate
to the expected volatility of Orphazyme’s share price, which was determined based on the Company’s own
historical volatility, and the term. The table below shows the inputs used in the valuation of the call option and
the estimated fair value at year-end December 31.
Call option on Facilitation Fee
Dec 2021
Dec 2020
Fair value of call option
326
838
Dividend yield (%)
—
—
Expected volatility (%)
147
%
54
%
Risk-free interest rate (%)
(0.63
)%
(0.61
)%
Expected life (years)
1.2
2.2
Share price (DKK)
17.2
67.1
The change in fair value of the call option is recognized as a finance income or expense in the
statement of profit or loss. For the year ended December 31, 2021, the Company recognized a gain of DKK 0.5
million (2020: DKK 0.8 million).
60
The structured debt facility included a potential second tranche available to Orphazyme, however as of
December 31, 2019 conditions allowing for the drawdown of the second tranche were not met and it expired
unused. In connection with the drawdown of Tranche 1, Orphazyme incurred transaction costs in the amount of
€0.5 million (DKK 3.4 million). As the transaction costs secured a potential financing of two tranches, half of
the transaction costs, or €0.2 million (DKK 1.7 million) are being amortized with the first tranche and upon
expiration of the second tranche, the other half of the transaction costs were written off as finance expense in the
statement of profit or loss (Note 2.7).
As part of the closing of the Loan Agreement, Orphazyme made a payment in the amount of €0.4
million (DKK 2.5 million) as a deposit for the last cash payment to be made on the borrowing (“Advance
Payment”).
The total liability for the Loan Agreement is being amortized net of the transaction costs, the
Facilitation Fee and the call option; and it is being presented net of the Advance Payment.
Maturities of financial liabilities
The table below presents the Group’s financial liabilities by relevant maturity groupings based on their
contractual maturities for all non-derivative financial liabilities and derivative financial instruments for which
the contractual maturities are essential for an understanding of the timing of the cash flows.
As the Facilitation Fee is due upon demand, it is shown as current Borrowings under non-derivatives.
The call option on the Facilitation Fee is shown as current under derivatives.
The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12
months equal their carrying balances as the impact of discounting is not significant.
Less
Between
Between
Total
than
1 and 2
2 and 5
contractual
Carrying
DKK 000
12 months
years
years
cash flows
amount
Non-derivatives
Trade payables and accruals
57,524
—
—
57,524
57,524
Borrowings
30,031
4,510
—
34,541
33,465
Lease liabilities
2,973
2,145
2,101
7,219
6,503
Total non-derivatives
90,528
6,655
2,101
99,284
97,492
Derivatives (Borrowings)
326
—
—
326
326
Total derivatives
326
—
—
326
326
Total changes in liabilities arising from financing activities are comprised as follows:
Non-cash changes
DKK 000
December 31,
2020
Cash
flows
Disposals
Adjustments
and
modifications
Accumulated
interest
Exchange
rate
adjustments
December 31,
2021
Borrowings
57,179
(30,904
)
—
—
7,350
(160
)
33,465
Lease liabilities
13,534
(4,127
)
(1,212
)
(2,496
)
624
180
6,503
Total liabilities from financing activities
70,713
(35,031
)
(1,212
)
(2,496
)
7,974
20
39,968
Non-cash changes
DKK 000
December 31,
2019
Cash
flows
Additions
Adjustments
and
modifications
Accumulated
interest
Exchange
rate
adjustments
December 31,
2020
Borrowings
62,824
(16,349
)
—
750
9,921
33
57,179
Lease liabilities
12,689
(3,678
)
3,963
—
567
(7
)
13,534
Total liabilities from financing activities
75,513
(20,027
)
3,963
750
10,488
26
70,713
61
Liabilities from accrued discount and rebates are calculated based on specific terms in the individual
agreements. Please refer to note 2.1 further information on the accrued discount and rebates and managements
estimates and judgements.
The clawback liability comprise both a current and non-current portion. Current clawback liability of
DKK 7.9 million is settled annually, as a rebate, in accordance with nATU program. Non-current clawback
liability of DKK 28.2 million will expected to be settled as the final price has been negotiated. As mentioned in
note 2.1, the limited available relevant market information for directly comparable commercialized drugs within
rare deceases increases the uncertainty in managements estimate of the clawback liability.
As mentioned in note 1.6 and 3.7, the clawback liability has been transferred to KemPharm at the
carrying amount subsequently to the balance sheet date and on the basis of the amounts estimated by
management. Thus, while the liability has been transferred after the balance sheet date to KemPharm, this is
considered a non-adjusting event and has not impacted current vs. non-current presentation.
Total changes in liabilities arising from accrued discounts and rebates are comprised as follows:
DKK 000
December 31,
2020
Cash flows
Accruals
December 31,
2021
Discount and rebate liabilities
—
—
36,193
36,193
Total liabilities from accrued discount and rebates
—
—
36,193
36,193
Total current other liabilities are comprised of the following as of the years ended December 31:
DKK 000
2021
2020
Remuneration to the Board of Directors
293
2,840
Payroll and employee-related costs
29,230
50,487
Total current other liabilities
29,523
53,327
In addition, the Group has the following total other non-current liabilities as of the years ended
December 31:
DKK 000
2021
2020
Accrual for milestone payment to vendor
—
1,179
Phantom shares liability to employees
98
455
Total non-current other liabilities
98
1,634
3.8 CASH
§ ACCOUNTING POLICIES
Cash includes cash on hand and in banks. Please see Financial Risks discussed in Note 4.4.
The Group’s cash balance denominated in foreign currencies were as follows as of the years ended
December 31:
DKK 000
2021
2020
DKK
53,291
483,862
USD
43,340
241,353
EUR
4,070
644
CHF
662
18
GBP
892
1,052
Total cash
102,255
726,929
62
3.9 COMMITMENTS AND CONTINGENCIES
Pledges and securities for loans.
In connection with a loan agreement in the amount up to €18.0 million entered into on August 27, 2019
with Kreos Capital VI (UK) Ltd., the Company has granted security in favor of Kreos Capital VI (UK) Ltd. over
(i) certain of its assets, including its intellectual property rights, pursuant to a floating charge agreement
registered with the Danish personal register in the initial principal amount of €9.0 million, (ii) its patents
registered in Germany, the UK and the US pursuant to a patent pledge agreement and (iii) its shares in its US
subsidiary, Orphazyme US, Inc. Furthermore, Orphazyme US, Inc. has granted in favor of Kreos Capital VI
(UK) Ltd. (i) a guarantee for the Company’s obligations under the loan agreement pursuant to a guaranty
agreement and (ii) security over certain of its assets, including its intellectual property rights, pursuant to a
security agreement governed under US law.
On July 9, 2021, a putative class action lawsuit was filed against the company and certain of its current
and former directors and officers in the United States District Court for the Northern District of Illinois. This
lawsuit alleges that certain representations about arimoclomol in the Company’s U.S. IPO offering documents
and in subsequent public statements were false and misleading, in violations of U.S. securities. Management
does not believe these claims have any merit and believe that the outcome will not materially affect the
Company's financial position.
With reference to note 1.6, significant events have occurred after the reporting period, with
substantially all assets and business activities sold to KemPharm, Inc. The transaction included Orphazyme
assets, including those relating to the development and approval of arimoclomol and the full claw back liability
related to the French early access program. As a result, such commitments and contingencies related to the
French early access program have been transferred to KemPharm Inc.
63
SECTION 4 Other disclosures
4.1 CAPITAL MANAGEMENT
For the purpose of the Group’s capital management, capital includes issued capital, share premium and
all other equity reserves attributable to the equity holders of the Group. The primary objective of the Group’s
capital management is to maximize shareholder value while limiting the financial risk. The Board of Directors’
policy is to maintain needed capital base in order to maintain investor, creditor and market confidence.
As of December 31, 2021, the Group held cash totaling DKK 102.3 million (2020: DKK 726.9
million). With reference to note 1.6 management therefore considers it appropriate to prepare these financial
statements on a going concern basis.
As of December 31, 2021 the Group has lost more than 50% of it subscribed share capital. On the
ordinary general meeting of shareholders on June 29, 2022, the Board of Directors will give an account of the
Group’s financial position.
4.2 EQUITY
The following table summarizes the Company’s share activity:
Ordinary
shares
December 31, 2018
19,939,564
Issuance of bonus shares as part of license agreement (note 3.1)
26,060
Issuance of Matching Shares (Note 2.6)
19,175
December 31, 2019
19,984,799
Issuance of bonus shares as part of license agreement (note 3.1)
20,650
Issuance of Matching Shares (Note 2.6)
31,250
Issuance of shares due to exercise of restricted share-units
11,921
Issuance of shares related to directed issue and private placement, February 2020
7,032,937
Issuance of shares related to US listing, September 2020
7,616,146
December 31, 2020
34,697,703
Capital increase, issuance of Matching Shares, net of costs
170,131
Capital increase, Bonus Shares
22,553
Capital increase, issuance of sign-on bonus shares to former CEO
58,000
Capital increase, exercise of RSUs
3,854
December 31, 2021
34,952,241
The Company has never declared or paid any cash dividends on its ordinary shares and does not
anticipate doing so in the foreseeable future. The Company intends to use all available financial resources as
well as revenue, if any, for purposes of the Company’s current and future business.
In March 2019, the Company issued 19,175 Matching Shares to participants in the 2017 LTIP (see
Note 2.6)
In January 2020, the Company issued 20,650 (2019: 26,060) bonus shares to KLSDC and UCL under
the terms of the license agreement discussed in Note 3.1.
In February 2020, the Company completed an offering of 7,032,937 shares in a directed issue and
private placement and raised gross proceeds of approximately DKK 745 million and net proceeds of
approximately DKK 694 million.
The transaction consisted of a directed issue and private placement of up to 3,961,264 new shares of a
nominal value of DKK 1 each (the “New Shares”) and private placement of up to 3,071,673 existing shares of a
nominal value of DKK 1 each (the “Existing Shares” and together with the New Shares, the “Offer Shares”) at
an offer price of DKK 106 per Offer Share, as determined by the Board of Directors of the Company through a
64
book-building process (the “Offering”). The New Shares will be issued without pre-emption rights for existing
shareholders.
The offering of Existing Shares was facilitated by a share loan from Novo Holdings A/S and Orpha
Pooling B.V. (the “Lending Shareholders”) to the Company pursuant to a stock lending and subscription
agreement with an obligation for the Company to redeliver new shares of an equivalent number as the Existing
Shares borrowed by the Company from each of the Lending Shareholders (the “Replacement Shares”), which
were issued without pre-emption rights for existing shareholders. The Lending Shareholders did not participate
in the Offering and only facilitated the loan of the Lending Shares for purposes of the Company’s offering of
Existing Shares in the Offering.
In April 2020, the Company issued 5,378 new shares to board members following the exercise of fully
vested RSUs under the 2019 RSU program (see Note 2.5).
In July 2020, the Company issued 31,250 Matching Shares to participants in the 2019 LTIP (see
Note 2.6)
In September 2020, the Company listed American Depositary Shares (ADSs) on the Nasdaq Global
Select Market. In connection with this listing, we issued and sold 3,650,000 ordinary shares and 3,966,146
ADSs, each representing one ordinary share. Aggregate gross proceeds from the offering amounted to DKK
534.5 million, or USD 83.7 million translated at the exchange rate on the date the transaction
closed. Orphazyme incurred transaction costs in the amount of DKK 56.6 million in connection with the US
listing, which were accounted for as a deduction from equity.
In January 2021, the Company issued 22,553 (2020: 20,650 and 2019: 26,060) bonus shares to KLSDC
and UCL under the terms of the license agreement discussed in Note 3.1.
In March 2021, the Company issued 3,854 new shares to board members following the exercise of
fully vested RSUs under the 2020 RSU program (see Note 2.6).
In January 2021, the Company issued 170,131 Matching Shares to participants in the 2020 LTIP (see
Note 2.6)
In February 2021, the Company issued 58,000 new shares to former CEO, Kim Stratton following the
service agreement (see Note 2.6)
As a result of the above transactions, the total nominal share capital of the Company as of
December 31, 2021 was DKK 34,952,241, divided into 34,952,241 ordinary shares each with a nominal value of
DKK 1.
Pursuant to Section 3 of the Company’s articles of association, the Board of Directors was at December
31, 2021 authorized to increase the Company’s share capital by:
• Issue of new shares at market price without pre-emption rights by up to a nominal amount of DKK
6,989,767 in the period until 25 March 2026 (Article 3.1 of the Articles of Association)
• Issue of new shares against cash payment at a subscription price, which may be below the market price,
to members of the Board of Directors, executives and/or employees of the Company without pre-emption
rights by up to a nominal amount of DKK 1,300,000 in the period until 2 November 2022 (Article 3.2 of
the Articles of Association). The authorization in article 3.2 has been partly exercised following which a
nominal value of DKK 294,331 of the authorization has been issued.
• Directed issues of bonus shares, and/or directed issues of new shares effected by cash payment, to Kansas
Life Sciences Development Inc. and UCL Business PLC (or entities designated by them), respectively,
without pre-emption rights by up to a nominal amount of DKK 15,750,000 in the period until 2 November
2022 (Article 3.3 of the Articles of Association). The capital increase shall take place at par value (i.e.
below market price). The value of such new shares to be issued can in any case not exceed a maximum
of USD 2.5 million with a fixed exchange rate of DKK 6.30 per 1 USD based on the average closing
price of the Company’s shares on Nasdaq Copenhagen A/S for the 30 days immediately prior to the date
65
of issuance. The authorization in article 3.3 has been partly exercised following which a nominal value
of DKK 80,643 of the authorization has been issued.
• Issue of new shares at a subscription price which may be below the market price with pre-emption rights
by up to a nominal amount of DKK 25,000,000 in the period until 25 January 2025 (Article 3.4 of the
Articles of Association).
• Issue of new shares against cash payment at a subscription price, which may be below the market price
to members of the Board of Directors, executives and/or employees of the Company without pre-emption
rights by up to a nominal amount of DKK 1,300,000 in the period until 25 March 2026. The new shares
shall be issued (Article 3.5 of the Articles of Association).
The authorisations granted to the Board of Directors at December 31, 2021 pursuant to Articles 3.2 and
3.5 of the Articles of Association could in the aggregate only be exercised to increase the share capital by a
maximum nominal amount of DKK 2,000,000.
4.3 LOSS PER SHARE
Basic loss per share for the year is calculated by dividing the net loss for the year by the weighted
average number of ordinary shares outstanding during the year. The diluted loss per share is calculated by
dividing the net loss for the year by the weighted average number of ordinary shares outstanding during the
period increased by the dilutive effect of the assumed issuance of outstanding share-based awards. As a result of
the Group incurring losses for each of the years ended December 31, 2021, 2020 and 2019, the potential shares
issuable related to outstanding share-based awards have been excluded from the calculation of diluted per share
amounts, as the effect of such shares is anti-dilutive.
Basic and diluted loss per share for the years presented have been adjusted retrospectively to include
the 2019 Bonus Shares, the 2020 Bonus Shares and the 2021 Bonus Shares discussed in Note 3.1 in the number
of weighted average shares outstanding for the years ended December 31, 2021, 2020 and 2019. This results in
the comparative figures for 2020 and 2019 being updated accordingly.
The following reflects the net loss attributable to shareholders and share data used in the basic and
diluted earnings/(loss) per share computations for the years ended December 31:
2021
2020
2019
Net loss for the year (DKK 000)
(626,539
)
(633,246
)
(337,497
)
Weighted-average shares outstanding
34,924,702
28,366,469
20,024,692
Loss per share
(17.94
)
(22.32
)
(16.85
)
4.4 FINANCIAL RISKS
The Group’s activities expose it to a number of financial risks whereby future events, which can be
outside the control of the Group, could have a material effect on its financial position and results of operations.
The known risks include foreign currency, interest and credit risk and there could be other risks currently
unknown to Management. The Group has not historically hedged its financial risks.
Liquidity Risk
At December 31, 2021, the Group’s liquidity risk was assessed to be high. Management continuously
assesses the Group’s capital structure in order to evaluate whether its liquidity reserves allow it to achieve its
business objectives. At December 31, 2021, the available liquidity reserves, including funded capital in
subsequent period, were assessed to be sufficient for the Group to meet its planned operating activities,
including decreased levels of research and development activities, in the normal course of business for at least
the next twelve months.
Foreign Currency Risk
The Group’s foreign currency risk is assessed to be high. The Group conducts cross border transactions
where the functional currency of the respective group entity is not always used. Accordingly, future changes in
the exchange rates of the DKK against the EUR, the USD, the CHF and/or the GBP will expose the Group to
66
currency gains or losses that will impact the reported amounts of assets, liabilities, income and expenses and the
impact could be material.
Interest Rate Risk
The Group’s interest rate risk is assessed to be low. The Group has a borrowing on which it incurs a
fixed rate of interest (see Note 3.6). In addition, due to the current interest level in Denmark, the Group incurs
negative interest on bank deposits.
Credit Risk
The Group’s credit risk is assessed to be low. The Group’s credit risk is associated with cash held in
banks. The Company does not trade financial assets for speculative purposes and invests with the objective of
preserving capital. The Company’s cash is held primarily at two banks in Denmark with Moody’s long-term
credit ratings exceeding of A1.
The Group has prepared a sensitivity analysis in order to assess the potential impact on the Group’s net
loss for possible fluctuations in the EUR and USD exchange rates against the DKK and the impact for the
possible fluctuations in the interest rate on bank deposits in Denmark and in the USA. The methods and
assumptions used are consistent with prior year and consider increases and decreases in the Group’s three main
currencies, as well as reasonable fluctuations in the interest rate on its bank deposits. Based on these analyses, if
interest rates on our cash deposits would have fluctuated by +/- 1%, the impact on the Group’s net loss for the
year ended December 31, 2021 would have been approximately DKK 14 thousand (2020: DKK 36 thousand;
2019: DKK 8 thousand).
The impact of currency fluctuations on the Group’s net loss is shown in the table below:
Effect
Effect
Effect
Currency
2021
2020
2019
Currency
fluctuation
TDKK
TDKK
TDKK
EUR
+/- 2%
284
538
503
USD
+/-10%
19,239
22,178
21
CHF
+/-10%
508
611
-
GBP
+/-10%
22
199
461
4.5 REMUNERATION OF BOARD OF DIRECTORS AND EXECUTIVE MANAGEMENT
Executive Management consists of the Company’s Chief Executive Officer and the Chief Financial
Officer, also the registered management of the Company. In July 2019, Orphazyme announced that the Board of
Directors appointed Kim Stratton as the new Chief Executive Officer, succeeding Anders Hinsby on October 1,
2019.
Ms. Stratton resigned from her position at Orphazyme on December 10, 2020. As part of the
separation agreement, Ms. Stratton will continue to receive her monthly base salary during 2021 and on
December 31, 2021 she will receive severance pay equal to one year’s base salary. Therefore, as of December
31, 2020, two times her base salary is additionally recognized as salary expense. Subsequent to December 31,
2020, Ms. Stratton received 35,304 Matching Shares as part of the 2020 LTIP program and will receive 58,000
ordinary shares as part of the sign-on bonus described in Note 2.5. As of December 31, 2020, 52,956
Performance Shares had vested as part of the 2020 LTIP program. These awards will be settled in January 2024
based on the development of the Company’s share price (Note 2.5).
In March 2021, Orphazyme announced that the Board of Directors appointed Christophe Bourdon as
the new Chief Executive Officer, succeeding Interim Chief Executive Officer Anders Fink Vadsholt April 1,
2021.
The Executive Management is eligible to receive an annual performance-based cash bonus subject to
certain predefined corporate and individual goals as determined by the Board of Directors on an annual basis. A
cash bonus received under the short-term incentive program may not exceed 100% of the annual fixed salary of
the participants. As part of the separation agreement, Ms. Stratton is entitled to the annual performance-based
67
cash bonus. The Executive Management is also eligible to receive an extraordinary bonus at the discretion of the
Board of Directors.
The following table presents remuneration to the Executive Management for the years ended December
31, 2021, 2020 and 2019.
REMUNERATION TO INDIVIDUAL
MEMBERS OF EXECUTIVE MANAGEMENT (DKK 000)
2021
2020
2019
Anders Vadsholt (CFO and interim CEO)
Salary
2,376
2,324
1,803
Bonus
585
2,491
1,250
Share-based compensation
2,164
2,805
406
Other employee benefits
277
983
260
Total
5,402
8,603
3,719
Christophe Bourdon (CEO from April 1, 2021)
Salary
2,925
—
—
Bonus
1,330
—
—
Share-based compensation
(1)
4,967
—
—
Other employee benefits
107
—
—
Total
9,329
—
—
Kim Stratton (CEO through December 31, 2020)
Salary
—
11,001
962
Bonus
—
3,500
1,025
Share-based compensation
—
7,359
—
Other employee benefits
—
2,542
215
Total
—
24,402
2,202
Anders Hinsby (former CEO)
Salary
—
—
2,424
Bonus
—
—
1,038
Share-based compensation
—
—
294
Other employee benefits
—
—
270
Total
—
—
4,026
Total remuneration to the Executive Management
14,731
33,005
9,947
(1) includes two times share based compensation. Both sign-on bonus and LTIP 2021 program, both described in note
2.6
Remuneration paid to members of the Board of Directors is made up of board and committee fees, a
travel allowance, ad-hoc fees for additional services provided as described in Note 4.6, and share-based
compensation related to the Restricted Share Units (RSUs) as described in Note 2.6. Board remuneration is
recognized as general and administrative expenses in the Statement of Profit or Loss. The following table lists
Board of Directors remuneration for the years ended December 31:
68
REMUNERATION TO INDIVIDUAL MEMBERS
OF THE BOARD OF DIRECTORS (DKK 000)
2021
2020
2019
Georges Gemayel (Chairman of the Board)
Board and committee fees
659
565
470
Ad hoc board fees
(1)
1,312
186
—
Travel allowance
30
27
64
Share-based compensation
164
161
28
Total
2,165
939
562
Bo Jesper Hansen (Deputy Chairman of the Board)
Board and committee fees
447
421
395
Ad hoc board fees
—
112
—
Travel allowance
97
34
46
Share-based compensation
68
102
21
Total
612
669
462
Martin Bonde
Board and committee fees
318
276
259
Travel allowance
—
—
—
Share-based compensation
48
73
16
Total
366
349
275
Martijn Kleijwegt
Board and committee fees
161
304
285
Travel allowance
—
35
46
Share-based compensation
25
73
16
Total
186
412
347
Rémi Droller
(2)
Board and committee fees
(828
)
288
270
Travel allowance
(90
)
25
46
Share-based compensation
(89
)
73
16
Total
(1,007
)
386
332
Sten Verland
Board and committee fees
81
327
309
Travel allowance
—
1
—
Share-based compensation
25
73
16
Total
106
401
325
Anders Hedegaard
Board and committee fees
153
288
270
Travel allowance
—
13
46
Share-based compensation
25
73
16
Total
178
374
332
Catherine Moukheibir
Board and committee fees
353
355
336
Ad hoc board fees
—
112
—
Travel allowance
—
23
46
Share-based compensation
25
73
16
Total
378
563
398
Carrolee Barlow
Board and committee fees
320
77
—
Travel allowance
—
—
—
Share-based compensation
80
145
—
Total
400
222
—
Stephanie Okey
Board and committee fees
247
—
—
Ad hoc board fees
107
Share-based compensation
72
—
—
Total
426
—
—
69
Andrew Mercieca
Board and committee fees
24
—
—
Total
24
—
—
Total remuneration to the Board of Directors
3,834
4,315
3,033
(1) George Gemayel received ad-hoc fee in connection with a consultancy agreement for support during the interim
period until Christophe Bourdon joined as CEO in April 2021
(2) Rémi Droller resigned effective as of June 30, 2021. At the same time all historical board fee was reversed.
4.6 RELATED PARTIES
Orphazyme A/S, incorporated in Denmark, is the ultimate parent company of the Group, which wholly
owns Orphazyme US, Inc and Orphazyme Switzerland GmbH. These three entities are considered related
parties. Orphazyme A/S is not ultimately controlled by any of its investors. Major investors owning more than
10% of the Company are considered related parties.
For the years ended December 31, 2021, 2020 and 2019, the following related party transactions were
identified:
• Remuneration to Executive Management (Note 4.5)
• Remuneration to the Board of Directors (Note 4.5)
• Participation of Executive Management in the 2017 LTIP, the 2019 LTIP and the 2020 LTIP (Note
2.5)
• Participation of the Board members in the 2019 RSU and 2020 RSU programs (Note 2.5)
• Share lending arrangement in connection with the directed issue and private placement in February
2020 (Note 4.2). We entered into a Stock Lending and Subscription Agreement on February 6,
2020 with Danske Bank A/S, Orpha Pooling B.V. and Novo Holdings A/S, pursuant to which we
borrowed 3,071,673 existing ordinary shares (the Lending Shares) from Orpha Pooling B.V. and
Novo Holdings A/S, major investors at the time, through Danske Bank A/S as settlement agent in
order for us to place such ordinary shares in a private placement. The Lending Shares were
borrowed subject to an obligation for us to issue new ordinary shares of an equivalent number as
the Lending Shares placed in this private placement, or the Listing Shares, and for Danske Bank
A/S to use the proceeds from the sale of Lending Shares in the private placement to subscribe for
the Listing Shares and deliver the Listing Shares to the Orpha Pooling B.V. and Novo Holdings
A/S. The Listing Shares were issued and delivered, as agreed, on February 11, 2020.
• Ad-hoc fees paid to certain members of the Board of Directors in connection for their support
during the US listing process in 2020. Total ad-hoc fees amounted to EUR 55,000 (DKK 0.4
million) and was recorded in the statement of profit or loss and other comprehensive income.
• Ad-hoc fees paid to the Chairman of the Board in 2020 connection with a consultancy agreement
for support during the interim period until a new CEO is hired. As part of this agreement,
Orphazyme has paid the Chairman of the Board an up-front payment of EUR 88,605 (DKK 0.7
million) in December 2020, which is recognized as a prepayment in the statement of financial
position. An additional payment of 100% of his aggregate annual board and committee fees is
payable in June 2021. In addition to cash compensation, the Chairman has been granted 4.351
RSUs under the 2020-2 RSU program (see Note 3.5). The full remuneration to the Chairman of
the Board under this consultancy agreement is subject to the approval of the shareholders at the
Company’s annual general meeting in March 2021.
As of December 31, 2021 and 2020, the Company did not have any amounts receivable from related
parties and therefore recorded no related impairment. The Company has not granted any loans, guarantees, or
other commitments to or on behalf of any of the members of the Board of Directors or Executive Management.
For amounts payable to the Board of Directors, please see Note 3.6.
70
Executive Management and members of the Board of Directors had the following shareholding in
Orphazyme A/S for the years ended December 31:
Number of
Number of
Number of
shares owned
shares owned
shares owned
2021
2020
2019
Anders Vadsholt
160,717
143,156
132,595
Christophe Bourdon
—
—
—
Kim Stratton
—
50,600
—
Anders Hinsby (Former CEO)
—
—
209,596
December 31,
2021
December 31,
2020
December 31,
2019
Number of
Number of
Number of
MEMBERS OF THE
Number of
Unvested
Unexercised
Number of
Unvested
Number of
BOARD OF DIRECTORS:
shares owned
RSUs 2021
RSUs 2020
shares owned
RSUs 2019
shares owned
Georges Gemayel
100,809
9,222
—
100,809
4,351
97,358
Bo Jesper Hansen
143,234
2,849
—
143,234
2,689
100,545
Martijn Kleijwegt
1,927
—
—
—
1,927
—
Martin Bonde
47,936
2,042
—
47,936
1,927
46,009
Rémi Droller
—
—
—
—
1,927
—
Sten Verland
—
—
—
—
1,927
—
Anders Hedegaard
15,677
—
—
15,677
1,927
13,750
Catherine Moukheibir
9,907
—
—
7,980
1,927
7,980
Carrolee Barlow
—
2,042
—
—
4,391
—
4.7 FEES TO AUDITORS
The following table presents the fees to our independent registered public accounting firm, EY
Godkendt Revisionspartnerselskab (“EY”), recognized in general and administrative expenses in the Statement
of Profit or Loss for the years ended December 31. This note was prepared in accordance with the requirements
of the Danish Financial Statements Act:
DKK 000
2021
2020
2019
Audit services
2,743
2,416
2,244
Audit-related services
430
803
882
Other assistance
753
3,795
—
Total fees to auditors
3,926
7,014
3,126
Audit services
Audit services consist of fees billed for professional services rendered by EY for the audit of our
annual consolidated financial statements or services that are normally provided by the accountant in connection
with statutory and regulatory filings or engagements for those fiscal years. With reference to the events
disclosed in note 1.6 , the fee for audit services have increased compared to 2020..
Audit-Related services
Audit-related services consist of assurance and related services performed by EY that are reasonably
related to the performance of the audit or review of our consolidated financial statements and are not reported
under "Audit services".
Other assistance
In 2020, other assistance consists of services provided by EY for other permitted services, including
fees for work performed by EY in connection with the U.S. listing in September 2020
In 2021, other assistance consists of services provided by EY for other permitted services, including
fees for work performed by EY in connection with the U.S. At -the-Market offering program in November
2021.
71
Pre-approval policies
The Audit Committee assesses and pre-approves all services provided by the statutory auditors. The
pre-approval includes the type of service and a fee budget.
72
2021 Parent Financial Statements
STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
For the years ended December 31,
'DKK 000, except per share and share data
Note
2021
2020
Net revenue
2.1
36,193
-
Research and development expenses
2.2
(331,046)
(362,413)
General and administrative expenses
2.3
(340,316)
(258,933)
Operating loss
(671,362)
(621,346)
Financial income
2.5
11,983
2,427
Financial expenses
2.5
(10,438)
(28,985)
Loss before tax
(633,624)
(647,905)
Income tax benefit
2.6
5,500
5,500
Net loss for the year
(628,124)
(642,405)
Items that will be reclassified subsequently to the Statement of
Profit or Loss:
Exchange difference from translation of foreign operations
(57)
(54)
Total comprehensive loss
(628,181)
(642,459)
The accompanying notes form an integral part of these consolidated financial statements
73
STATEMENTS OF FINANCIAL POSITION
DKK 000
ASSETS
Note
2021
2020
Non-current assets
Intangible assets
2.7
2,152
10,681
Right-of-use assets
2.8
3,726
12,862
Property, plant, and equipment
2.9
2,205
3,770
Corporation tax receivable
2,750
2,750
Investment in subsidiaries
2.10
-
139
Prepayments and deposits
2.11
593
1,666
Total non-currents assets
11,426
31,805
Current assets
Corporation tax receivable
2.6
5,500
5,500
Trade receivables
29,268
-
Prepayments and other receivables
2.11
25,056
262,173
Inventory
-
-
Cash
2.13
85,693
487,322
Total current assets
145,517
754,995
Total assets
156,943
786,800
EQUITY AND LIABILITIES
Note
2021
2020
Equity
Share capital
34,952
34,698
Share premium
2,082,487
2,082,255
Other reserves
2,324
5,674
Accumulated deficit
(2,120,884)
(1,511,221)
Total equity
(1,121)
611,406
Non-current liabilities
Borrowings
2.12
2,482
23,830
Lease liabilities
2.8
2,427
8,071
Discount and rebate liabilities
2.12
28,293
-
--Other non-current liabilities
2.12
98
1,634
Total non-current liabilities
33,300
33,535
Current liabilities
Borrowings
2.12
30,983
33,349
Lease liabilities
2.8
2,122
3,276
Trade payables and accruals
2.12
49,445
49,074
Discount and rebate liabilities
2.12
7,900
-
Other liabilities
2.12
34,314
56,160
Total current liabilities
124,764
141,859
Total equity and liabilities
156,943
786,800
The accompanying notes form an integral part of these consolidated financial statements.
74
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
DKK 000
Other reserves
Notes
Share
capital
Share
premium
Foreign
currency
translation
reserve
Share-based
compensation
– acquisition
of intangible
assets
Accumulated
deficit
Total
Balance as of December 31, 2019
19,984
924,021
(51)
7,873
(898,159
)
53,668
Net loss for the year
(642,405
)
(642,405)
Other comprehensive income (loss)
(54)
(54)
Total other comprehensive income (loss)
(642,459)
Transactions with owners:
Issuance of bonus shares to KLSDC and UCL
21
(2,094)
2,073
-
Issuance of shares due to exercise of RSUs
13
717
730
Issuance of LTIP matching shares
31
Issuance of new shares in private placement
7,033
738,458
Transaction costs
(51,243)
Issuance of new shares in U.S listing
7,616
526,918
Transaction costs
(56,616)
Share-based payments costs for the period
27,270
27,270
Total transactions with owners, December
31, 2020
34,698
2,082,255
(105)
5,779
(1,511,221)
611,406
Net loss for the year
(628,124)
(628,124)
Other comprehensive income
(57)
(57)
Total other comprehensive income (loss)
(628,181)
Transactions with owners:
Capital increase, issuance of Matching Shares,
net of costs
170
170
Capital increase, Bonus Shares
22
(1,645
)
1,623
-
Cash settlement of Bonus Shares
(1,648
)
(1,648)
Capital increase, issuance of sign-on bonus
shares to former CEO
58
58
Capital increase, exercise of RSUs
4
232
236
Share-based compensation expense
16,838
16,838
Total transactions with owners
254
232
(3,293
)
18,461
15,653
Balance as of December 31, 2021
34,952
2,082,487
(162)
2,486
(2,120,884)
(1,121)
75
STATEMENTS OF CASH FLOWS
DKK 000
Note
2021
2020
Net loss
(628,124)
(642,405)
Reversal of non-cash items:
Equity-settled share-based compensation expense
2.4
12,493
20,823
Depreciation and amortization
2.7,
2.8,
2.9
14,870
4,742
Financial income
2.5
(11,983)
(2,427)
Financial expenses
2.5
10,438
28,985
Income tax benefit
2.6
(5,500)
(5,500)
Change in working capital:
Change in prepayments, deposits, and other receivables
2.11
2,344
(32,552)
Change in trade payables, accruals, and other liabilities
2.12
12,638
49,502
Change in intercompany receivables
2.11
153,123
(211,878)
Change in intercompany payables
2.12
53,998
7,907
Exchange rate adjustments on intercompany balances
9,055
(4,044)
Cash generated by operating activities before financial items and tax
(376,648)
(786,845)
Interest paid
(6,098)
(10,639)
Interest received
0
28
Income taxes received
5,500
5,500
Cash flow from operating activities
(377,246)
(791,957)
Investment in intangible assets
2.7
(85)
(896)
Investment in property, plant and equipment
2.9
-
(1,259)
Proceeds from sale of property, plant and equipment
1,040
-
Cash flow from investing activities
955
(2,155)
Proceeds from issue of shares and exercise of
RSUs
(1,184)
1,280,786
Transaction costs
-
(107,859)
Repayment of borrowing
(25,657)
(10,535)
Repayment of leasing liabilities
(3,090)
(2,913)
Cash flow from financing activities
(29,931)
1,159,478
Changes in cash and cash equivalents
(406,222)
365,366
Cash and cash equivalents at the beginning of the
period
487,322
123,250
Exchange rate adjustment on cash and cash
equivalents
1,857
(1,294)
Cash and cash equivalents at the end of the
period
82,957
487,322
76
SECTION 1 Basis of Preparation
The financial statements of Orphazyme A/S (the “Parent Company”) have been prepared in accordance
with International Financial Reporting Standards, or IFRS, as adopted by the EU and additional disclosure
requirements under the Danish Financial Statements Act.
1.1 COMPANY INFORMATION
In April 2018, a wholly-owned subsidiary, Orphazyme U.S., Inc., was incorporated in Delaware, USA
and in March 2020, a wholly-owned subsidiary, Orphazyme Schweiz GmbH, was incorporated in Zug,
Switzerland (together with Orphazyme A/S, “Orphazyme” or “the Group”).
1.2 SIGNIFICANT ACCOUNTING POLICIES APPLICABLE TO THE PARENT COMPANY
The Parent Company applies the same accounting policies as disclosed in the Group’s consolidated
financial statements. Therefore, only accounting policies specific to the Parent Company or that differ from the
accounting policies applied by the Group are disclosed in these notes to the parent statements. If an accounting
policy is not specifically mentioned, the Group accounting policy is applied.
A description of Management’s key accounting estimates and judgements as well as new IFRS
standards are disclosed in the Group financial statements and also apply to the Parent Company.
The Parent Company financial statements are presented in Danish Kroner, or DKK, which is both the
functional and presentation currency of the Parent Company. Where indicated, amounts are rounded to the
nearest thousand, or TDKK.
SECTION 2 Notes
2.1 NET REVENUE
DKK 000
2021
2020
Revenue by type
Revenue from sale of goods
36,193
-
Revenue by partner
Clinigen Health Limited
36,193
-
Geographical areas
France
36,193
-
2.2 RESEARCH AND DEVELOPMENT EXPENSES
DKK 000
2021
2020
External costs
229,252
256,445
Employee costs
79,388
93,261
Intercompany expenses
8,697
8,752
Depreciation and amortization
13,709
3,955
Total research and development expenses
331,046
362,413
77
2.3 GENERAL AND ADMINISTRATIVE EXPENSES
DKK 000
2021
2020
External costs
136,148
54,251
Employee costs
64,294
64,313
Intercompany expenses
138,713
139,582
Depreciation and amortization
1,161
787
Total research and development expenses
340,316
258,933
2.4 EMPLOYEE COSTS
DKK 000
Employee costs
2021
2020
Salaries
99,110
97,444
Cash bonus
10,886
21,636
Share-based compensation (Note 2.6)
12,050
19,976
Pension
8,306
8,914
Other social security contributions
1,900
2,020
Other staff costs
7,596
3,267
Total employee costs excluding board remuneration
139,848
153,257
Board remuneration (Note 4.5)
3,391
3,470
Board share-based compensation (Note 2.6 and Note 4.5)
443
847
Total employee costs
143,683
157,574
Recognized as follows in the statement of Profit or Loss
Research and development expenses
79,388
93,261
General and administrative expenses
64,294
64,313
Total employee costs
143,683
157,574
Average number of full-time employees
99
94
Year-end number of full-time employees
49
102
78
2.5 FINANCIAL INCOME AND FINANCIAL EXPENSES
DKK 000
2021
2020
Interest income on cash balances
28
Foreign currency exchange gains
11,438
1,649
Gain on embedded call option
546
750
Total financial income
11,983
2,427
Interest expense on Loan Agreement
7,350
9,921
Interest expense on lease liabilities
490
499
Interest expense on cash balances
(330)
3,608
Foreign currency exchange loss
1,364
14,805
Bank fees and other charges
80
152
Total financial expenses
10,438
28,985
2.6 INCOME TAXES
The following table presents the total income tax benefit for the years ended December 31:
DKK 000
2021
2020
Current tax benefit on net loss
139,397
142,539
Adjustments prior years
-
(1,065)
Tax credit research and development expenses
5,500
5,500
Change in unrecognized deferred tax before tax credit
(150,544)
(144,256)
Permanent differences
11,147
2,782
Total income tax benefit for the year
5,500
5,500
´
The following table presents the reconciliation of the effective tax rate to the statutory corporate
income tax rate in Denmark.
DKK 000
2021
2020
Net loss before tax
(633,624)
(647,905)
Corporate income tax rate in Denmark
22 %
22%
Computed income tax benefit
139,397
142,539
Tax effect of:
Adjustments prior years
-
(1,065)
Other non-deductible expenses, including US listing-related costs and share-
based compensation
11,147
2,782
Effect of different tax rate
-
Deferred tax asset not recognized after tax credit
(145,044)
(138,756)
Total income tax benefit for the year
5,500
5,500
79
The following table presents the carrying amount of deferred tax in the Statement of Financial Position:
DKK 000
2021
2020
Tax deductible losses
319,811
192,837
Deferred tax on intangible assets
132,310
112,192
Other temporary differences
1,882
2,019
454,003
307,048
Deferred tax asset not recognized
454,003
307,048
Carrying amount included in the Statement of Financial Position
-
-
2.7 INTANGIBLE ASSETS
DKK 000
Software
Licenses
Total
Cost at December 31, 2019
—
12,083
12,083
Additions
896
—
896
Cost at December 31, 2020
896
12,083
12,979
Additions
85
85
Cost at December 31, 2021
981
12,083
13,064
Accumulated amortization at December 31, 2019
—
1,544
1,544
Amortization expense
42
712
754
Accumulated amortization at December 31, 2020
42
2,256
2,298
Amortization expense
391
119
510
Impairment expense
0
8,105
8,105
Accumulated amortization at December 31, 2021
433
10,480
10,912
Net carrying value at
December 31, 2020
854
9,827
10,681
December 31, 2021
549
1,603
2,152
80
2.8 LEASES
The following table presents the carrying amounts of right-of-use assets recognized and the movements
during the period:
Office
Operating
DKK 000
buildings
equipment
Total
At December 31, 2019
10,095
3,808
13,903
Additions
1,712
-
1,712
Depreciation expense
(2,351
)
(401)
(2,752)
Modifications
-
At December 31, 2020
9,456
3,406
12,862
Additions
-
-
-
Disposals
(1,177)
-
(1,177)
Depreciation expense
(2,387)
(167)
(2,554)
Impairment expense
-
(3,239)
(3,239)
Modifications
(2,166)
-
(2,166)
Exchange rate adjustments
At December 31, 2021
3,726
-
3,726
The following table presents the carrying amounts of lease liabilities and the movements during the
period:
DKK 000
2021
2020
At January 1
11,346
12,689
Additions
-
1,712
Accretion of interest
490
499
Disposals
(1,212)
Payments
(3,579)
(3,554)
Exchange rate adjustments
Modifications
(2,496)
-
At December 31
4,549
11,346
Current
2,122
3,275
Non-current
2,427
8,071
The maturity analysis of lease liabilities is disclosed in Note 3.7.
The following amounts are recognized in the Statement of Profit or Loss:
DKK 000
2021
2020
Depreciation and impairment expense of right-of-use assets (R&D)
5,386
2,441
Depreciation and impairment expense of right-of-use assets (G&A)
407
311
Interest expense on lease liabilities
490
499
Gain on lease modification and disposals
(330)
—
Total amount recognized in the Statement of Profit or Loss
5,953
3,574
81
2.9 PROPERTY, PLANT, AND EQUIPMENT
The following table presents the Company’s Property, plant and equipment as of the years presented:
Furniture
and
Leasehold
DKK 000
equipment
improvements
Total
Cost at December 31, 2019
5,532
2,066
7,598
Additions
1,259
1,259
Disposals
—
—
—
Cost at December 31, 2020
6,791
2,066
8,857
Additions
Disposals
(597
)
—
(597)
Cost at December 31, 2021
6,194
2,066
8,260
Accumulated depreciation at December 31, 2019
3,614
300
3,914
Depreciation expense
919
317
1,236
Exchange rate adjustments
0
Accumulated depreciation at December 31, 2020
4,533
617
5,150
Depreciation expense
999
317
1,316
Depreciation reversed on disposals during the year
(411
)
0
(411)
Exchange rate adjustments
0
Accumulated depreciation at December 31, 2021
5,121
934
6,055
Net carrying value at
December 31, 2020
2,258
1,449
3,707
December 31, 2021
1,073
1,132
2,205
There has been no impairment of property, plant and equipment for the years ended December 31,
2021 and 2020. Depreciation expense is included within operating loss as follows:
DKK 000
2021
2020
Research and development expenses
1,031
802
General and administrative expenses
285
434
Total depreciation expense
1,316
1,236
2.10 INVESTMENT IN GROUP COMPANIES
DKK 000
2021
2020
Cost at January 1
1,346
1,207
Additions
2,596
139
Cost end of year December 31
3,942
1,346
Adjustment January 1
(1,207)
(1,207)
Impairment
(2,735)
-
End of year December 31
(3,942)
(1,207)
Carrying amount of investment
-
139
82
DKK 000
Registered
office
Ownership
interest (%)
Share capital
Equity
Net result
Orphazyme US, Inc.
Delaware,
USA
100 %
USD 1 (USD
000)
1,630
(1,776)
Orphazyme GmhH (CH)
Zug,
Switzerland
100 %
CHF 20,000
(CHF 000)
592
301
2.11 PREPAYMENTS, DEPOSITS, AND OTHER RECEIVABLES
DKK 000
2021
2020
Deposits with vendors
-
296
Prepayments to vendors
-
280
Leasehold deposit
593
1,090
Total non-current prepayments and deposits
593
1,666
DKK 000
2021
2020
Prepayments to vendors
12,436
37,342
Grant income receivable
-
81
VAT receivable, net
2,903
10,331
Foreign VAT receivable
1,627
1,304
Receivables from group entities
5,300
211,878
Other current receivables
2,790
1,237
Total current prepayments and other receivables
25,056
262,173
2.12 FINANCIAL ASSETS AND LIABILITIES
DKK 000
2021
2020
Borrowings
33,465
57,180
Lease liabilities (Note 3.2)
4,549
11,346
Trade payables
41,395
18,376
Accruals
8,050
30,698
Total liabilities measured at amortized cost
87,459
117,600
DKK 000
2021
2020
Remuneration to the Board of Directors
293
2,840
Payables to group entities
8,451
7,907
Payroll and employee-related costs
25,570
45,413
Total current other liabilities
34,314
56,160
Non-cash changes
DKK 000
December 31,
2020
Cash
flows
Additions
Adjustments
and
modifications
Accumulated
interest
Exchange
rate
adjustments
December 31,
2021
Borrowings
57,180
(30,904
)
-
-
7,350
(160)
33,466
Lease liabilities
11,346
(3,579
)
(2,496)
(1,212)
490
-
4,549
Total liabilities from financing activities
68,526
(34,483
)
(2,496)
(1,212)
7,840
(160)
38,015
83
DKK 000
December 31,
2020
Cash flows
Accruals
December 31,
2021
Discount and rebate liabilities
—
—
36.193
36.193
Total liabilities from accrued discount and rebates
—
—
36.193
36.193
2.13 CASH
DKK 000
2021
2020
DKK
53,291
483,872
USD
27,440
1,765
EUR
4,070
644
CHF
-
-
GBP
892
1,051
Total cash
85,693
487,332
2.14 RELATED PARTY DISCLOSURES
Orphazyme A/S’ related parties are the parent company’s Board of Directors, Executive Management
and close members of the family of these persons.
Transactions with subsidiaries
Orphazyme US, Inc. and Orphazyme GmbH (CH) are 100% owned subsidiaries of Orphazyme A/S
and are included in the consolidated financial statements. They perform certain research and development,
general and administrative and management activities on behalf on the parent company. All intercompany
transactions have been eliminated in the consolidated financial statements of the Orphazyme Group.
DKK 000
2021
2020
Transaction with subsidiaries
Service fee costs
147,410
148,334
Balances with subsidiaries
Current receivables
5,300
211,878
Current payables
8,451
7,907
Please refer to note 4.6 in the consolidated financial statements for additional information regarding
transactions with related parties of the Group.
84
Statements and Signatures
Statements by Board of Directors and Executive Management
BOARD OF DIRECTORS
EXECUTIVE MANAGEMENT
85
Independent Auditors’ Report
Report of Independent Registered Public Accounting Firm
Report on the audit of the Consolidated Financial Statements and Parent Company Financial Statements
Opinion
Basis for opinion
Key audit matters
86
Statement on the Management's review
87
Management's responsibilities for the financial statements
Auditor's responsibilities for the audit of the financial statements
88
Report on compliance with the ESEF Regulation
89
Copenhagen, 7 June 2022
CVR no. 30 7 0 02 28
mne33234
mne46667
90
Company registration no.: 32266355