Orphazyme A/S
Company registration no.: 32266355
Ole Maaløes Vej 3, DK-2200
Copenhagen N, Denmark
ANNUAL REPORT
2022
2
Contents
Management Review ............................................................................................................................. 3
Introduction ..................................................................................................................................... 4
Key Figures & Ratios ......................................................................................................................... 5
Letter from the CEO .......................................................................................................................... 6
2022 Financial Review ....................................................................................................................... 7
Outlook ........................................................................................................................................... 9
Shareholder Information ..................................................................................................................10
Corporate Governance .....................................................................................................................11
Risk Management ............................................................................................................................15
Corporate Social Responsibility ..........................................................................................................17
Corporate information ......................................................................................................................22
Financial Statements ...........................................................................................................................23
2022 Consolidated Financial Statements .............................................................................................24
Notes to Financial Statements ...........................................................................................................28
2022 Parent Financial Statements ......................................................................................................60
Statements and Signatures ...............................................................................................................73
Independent Auditors’ Report ............................................................................................................74
Other Information ...............................................................................................................................78
Disclaimer ......................................................................................................................................79
3
Management Review
4
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).
In light of this, and considering Orphazyme’s financial situation at the time, in March 2022, the Board of
Directors of Orphazyme filed a petition to initiate 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, the Company 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 Orphazyme’s
operations to continue, including a basis for injecting further capital, and/or a basis for a sale of all or parts of
its assets.
Also in March 2022, the Company voluntarily delisted American Depositary Shares (ADSs) representing
Orphazyme’s ordinary shares from the Nasdaq Global Select Market in the United States, effective March 31,
2022. The Deposit Agreement among the Company, The Bank of New York Mellon, as depositary, and owners
and American Depositary Receipt (ADRs) holders was terminated, effective July 6, 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. (now known as Zevra Therapeutics
1
) 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). 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, Orphazyme 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 provided full coverage to creditors with undisputed claims based on the claims
filed during the restructuring. All known claims related to the time prior to restructuring have been paid in full,
including all obligations outstanding under the Company’s debt facility with Kreos Capital.
Since the Sale of Assets, the focus of the Board of Directors and management has been to ensure the smooth
transition of assets to KemPharm and manage our limited business operations in as lean and cost-efficient
manner as possible. The Company has also continued to assist its legal representatives with a class action
lawsuit in the United States. In April 2023, the Company and the other parties to the class action lawsuit in the
United States reached an agreement in principle to settle the action in its entirety. More details on the class
action lawsuit can be found in the following sections in the Management Review: ‘Lette r from the CEO’, ‘Risk
Management’ and in Note 3.9 to the Financial Statements.
As of the date of publication of this annual report, Orphazyme has limited ongoing operational business
activities and only one employee.
1
On February 22, 2023 KemPharm Inc. changed its name to Zevra Therapeutics. However, KemPharm will be used
throughout this annual report as the Sale of Assets was completed prior to this, within the reporting period.
5
Key Figures & Ratios
Key figures & ratios for 2022 and 2021 are presented with a split of continuing and discontinued operations for
P&L and cash flow to reflect restructuring and the KemPharm transaction. 2020, 2019 and 2018 figures have
not been restated since they represent a significantly different stage of the business and such presentation is
not meaningful to an understanding of Orphazyme’s current business.
TDKK
2022
2021
2020
2019
2018
Statement of Profit and Loss and other comprehensive income
Net revenue
-
-
-
-
-
R&D expenses
-
-
(361,284)
(285,413)
(196,525)
G&A expenses
(41,241)
(83,472)
(247,250)
(50,541)
(35,127)
Operating Loss
(41,241)
(83,472)
(608,534)
(335,954)
(231,652)
Net Financial items
193
37
(26,627)
(7,043)
(3,448)
Loss Before Tax
(41,048)
(83,436)
(635,161)
(342,997)
(235,100)
Income tax benefit
2,736
4,941
1,915
5,500
5,500
Loss from continuing operations
(38,312)
(78,495)
-
-
-
Net result from discontinued operations
64,382
(548,044)
-
-
-
Net result for the period
26,070
(626,539)
(633,246)
(337,497)
(229,600)
Total comprehensive profit/ loss
25,165
(626,841)
(632,641)
(337,430)
(229,558)
Total profit/loss per share, basic (DKK)
0.74
(17.94)
(22.32)
(16.87*)
(11.5*)
* adjusted retrospectively, see Note 4.3 in consolidated financial statements. See also footnote (4)
Statement of financial position
Intangible Assets
-
2,152
12,454
10,539
10,744
Right-of-use assets
-
5,434
14,859
13,903
-
Property, plant, and equipment
-
2,985
4,687
3,685
1,940
Other non-current assets
-
3,714
6,829
-
-
Total non-current assets
-
14,285
38,829
32,529
17,965
Cash
42,464
102,255
726,929
123,588
394,706
Other current assets
15,658
56,689
56,735
19,137
28,678
Total assets
58,122
173,229
822,493
180,754
441,349
Share capital
35,312
34,952
34,698
19,984
19,939
Total equity
41,667
9,339
620,525
52,969
388,249
Non-current borrowings
-
2,482
23,830
51,606
-
Non-current lease liabilities
-
3,925
9,877
9,813
-
Other non-current liabilities
98
98
1,634
-
-
Total current liabilities
16,357
129,092
166,627
65,988
52,995
Cash flow statement
Cash flow from operating activities
(117,945)
(602,571)
(539,076)
(326,818)
(234,764)
Cash flow from investing activities
90,347
46
(5,101)
(3,285)
(2,346)
Cash flow from financing activities
(35,078)
(30,344)
1,159,422
58,939
-
Net cash flow from discontinued
operations
32,862
(549,447)
-
-
-
Other
Share Price (DKK)
0.88
17.16
67.10
72.40
43.35
Total outstanding shares
35,312,241
34,952,241
28,514,047
19,984,799
19,939,564
Market capitalization (MDKK)
1
31.1
599.8
1,913.3
1,446.9
864.4
Equity ratio
2
72%
5%
75%
29%
88.0%
Equity per share (DKK)
3
1.18
0.27
21.76
2.65
19.47
Average number of employees
21
130
117
74
46
Number employees at year end
1
62
141
86
57
(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.
6
Letter from the CEO
2022 was a challenging year for Orphazyme which culminated, in May 2022, with the sale of substantially all of
our assets and business activities to KemPharm Denmark A/S (KemPharm), a wholly owned subsidiary of
KemPharm Inc (the Sale of Assets). As of December 31, 2022, the Company had one employee.
Prior to the Sale of Assets, Orphazyme’s focus was on developing our investigational product candidate
arimoclomol for the treatment of Niemann-Pick disease type-C (NPC), an ultra-rare disease with limited
available treatment options. Arimoclomol was under regulatory review in Europe but in February 2022, we
were notified by the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines
Agency (EMA) of a negative trend vote relating to our marketing authorisation application (MAA). We withdrew
our MAA in March 2022, ahead of the CHMP’s final vote. We were also working towards registration of
arimoclomol in the United States, where we had received a Complete Response Letter (CRL) from the U.S.
Food and Drug Administration (FDA) for our New Drug Application (NDA) in June 2021.
In light of our financial situation at the time, and the negative trend vote from the CHMP, in March 2022, the
Board of Directors of Orphazyme commenced in-court restructuring proceedings of Orphazyme, further details
of which are outlined in the Introduction. As a result of this process, we sold substantially all of our assets and
business activities, including those relating to the development and approval of arimoclomol and the early
access programs, to KemPharm for a total of USD 12.8 million in cash and assumed liabilities estimated to
equal approximately USD 5.2 million. Under the terms of the agreement, KemPharm agreed to also retain a
majority of Orphazyme’s remaining Danish employees. The Sale of Assets was completed May 31, 2022 and it
provided full coverage to creditors with undisputed claims filed during the restructuring as well as all
(undisputed and unconditional) debts related to the time prior to restructuring, including all obligations
outstanding under the Company’s debt facility with Kreos Capital.
Considering the limited nature of our business following the Sale of Assets, Stephanie Okey, Carrolee Barlow
and Martin Bonde stepped down from their positions as members of the Board of Directors of Orphazyme as of
May 23, 2022. At the Annual General Meeting (AGM) in June 2022, the Board of Directors was further reduced
to three members: Bo Jesper Hansen assumed the role of Chairman, and John Sommer Schmidt and myself,
Anders Vadsholt, were appointed as new Board members.
Since the Sale of Assets the focus of the Board of Directors and Management has been to ensure the smooth
transition of assets to KemPharm. This has included the transfer of data, contracts and other obligations that
were part of the agreement. We have also continued to assist our legal representatives with a previously
communicated putative class action lawsuit, filed in July 2021 in the United States. While Management does
not believe the class action lawsuit claims have any merit, the Company decided, for cost control reasons and
because of the risks inherent in any litigation, to engage in settlement discussions. In April 2023, the parties
reached an agreement in principle to settle this action in its entirety. The Court has stayed all proceedings in
the action pending the filing of the parties’ settlement documents. The parties currently anticipate that a
motion seeking the Court’s preliminary approval of the settlement will be filed in May 2023 and that, if
preliminary approval is granted, final court approval will be sought after members of the proposed settlement
class have been afforded an opportunity to object to or opt out of the settlement. As the legal process is
ongoing and no settlement has yet been concluded or approved by the Court, material uncertainty remains
with regards to the final outcome. Whether or not the parties’ proposed settlement is ultimately concluded and
approved by the Court, the Company believes it will be able to continue its operations until at least December
31, 2023 and therefore is regarded as a going concern. We expect to end 2023 with DKK 6 – 10 million in
cash.
The Board of Directors continues to assess ways to maximize value for shareholders, including exploring ways
to realize value from the Company’s remaining assets and listing on Nasdaq Copenhagen.
Our limited business activities have been operated in as lean and cost-efficient manner as practicable in order
to conserve our limited capital. We ended year with DKK 42.5 million in cash as of as of December 31, 2022.
I would like to extend my sincere gratitude to Orphazyme’s alumni and to our long-standing shareholders for
their commitment during a challenging year for Orphazyme.
Anders Vadsholt, Chief Executive Officer & Chief Financial Officer
7
2022 Financial Review
Introduction
Substantially all of Orphazyme’s assets and business activities, including those relating to the development and
approval of arimoclomol, the full claw back liability related to the French early access program and costs
associated with certain employees, were transferred to KemPharm Denmark A/S (KemPharm), a wholly owned
subsidiary of KemPharm, Inc., from June 1, 2022, in line with the terms of the Sale of Assets agreement which
was completed on May 31, 2022. These activities have been reclassified as discontinued operations, cf note
1.7, in the presentation of the consolidated Financial Statements. Please note the figures below are presented
on a continuing basis, unless otherwise described.
Income statement
The net result for the full year ended December 31, 2022 (from continuing and discontinued operations) was a
profit of DKK 26.1 million compared to a net loss of DKK 626.5 million for the same period in 2021.
Loss from continuing operations was DKK 38.3 million compared to a loss of DKK 78.5 million for the full year
2021. The reduction in loss from continuing operations of DKK 40.2 million compared to the prior year is
primarily due to a reduction in operating expenses following the restructuring process and the Sale of Assets to
KemPharm. Note that the loss from continuing operations for 2022 of DKK 38.3 million is marginally better
than our previously communicated outlook of a loss from continuing operations of DKK 40 – 45 million for the
period.
The net result from discontinued operations was a profit of DKK 64.4 million for the full year compared to a net
loss of DKK 548.0 million for the same period in 2021. The change primarily relates to the net effect of income
received from the Sale of Assets to KemPharm and higher costs during the same period the prior year
associated with preparations for commercial launch of arimoclomol in the U.S., accelerated close out of certain
clinical trials and impairment costs following unfavorable results in two late-stage clinical trials in amyotrophic
lateral sclerosis (ALS) and inclusion body myositis (IBM), initiation of a restructuring program and termination
of onerous contracts. Note that the net result from discontinued operations of DKK 64.4 million was lower than
our previously communicated guidance of DKK 87.4 million as a result of higher-than-expected expenses
relating to discontinued operations in the second half of 2022.
Net revenue
As substantially all Orphazyme’s business activities were sold to KemPharm, including any revenue from sales
of arimoclomol, net revenue from continuing operations for the full year 2022 was DKK 0 million (DKK 0 million
for 2021). Net revenue from discontinued operations was DKK 17.9 million in 2022 compared to DKK 36.2
million in the same period in 2021. The reduction in net revenue compared to the prior year is due to the sale
of assets to KemPharm resulting in only a partial year of net revenues recorded in 2022.
Research and development expenses
Following the Sale of Assets to KemPharm, research and development (R&D) expenses have also been
reclassified as discontinued operations. As such, R&D expenses from continuing operations totaled DKK 0
million for the full year 2022 (DKK 0 million for the same period in 2021). R&D expenses from discontinued
operations totaled DKK 36.7 million for the year ended December 31, 2022 compared to DKK 330.0 million in
2021. The difference primarily relates to higher costs in 2021 associated with manufacturing, accelerated close
out of certain clinical trials following unfavorable results and associated impairment costs, initiation of a
restructuring program and termination of onerous contracts.
General and administrative expenses
General and administrative (G&A) expenses from continuing operations totaled DKK 41.2 million in 2022, a
reduction of approx. DKK 42 million compared to the prior year (DKK 83.5 million in 2021). G&A expenses
include costs associated with employees and Board of Directors, service providers and external assistance,
legal and technology expenses. G&A expenses from discontinued operations were DKK 59.5 million for the year
ended December 31, 2022, compared to DKK 256.0 million for the same period in 2021. The difference
primarily relates to lower costs in 2022 following the Sale of Assets to KemPharm against costs in 2021
associated with the build-up of a commercial organization, including commercial launch preparation activities,
8
as well as expenses related to support functions and an impairment charge for software and the employee
restructuring program.
Net financial items
Net financial income from continuing operations for the financial period ended December 31, 2022, was DKK
193 thousand compared to DKK 37 thousand for the same period in 2021. Net financial items from
discontinued operations were an expense of DKK 2.8 million in 2022 compared to an income of DKK 1.8 million
in 2021. The difference primarily relates to fluctuations in foreign exchange rates year over year, particularly
the USD / DKK exchange rate.
Income tax benefit
Income tax benefit from continuing operations totaled DKK 2.7 million for the full year ended December 31,
2022, compared to DKK 4.9 million for the same period in 2021. This includes income tax benefit related to tax
credits for R&D expenses at the applicable tax rate under the Danish Corporate Income Tax Act. The reduction
compared to the prior year is due to cessation of eligible R&D activities following the Sale of Assets to
KemPharm resulting in only a partial year of tax benefit being recorded in 2022. Income tax benefit from
discontinued operations was DKK 0 million during 2022 compared to DKK 0 million during 2021.
Statement of financial position
Cash
As of December 31, 2022, Orphazyme held cash of DKK 42.5 million as compared to DKK 102.3 million as of
December 31, 2021. Note the cash position at the end of 2022 is in line with our previously communicated
outlook for cash of >DKK 30 million for the period.
Equity
As of December 31, 2022, total equity amounted to DKK 41.7 million compared to DKK 9.3 million as of
December 31, 2021. The increase relates to a positive impact from the Sale of Assets transaction with
KemPharm.
Cash flows
Cash flow from operating activities
Net cash flow from operating activities (continuing and discontinued operations) amounted to an outflow of
DKK 117.9 million for the full year ended December 31, 2022, compared to an outflow of DKK 602.6 million for
the same period in 2021. The difference in cash flow from operating activities during the period was due to
higher costs in the prior year relating to clinical, manufacturing and pre-commercial activities relating to
arimoclomol, among other operating costs. Net cash flow from discontinued operating activities was an outflow
of DKK 17.1 million in 2022, compared to an outflow of DKK 520.3 million in 2021.
Cash flow from investing activities
Net cash inflow from investing activities amounted to DKK 90.3 million in 2022 (cash inflow of DKK 46
thousand in 2021). The change compared to the prior year primarily relates to proceeds for the Sale of Assets
to KemPharm.
Cash flow from financing activities
Net cash flow from financing activities amounted to an outflow of DKK 35.1 million in 2022 compared to an
outflow of DKK 30.3 million in 2021. The difference relates to the net effect of cash inflow relating to the U.S.
At-the-market program share issue in H1 2022 and repayment of the debt facility with Kreos Capital, also in
H1 2022, compared to cash outflows in H1 2021 relating to bonus share issues due to the license agreement
with KLSDC and UCL (note 3.1).
Other disclosures
Uncertainty regarding recognition and measurement, unusual matters and going concern
9
We have continued to assist our legal representatives with a previously communicated putative class action
lawsuit, filed in July 2021 in the United States. While Management does not believe the class action lawsuit
claims have any merit, the Company decided, for cost control reasons and because of the risks inherent in any
litigation, to engage in settlement discussions. In April 2023, the parties reached an agreement in principle to
settle this action in its entirety. The parties are now undertaking to prepare mutually agreeable settlement
documents, and the Court has stayed all proceedings in the action pending the filing of the parties’ settlement
documents. The parties currently anticipate that a motion seeking the Court’s preliminary approval of the
settlement will be filed in May 2023 and that, if the Court grants preliminary approval, final court approval will
be sought after members of the proposed settlement class have been afforded an opportunity to object to or
opt out of the settlement. As the legal process is ongoing and no settlement has yet been concluded or
approved by the Court, uncertainty remains with regards to the final outcome. Whether or not the parties’
proposed settlement is ultimately concluded and approved by the Court, the Company believes it will be able to
continue its operations until at least December 31, 2023. For further information reference is made to note
3.9 to the consolidated Financial Statements.
Outlook
For the full-year 2023 we anticipate an operating loss in the range of DKK 30 – 35 million. We expect to end
2023 with DKK 6 - 10 million in cash. There are inherent risks and uncertainties in our Outlook for 2023
including the limited nature of our business activities, the class action lawsuit in the United States and our
future prospects. For further information please refer to note 3.9 of the consolidated Financial Statements and
for further information on risks please see the Risk Management section in the Management Review.
10
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.
We conduct our communications in accordance with the applicable rules and regulations required under Danish,
and EU laws, including as set forth by the Danish Financial Supervisory Authority.
Ownership and share capital
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, 2022, Orphazyme has a total share capital of nominally DKK 35,312,241 divided into
35,312,241 shares and representing a total of 35,312,241 voting rights. As of December 31, 2022, 11,714,720
shares were represented by American Depositary Shares (ADS) held by The Bank of New York Mellon, as
depositary.
As of December 31, 2022 the Company had approximately 11,783 registered shareholders. Please refer to note
4.2 for further information on our share capital.
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.
Orphazyme voluntarily delisted the Company’s ADSs representing its shares from Nasdaq Global Se lect Market
in the US, effective March 31, 2022. In connection with this, the Deposit Agreement with the Bank of New York
Mellon, as depositary, was terminated July 6, 2022 and holders of ADRs were asked to surrender ADRs for
delivery of the underlying shares by July 11, 2022. If the shares were not surrendered then, 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)
As of the publication of this Annual Report, LSP V Cooperatieve U.A., Johannes Vermeer, Plein 9, 1071 DV
Amsterdam, Netherlands owns 2,426,711 shares representing 6.87% of total share capital.
11
Corporate Governance
Orphazyme is committed to ensuring transparent and good corporate governance. As a Danish company listed
on Nasdaq Copenhagen, Orphazyme is subject to the Danish Recommendations on Corporate Governance. The
Recommendations on Corporate Governance are best practice guidelines for the management of companies
admitted to trading on a regulated market.
Orphazyme complies with the Recommendations on Corporate Governance where deemed relevant given
Orphazyme’s current situation and focus. Therefore, the Company has opted to deviate in the following areas:
• Given the Company’s current situation, and as the Company has focused its limited resources on
handling the Company’s restructuring proceedings, the Company has decided only to publish annual
reports and half-yearly financial reports.
• The Company has limited resources and has therefore not provided and does not intend to provide a
webcast or other digital transmission of the general meeting.
• The Company has focused on the restructuring proceedings, as well as assisting its legal representatives
with a putative class action lawsuit in the United States, and therefore the Company’s purpose is not
currently being used actively as part of the Company’s strategy.
• Given the Company’s current situation, including limited resources and the size of the Board of Directors,
at least half of the board members elected by the general meeting are not considered independent.
Moreover, the majority of the members of the board committees are not considered independent.
• The Company has not included information in the annual report on board members’ individual
participation in board meetings and committee meetings. Any board member unable to attend a board
or committee meeting has the opportunity to present his or her views or engage in dialogue with the
Chairmanship regarding the items of the agenda prior to the board or committee meeting. Accordingly,
a board member may contribute to the discussions at a board or committee meeting, even if he or she
is not present.
• Given the Company’s current situation, the Board of Directors has c hosen not to adopt a policy for the
Company’s corporate social responsibility and tax, as the Company has focused its limited resources on
handling the Company’s restructuring proceedings.
• Given the Company’s current situation, including limited resources, a member of the Executive
Management is temporarily also a member of the Board of Directors.
• Given the Company’s current situation, the Company has focused its limited resources on handling the
Company’s restructuring proceedings and legal matters. Therefore, the Company has not included
information in the management commentary on the board committees’ most significant activities and
number of meetings in the past year.
• Given the Company’s current situation, and as the Company has focused its limited resources on
handling the Company’s restructuring proceedings and legal matters, the Board of Directors has not
engaged external assistance in the evaluation of the Board of Directors.
• The general conclusions of the latest evaluation of the Board of Directors are not described in the
management commentary, however, the Chairman will account for the evaluation process and the
general conclusions at the annual general meeting.
• Given the Company’s current situation, the Company has not used its limited resources on considering
the potential value of the variable remuneration at the time of exercise under pessimistic, expected,
and optimistic scenarios.
• Share-based compensation, e.g. shares, share options, performance shares or warrants, constitutes a
common part of the board remuneration in international biotech companies. Due to the Company’s
status as a biotech company, Orphazyme has programs in place which offers share-based incentives to
the Board of Directors in the form of Restricted Share Units. As members of the Board of Directors are
elected for a term of one year, the share-based instruments granted to board members have a vesting
period of one year. No share-based incentives were granted to the Board of Directors in 2022.
• Orphazyme believes that share-based remuneration may serve shareholders’ long-term interests as
share-based incentives together with the base fee support the objective of lasting value creation for the
shareholders.
12
Orphazyme’s corporate governance statement includes a summary of the Company’s governance structure, a
description of internal control and financial reporting procedures, Orphazyme’s position on the
Recommendation on Corporate Governance as well as a complete list of the Company’s comments to
recommendations that the Company opted to deviate from.
The corporate governance statement is available under “Corporate Governance” in the Investors & Media
section of our website: investors.orphazyme.com/corporate-governance.
Board of Directors
The Board of Directors is responsible for the overall management and strategic direction of Orphazyme’s
business and operations and it supervises the Company’s activities, management, and organization. The Board
of Directors appoints and dismisses the members of the Executive Management, who are responsible for the
day-to-day management of the Company.
Meetings
The Board of Directors normally holds at least five regular meetings annually, including a strategy review, plus
ad-hoc meetings as required. Extraordinary board meetings are convened by the Chairman when necessary or
when requested by a member of the Board of Directors, a member of the Executive Management, or by the
Company‘s auditor. There was a higher frequency of meetings in H1 2022 due to the in-court restructuring
process, and three Board meetings in H2 2022. The Board of Directors forms a quorum when more than half of
its members are represented, including the Chairman or the Deputy Chairman. Resolutions of the Board of
Directors are passed by a simple majority of the votes present at the meeting. In the event of equal votes, the
Chairman or, in his absence, the Deputy Chairman shall have the casting vote. The Board of Directors conducts
an annual evaluation of the effectiveness, performance, achievements, and competencies of the Board of
Directors and of the individual members as well as the collaboration with the Executive Management.
The members of the Board of Directors elected by the general meeting are elected for a term of one year.
Members of the Board of Directors may be re-elected.
Orphazyme Board of Directors
Name
Position
Independent
(1)
Year of first
appointment
Expiration of
term
Bo Jesper Hansen
Chairman
Non-independent
2010
2023
John Sommer Schmidt
Deputy Chairman
Independent
2022
2023
Anders Vadsholt
Member
Non-independent
2022
2023
(1) According to the Danish Recommendations on Corporate Governance at least half of the members of the
Board of Directors should be independent.
Board Committees
To support the Board of Directors in its duties, the Board of Directors has established and appointed an Audit
Committee, a Nomination Committee, and a Remuneration Committee. These committees are charged with
reviewing issues pertaining to their respective fields that are due to be considered at board meetings. The
Board of Directors discontinued a Science Committee in May 2022.
Audit Committee
Members
John Sommer Schmidt
(Chairman)
Bo Jesper Hansen
(Member)
Purpose & Key Roles
• Reviews and evaluates certain accounting and audit matters that by decision of the Board of Directors
or the Audit Committee require a more thorough evaluation;
• Assesses internal controls and risk management systems;
• Supervises the Company’s auditors and review the audit process;
13
• The Audit Committee Chairman monitors Orphazyme’s Whistleblower Hotline.
Key Requirements
• No less than two members appointed by and among the Board of Directors, including the Chairman of
the Audit Committee.
• The Chairman of the Board of Directors may not also be the Chairman of the Audit Committee.
• The members of the Audit Committee are required to meet the independence requirements set out in
the Corporate Governance Recommendations. Currently, one member does not meet such independence
requirements.
• At least one member shall have accounting or audit qualifications and between them, the members shall
possess such expertise and experience to be able to provide an updated insight into, and experience in,
the financial, accounting, and audit aspects of companies with shares admitted to and trading on a
regulated market.
• T he Company’s external auditor shall participate in meetings of the Audit Committee if requested by the
Audit Committee.
• The external auditor shall attend at least one meeting per year, of the relevant part thereof, where the
Executive Management is not present.
Nomination Committee
Members
Bo Jesper Hansen
(Chairman)
John Sommer Schmidt
(Member)
Anders Vadsholt
(Member)
Purpose & Key Roles
• Assists the Board of Directors in ensuring that appropriate plans and processes are in place for the
nomination of candidates to the Board of Directors and the board committees;
• Evaluates the composition of the Board of Directors, including making recommendations for nomination
or appointment of members of (a) the Board of Directors and (b) board committees.
• Evaluates the composition of the Executive Management annually, including making recommendations
for nomination or appointment of members of the Executive Management;
• Assists the Board of Directors with ensuring that appropriate plans and processes are in place for
nomination of candidates to the Executive Management.
Key Requirements
• No less than three members appointed by and among the Board of Directors.
• The members of the Nomination Committee are required to meet the independence requirements set
out in the Corporate Governance Recommendations. Currently, two members do not meet such
independence requirements.
Remuneration Committee
Members
Bo Jesper Hansen
(Chairman)
John Sommer Schmidt
(Member)
Purpose & Key Roles
• Ensures the Company maintains a Remuneration Policy for the members of the Board of Directors and
the Executive Management;
• Evaluates and makes recommendations for the remuneration of the members of the Board of Directors
and the Executive Management;
• Assist the review and preparation of the Company’s Remuneration Report.
14
Key Requirements
• No less than two members appointed by and among the Board of Directors.
• The members of the Remuneration Committee are required to meet the independence requirements set
out in the Corporate Governance Recommendations. Currently, one member does not meet such
independence requirements.
Visit the Corporate Governance section under Investors & Media at www.orphazyme.com for more information.
Internal controls and financial reporting procedures
The Board of Directors, the Audit Committee, and the Executive Management are responsible for risk
management and internal controls over its financial reporting and approve general policies in that regard. The
Audit Committee assists the Board of Directors in overseeing the reporting process and the most important
risks involved in this respect. The Executive Management is responsible for the effectiveness of the internal
controls and risk management and for the implementation of such controls aimed at mitigating the risk
associated with the financial reporting.
The Board of Directors and Executive Management assess risks on an on-going basis, including risks related to
financial reporting, and assess measures to manage, reduce, or eliminate identified risks. The Audit Committee
reviews selected key risk areas on a frequent basis, including significant accounting estimates and material
changes to accounting policies. At least once a year, the Audit Committee oversees a review of current internal
controls to determine whether they are effective in relation to the risks identified in the financial reporting
process.
Orphazyme has adopted and defined an internal control framework that identifies key processes, inherent
risks, and control procedures in order to secure appropriate accounting processes. The control procedures
include a variety of processes in order to prevent any misrepresentation, significant errors, omissions, or
fraudulent behavior.
Orphazyme’s independent auditors are appointed for a term of one year by the shareholders at the Company’s
annual general meeting upon recommendation from the Audit Committee. The Board of Directors assesses the
independence and competencies and other matters pertaining to the auditors. The framework for the auditors’
compensation and duties, including audit and non-audit tasks, is agreed annually between the Board of
Directors and the auditors based on recommendations from the Audit Committee.
15
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. The following significant risks and uncertainties
have been identified:
Risks relating 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 financial position and business.
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. While Management does not believe the class action lawsuit claims have any merit, the Company
decided, for cost control reasons and because of the risks inherent in any litigation, to engage in settlement
discussions. In April 2023, the parties reached an agreement in principle to settle this action in its entirety.
The parties are now undertaking to prepare mutually agreeable settlement documents, and the Court has
stayed all proceedings in the action pending the filing of the parties’ settlement documents. The parties
currently anticipate that a motion seeking the Court’s preliminary approval of the settlement will be filed in May
2023 and that, if the Court grants preliminary approval, final court approval will be sought after members of
the proposed settlement class have been afforded an opportunity to object to or opt out of the settlement.
As the legal process is ongoing and no settlement has yet been concluded or approved by the Court,
uncertainty remains with regards to the final outcome. As a result, the Company has not recorded any
provisions related to the class action lawsuit as of December 31, 2022. Whether or not the parties’ proposed
settlement is ultimately concluded and approved by the Court, the Company believes it will be able to continue
its operations until at least December 31, 2023.
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 relating to financial position and business prospects:
We may need to adjust our gross to net revenue estimate relating to rebates granted to co-financing the
healthcare authorities, which could impact our financial position. Further information is provided in note 2.1 to
the consolidated Financial Statements. Following the sale of substantially all our assets and business activities
to KemPharm, we have limited operating business activities and employees. As such our future prospects are
uncertain. We may choose to wind down our business, which could result in additional costs associated with
any distribution which would further limit funds to shareholders.
Risks Related to the Sale of Assets:
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
16
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.
Non-compliance with legislation and industry standards:
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.
Currency risk:
Financial risks may arise from changes in exchange rates. We are most exposed to foreign exchange
movements relating to the DKK, USD, EUR.
Political and geopolitical conflict:
The conflict in Ukraine and any retaliatory measures taken by the United States and NATO could threaten
global security and result in further regional conflict and otherwise have a lasting impact on regional and global
economies, any or all of which could adversely affect our business.
17
Corporate Social Responsibility
This section constitutes the Company’s statutory reporting according to Section 99a of the Danish Financial
Statements Act.
Our business
Until recently, Orphazyme A/S was a biopharmaceutical company involved in the research and
development of novel therapeutics for the treatment of neurodegenerative rare diseases. In May 2022,
substantially all our assets and business activities were sold to KemPharm Denmark A/S, a wholly owned
subsidiary of KemPharm Inc., and we now have limited ongoing operational business activities and employees.
Our headquarters is in Copenhagen, and we have non-operating subsidiaries in the U.S. and Switzerland.
Our responsibility
Before the Sale of Assets, our primary purpose was working towards a common vision: To profoundly
impact the lives of patients with underserved diseases. We established a team connected by a set of core
values, focused on courage, integrity, care and perseverance, which underpinned our corporate culture and
guided our responsibility towards society, patients, employees, and our stakeholders.
In May 2022, the majority of our Danish employees were transferred to KemPharm, leaving us with
minimal business operations and a couple of employees. As at December 31, 2022 there was only one
permanent employee remaining at Orphazyme, CEO and CFO, Anders Vadsholt.
In light of such limited business operations, Orphazyme’s Corporate and Social Responsibility (CSR)
risks are considered very limited. Our CSR activities for 2022 were commensurate with the size and limited
operations of the Company, though we continued to strive to uphold our values and responsibilities towards
society, employees, and our stakeholders. For 2023 we will continue, where possible, to fulfill our CSR
obligations as we execute our strategy.
2022 CSR reporting areas
Human Rights
Risk
• Very Limited: Orphazyme has limited operations, employees and suppliers.
Actions
• Continued to respect internationally declared human rights and did not employ child labor.
Policies in place
Orphazyme acknowledges and supports the maintenance of internationally declared human rights and
bases its work on the UN Universal Declaration of Human Rights and the interpretation that it is the
responsibility of the State to protect, and the companies’ responsibility to respect, these rights. Orphazyme
interprets human rights to comprise respect for diversity.
• Diversity policy.
• Whistleblower policy.
Results
• No diversity related incidents reported in 2022.
• No human rights violations reported in 2022.
• Employee composition: Not meaningful given company structure (One employee as of December 31,
2022; male).
• Leadership (director level and above): Not meaningful given company structure (One employee as of
December 31, 2022; male).
• Due to the changes to the board of directors that occurred in connection with the Sale of Assets to
KemPharm we no longer have an equal representation of men and women on the board of directors.
Thus, the Company has set a target of increasing the representation of women on the Board of Directors
18
to 40% by 2026 in accordance with the guidelines from the Danish Business Authority. As at year end
2022 the Board of Directors was comprised of three members, none of which were women.
Future Plans
• Continue to support and respect internationally declared human rights and will not employ child labor.
Aim to improve Board diversity in the future, subject to expansion of current business operations.
Anti-Corruption & Bribery
Risk
• Very Limited: We do not tolerate the use of bribery or corruption to achieve business objectives. Given
that we have limited operations, employees and suppliers our anti-corruption and bribery risk is very
limited.
Actions
• The Company is committed to maintaining the highest standards of conduct and will not tolerate the
use of bribery or corruption to achieve its business objectives.
• Anti-corruption and bribery training conducted when employees start.
• Legal & Compliance training refreshers, including anti-corruption and bribery
Policies in place
• Our policies on bribery and corruption are clearly set out in our anti-corruption policy and our employee
handbook.
Results
• No bribery and corruption violations identified or reported in 2022.
Future Plans
• Continue to maintain the highest standards of conduct and not tolerate the use of bribery or corruption
to achieve business objectives.
Environment & Climate
Risk
• Very limited: We have a very limited number of employees, minimal physical office presence and use
external suppliers for certain activities such as administration, finance and legal activities which we
believe have a low potential risk for impact on the environment & climate. Prior to the Sale of Assets, a
potential environment & climate risk was in regard to the use of hazardous substances in our
laboratories. The Company conducted its research and development activities in a highly regulated
industry and followed applicable rules on hazardous substances in order to minimize such risks. The
Company closed its laboratory space in Q1 2022 and therefore the potential risk from such hazardous
substances to the environment & climate is now zero.
Actions
• Followed established procedures both during use and at disposal of hazardous substances.
Policies in place
• Considering the business of the Company, and its limited operations and employees, Orphazyme’s
general potential impact on the environment and climate and the impact of the climate on Orphazyme’s
business is viewed as minimal. Applicable rules and procedures were followed regarding the use of
hazardous substances (no longer relevant due to closure of our laboratory space early in 2022) and we
continue to endeavor to protect the environment and climate through mindful business practices such
as, e.g. careful use of office materials and energy consumption.
Results
• Continued to keep records of all accidents in 2022.
• Recorded no records of spill of hazardous substances (monitored until our laboratory space was vacated
in Q1 2022).
• Continued to focus on efficient energy use and management of office materials in 2022.
19
Future Plans
• Orphazyme is no longer active in research and development activities associated with the use of
hazardous substances and as such these potential risks have been minimized. Further, with only limited
operating activities, employees and suppliers focusing on administration, finance and legal activities,
the general potential impact on the environment and climate and the impact of the environment and
climate on Orphazyme’s business is viewed as minimal. We will continue to endeavor to protect the
environment and climate through mindful business practices such as, e.g. careful use of office materials
and energy consumption.
Social / Employees
Risk
• Very Limited: As of December 31, 2022, Orphazyme had only one employee. The company continues
to value diversity in gender, age, ethnicity, nationality, religion, education, sexual orientation, work
history, perspectives, opinions, and skills at all levels of our business however given its limited
employees it currently does not have a diverse workforce. Further, the Company’s limited operations,
such as office space and support network, could impact the working conditions of remaining employees.
Actions
• The health and safety of our employees is of utmost importance and Orphazyme continually works to
ensure that all systems and processes meet strict international standards.
• Continued to train laboratory employees in the systems, processes and workplace safety until closure
of our laboratory space in Q1 2022.
• Continued to conduct regular mandatory Health and Safety surveys (APVs) assessing several aspects of
the working environment such as psychological, ergonomics, and chemical working environment until
employees transferred to KemPharm in June 2022.
• Continued to foster an open, trusting and inclusive workplace committed to freedom from discrimination,
harassment, and bullying.
• We went through a significant business transformation in 2022 which resulted in some redundancies.
We conducted our processes in accordance with applicable laws and regulations in the relevant
jurisdictions and the processes were well planned with a clear focus on transparency and support.
• Continued to provide health insurance as standard for all our employees.
Policies in place
• Diversity Policy.
• Health and Safety Policies.
Results
• Assisted staff with IT and health support both in-office and at home working.
• Established a resilient culture centered on trust and collaboration.
• Due to the changes in the Company following the Sale of Assets Orphazyme ended the financial year
December 31, 2022 with only one male employee, the CEO/CFO. Therefore, we believe diversity metrics
for the period are not meaningful at this time.
• Leadership (director level and above): Not meaningful given company structure (One employee as of
December 31,2022; male).
Future Plans
• As of the date of this annual report, the Company has limited ongoing business activities and only one
employee. Our future social / employee activities will be commensurate with the size and limited
operations of the Company. We will continue to strive to uphold our values and responsibilities and
promote a healthy, diverse and inclusive workplace, as we execute our strategy.
Data Ethics
Orphazyme operates in a highly regulated industry and the importance of responsible data handling is
appreciated and followed across our organization. We currently do not have a data ethics policy but we have a
Global Data Privacy Policy. Given the Company has limited operational business activities, it is no longer an
integrated part of the Company’s business strategy or activities to proc ess data or use algorithms for data
20
analysis in connection with clinical trials, etc. However, our practices will be evaluated on an ongoing basis in
order to ensure they align with the statutory requirements set forth in Section 99d of the Danish Financial
Statements Act.
Diversity in management cf. §99b
As of December 31, 2021, Orphazyme had 62 employees (FTEs), of which 58% were female and 42%
were male. Of our employees at director level and above, 53% were female and 47% were male and, below
director level, 63% of employees were female and 37% were male.
In March 2022, Orphazyme entered in-court restructuring proceedings, resulting in a reduction in its
workforce of approximately 50%. In May 2022, the majority of the remaining Danish employees were
transferred to KemPharm, following the Sale of Assets. As at December 31, 2022, there was only one
employee, Anders Vadsholt CEO and CFO. Given the size of our workforce, it is not meaningful to set out
diversity figures nor is it required in accordance with the Danish Companies Act.
The Board of Directors also saw some changes in 2022. At year-end 2021, the Board of Directors was
comprised of five members, of which two (40%) were women. Due to the evolution of the business, there were
only three Board members at the end of 2022, all of which were men. The company remains committed to
promoting a diverse and inclusive workplace and has therefore set a target of increasing the representation of
women on the Board of Directors to 40% by 2026 in accordance with the guidelines from the Danish Business
Authority.
21
Board of Directors and Executive
Management
Board of Directors
Bo Jesper Hansen, Chairman of the Board
• Member since: 2010 (Chairman, 2022)
• 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: Deputy Chairman of SOBI AB, member of the Board of directors of Laborie Inc., 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.
John Sommer Schmidt, Deputy Chairman
• Member since: 2022
• Born in: 1973
• Nationality: Danish
• Committees: Audit (Chair), Remuneration, Nomination
Special competencies: John is a partner at Gorrissen Federspiel Advokatpartnerselskab where he heads up
the Restructuring & Insolvency practice group. He holds a Law degree from Aarhus University, a LL.M. from
University of California, Los Angeles School of Law, and a B.Sc. (jur.) from Aarhus School of Business 1998. He
was appointed lawyer by the Danish Bar and law Society in 2004.
Current positions: Partner at Gorrissen Federspiel Advokatpartnerselskab.
Anders Vadsholt
• Member since: 2022
• Born in: 1969
• Nationality: Danish
• Committees: Nomination
Special competencies: Anders has 25+ years’ experience from biotech and corporate finance. Previously he
was at Topotarget, BankInvest Biomedical Venture and Carnegie Investment Bank. Anders holds an MBA in
Finance and Strategy from the University of Melbourne, and an MSc in Corporate Law and Economics from
Copenhagen Business School.
Current positions: Anders is currently owner of Alpha Healthcare Investments ApS, through which he holds a
position as Board member of Amplify Therapeutics ApS.
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.
22
Corporate information
Commercial bankers
Danske Bank A/S
Holmens Kanal 2-12
DK-1092 Copenhagen K
Annual Report
This annual report will be available on www.orphazyme.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.
23
Financial Statements
24
2022 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
2022
2021
Net revenue
2.1
-
-
Research and development expenses
2.2, 2.3
-
-
General and administrative expenses
2.4
(41,241
)
(83,472
)
Operating loss
(41,241
)
(83,472
)
Financial income
2.7
193
37
Financial expenses
2.7
-
-
Loss before tax
(41,048
)
(83,436
)
Income tax benefit
2.8
2,736
4,941
Loss from continuing operations
(38,312
)
(78,495
)
Net result from discontinued operations
1.7
64,382
(548,044
)
Net result for the year
26,070
(626,539
)
Items that will be reclassified subsequently to the Statement of
Profit or Loss:
Exchange difference from translation of foreign operations
(905
)
(302
)
Other comprehensive Profit/loss
(905
)
(302
)
Total comprehensive Profit/loss
25,165
(626,841
)
Weighted-average shares outstanding
35,268,725
34,924,702
Profit/ loss per share from continuing operations, basic and
diluted (DKK)
(1.08
)
(2.25
)
Profit/ loss per share from discontinued operations, basic and
diluted (DKK)
1.82
(15.69
)
Profit/ loss per share, basic and diluted (DKK)
4.3
0.74
(17.94
)
The accompanying notes form an integral part of these consolidated financial statements.
25
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As of December 31,
DKK 000
ASSETS
Note
2022
2021
Non-current assets
Intangible assets
3.1
—
2,152
Right-of-use assets
3.2
—
5,434
Property, plant, and equipment
3.3
—
2,985
Corporation tax receivable
2.8
—
2,750
Prepayments and deposits
3.4
—
964
Total non-currents assets
—
14,285
Current assets
Corporation tax receivable
2.8
7,338
7,229
Trade receivables
3.5
4,103
29,268
Prepayments and other receivables
3.4
4,217
20,192
Inventory
3.6
—
—
Cash
3.8
42,464
102,255
Total current assets
58,122
158,944
Total assets
58,122
173,229
EQUITY AND LIABILITIES
Note
2022
2021
Equity
Share capital
4.2
35,312
34,952
Share premium
2,087,436
2,082,486
Other reserves
(493
)
2,899
Accumulated deficit
(2,080,588
)
(2,110,998
)
Total equity
41,667
9,339
Non-current liabilities
Borrowings
3.7
—
2,482
Lease liabilities
3.2
—
3,925
Discount and rebate liabilities
3.7
—
28,293
Other non-current liabilities
3.7
98
98
Total non-current liabilities
98
34,798
Current liabilities
Borrowings
3.7
—
30,983
Lease liabilities
3.2
—
2,578
Trade payables and accruals
3.7
10,540
57,524
Corporation tax payables
2.8
284
584
Discount and rebate liabilities
3.7
4,457
7,900
Other liabilities
3.7
1,075
29,523
Total current liabilities
16,357
129,092
Total equity and liabilities
58,122
173,229
The accompanying notes form an integral part of these consolidated financial statements.
26
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
DKK 000
Other reserves
Note
Share
capital
Share premium
Foreign
currency
translatio
n reserve
Share-based
compensation
– acquisition
of intangible
assets
Accumulated
deficit
Total
Balance as of December 31, 2020
34,698
2,082,254
714
5,780
(1,502,921
)
620,525
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
170
—
—
—
—
170
Capital increase, Bonus Shares
3.1
22
—
—
(1,645
)
1,623
—
Cash settlement of Bonus Shares
3.1
—
—
—
(1,648
)
—
(1,648
)
Capital increase, issuance of sign-on bonus shares to
former CEO
4.2
58
—
—
—
—
58
Capital increase, exercise of RSUs
4.2
4
232
—
—
—
236
Share-based compensation expense
2.6
—
—
—
—
16,838
16,838
Total transactions with owners
254
232
—
(3,293
)
18,461
15,654
Balance as of December 31, 2021
34,952
2,082,486
412
2,487
(2,110,998
)
9,339
Net loss for the year
—
—
—
—
26,070
26,070
Other comprehensive income
—
—
(905
)
—
—
(905
)
Total other comprehensive income (loss)
—
—
(905
)
—
26,070
25,165
Transactions with owners:
Capital increase
4.2
360
5,091
—
—
—
5,451
Transaction cost related to capital increase
4.2
—
(141
)
—
—
—
(141
)
Reserve for bonus shares reversed
4.2
—
—
—
(2,487
)
2,487
—
Share-based compensation expense
2.6
—
—
—
—
1,853
1,853
Total transactions with owners
360
4,950
—
(2,487
)
4,340
7,163
Balance as of December 31, 2022
35,312
2,087,436
(493
)
—
(2,080,588
)
41,667
The accompanying notes form an integral part of these consolidated financial statements.
27
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31,
DKK 000
Note
2022
2021
Operating result from continuing operations
(41,241
)
(83,472
)
Operating result from discontinued operations
(78,309
)
(549,831
)
Adjustments to reconcile operating result to cash
flows from operating activities:
Equity-settled share-based compensation expense
2.6
1,773
16,019
Depreciation and amortization
2.2,2.4
1,820
18,111
Change in prepayments, deposits, and other receivables
3.4, 3.5
42,103
2,826
Change in trade payables, accruals, and other liabilities
3.7
(48,652
)
(3,758
)
Corporation taxes received
5,500
5,500
Corporation taxes paid
—
(1,738
)
Interest received
193
37
Interest paid
(1,132
)
(6,263
)
Cash flow from operating activities
(117,945
)
(602,571
)
Investing activities
Purchase of intangible assets
3.1
—
(902
)
Purchase of property, plant, and equipment
3.3
—
(92
)
Proceeds from sale of property, plant and equipment
1,460
1,040
Proceeds from sale of activity
1.7
88,887
—
Cash flow from investing activities
90,347
46
Financing activities
Repayment of borrowings
(39,155
)
(25,657
)
Repayment of lease obligations
3.2
(1,233
)
(3,503
)
Proceeds from issuance of shares
5,451
464
Transaction cost related to issuance of shares
(141
)
—
Cash settlement of Bonus Shares
—
(1,648
)
Cash flow from financing activities
(35,078
)
(30,344
)
Net change in cash and cash equivalents
(62,676
)
(632,869
)
Effects of changes in exchange rates
(2,885
)
8,195
Cash at the beginning of the year
102,255
726,929
Cash at the end of the year
42,464
102,255
The accompanying notes form an integral part of these consolidated financial statements.
28
Notes to Financial Statements
SECTION 1 Basis of preparation and significant accounting policies
1.1 CORPORATE INFORMATION
Orphazyme A/S (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.
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”).
Orphazyme was previously involved in the research and development of novel therapeutics for the
treatment of neurodegenerative rare diseases, including Niemann-Pick disease type C, or NPC. 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. The disposed
assets and business activities are presented as discontinued operations.
KemPharm Inc. and associated entities, including KemPharm Denmark A/S, changed their name in
February 2023 to Zevra Inc. and Zevra A/S respectively. For the purposes of this Annual Report the name of
the Company at the time of the Sale of Assets in March 2022, KemPharm Denmark A/S (KemPharm) is being
used.
As of the date of publication of this annual report, Orphazyme has limited ongoing operational
business activities and only one employee.
These consolidated financial statements were approved and authorized for issuance by the Board of
Directors on April 25, 2023.
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 adopted by the EU and
additional requirements of the Danish Financial Statements Act.
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.
29
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 th e
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 result for the year
and actual cash receipts and payments are included.
Cash flows from investing activities shows payments related primarily to the purchase of licenses and
property, plant, and equipment and sale of activity.
Cash flows from financing activities shows proceeds from share issuance, borrowings, net of
transaction costs, repayment of debt, and lease payments.
Assets held for sale and discontinued operations
The criteria for held for sale classification is regarded as met only when the sale is highly probable,
and the asset or disposal group is available for immediate sale in its present condition. Actions required to
complete the sale should indicate that it is unlikely that significant changes to the sale will be made or that the
decision to sell will be withdrawn. Management must be committed to the plan to sell the asset and the sale
expected to be completed within one year from the date of the classification.
Property, plant and equipment and intangible assets are not depreciated or amortised once classified
as held for sale.
Assets and liabilities classified as held for sale are presented separately as current items in the
statement of financial position.
Discontinued operations are excluded from the results of continuing operations and are presented as a
single amount as profit or loss after tax from discontinued operations in the statement of profit or loss.
30
Additional disclosures are provided in Note 1.7. All other notes to the financial statements include
amounts for continuing operations, unless indicated otherwise.
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, 2022 and 2021 the Danish entity generated revenue which is disclosed in a
separate note. For the years ended December 31, 2022 and 2021 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 inputs and assumptions used in share-based compensation valuation models (Note
2.6)
• 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)
• Judgement regarding management’s assessment of the outfall of the class action lawsuit (Note
3.9)
• Estimate of rebates granted to co-financing healthcare authorities (Note 2.1)
• Judgement regarding management’s accounting for discontinued operations (Note 1.7)
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
New accounting policies and disclosures
The Group has implemented the standards and amendments that are effective for the financial year
2022. The new standards and amendments have not affected the Group’s recognition or measurement for
2022, nor are they expected to have significant future impact.
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, 2023 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
No significant events after the reporting period to disclose, besides that already disclosed in note 3.9
to the consolidated Financial Statements on the class action lawsuit.
31
1.7 DISCONTINUED OPERATIONS
In May 2022, Orphazyme 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.
The Sale of Assets agreement 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). Under the terms of the agreement, KemPharm
agreed to also retain a majority of Orphazyme’s employees.
The business operations and activities that were part of the Sale of Assets agreement with KemPharm
have been reclassified as discontinued operations. The net result related to the above-mentioned discontinued
operations are therefore presented separately in the income statement and the statement of cash flows. The
comparative figures have been restated accordingly.
Judgement regarding management’s accounting for discontinued operations
Significant judgment is required to determine the presentation of discontinued operations in profit and
loss and cash flow, for both the current and prior year. Management has done the judgement based on the
Purchase agreement from the sale of assets to KemPharm.
Substantially all of Orphazyme’s assets and business activities was sold to KemPharm (the “Sale of
Assets”) on an “as-is” basis and there have not been given any substantial representations or warranties in
favor of KemPharm. While the management are not aware of any outstanding matters that would reasonably
form a basis for a claim related to the Sale of Assets, if the Group become subject to liability based upon our
contractual obligations to KemPharm or otherwise, it could have a material adverse effect on our financial
position.
Net result and net cash flow from discontinued operations are specified below:
For the years ended December 31,
DKK 000
Note
2022
2021
Net revenue
2.1
17,867
36,193
Research and development expenses
2.2, 2.3
(36,660
)
(329,980
)
General and administrative expenses
2.4
(59,516
)
(256,044
)
Operating loss
(78,309
)
(549,831
)
Financial income
2.7
6,354
12,395
Financial expenses
2.7
(9,184
)
(10,608
)
Loss before tax
(81,139
)
(548,044
)
Income tax benefit
2.8
—
—
Net result for the period
(76,682
)
(548,044
)
Gain from disposal of discontinued operations
145,520
—
Net result from discontinued operations
(64,382
)
(548,044
)
DKK 000
Note
2022
2021
Cash flow from operating activities
(17,097
)
(520,333
)
Cash flow from investing activities
90,347
46
Cash flow from financing activities
(40,388
)
(29,160
)
Net cash flow from discontinued operations
32,862
(549,447
)
32
Gain on disposal/carrying amount of disposed assets
DKK 000
Note
2022
2021
Carrying values of intangible assets
1,603
—
Carrying values of property, plan and equipment
134
—
Carrying values of liabilities
(58,370
)
—
Carrying values of assets and liabilities
(56,633
)
—
Gain on disposal – net
145,520
—
Gain on disposal
145,520
—
Net cash inflow from disposal of business
88,887
—
As the Company has sold substantially all assets and business activities, additional information is
provided for revenue (note 2.1), research and development expenses (note 2.2), government grants (note
2.3), general and administration expenses (note 2.4), employee costs (note 2.5), share-based compensation
costs (note 2.6) and financial income and financial expenses (note 2.7), to which references are made.
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) 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.
The revenue recognized reflects the various types of price reductions. Products sold in France are
covered by government programs under which products are sold at a discount. Rebates are granted to co-
financing the healthcare authorities. Rebates and discounts as described, are recognized in the period in which
the underlying sales are recognized as a reduction of gross sale.
The amount of rebates granted to co-financing the healthcare authorities are estimated by
management on the basis of the specific terms of the relevant regulations or agreements, and accrued as each
of the underlying sale transactions is recognized. The estimated amounts described above are recognized in
the income statement within Net revenue as a reduction of gross sales, and within Rebate and discount liability
in the balance sheet 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.
As of June 2022, the remunerated early access compassionate use program (“nATU”) in France, was
transferred to KemPharm as part of the sale of substantially all of the Company’s assets and business
activities. All revenue is therefore presented as discontinued operations (Note 1.7).
The following table presents net revenue for the years ended December 31:
DKK 000
2022
2021
Revenue by type
Revenue from sale of goods
17,867
36,193
Revenue by partner
Clinigen Health Limited
17,867
36,193
Geographical areas
France
17,867
36,193
33
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.
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 tria l
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
34
restructuring 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
2022
2021
External costs
18,385
229,942
Employee costs (Note 2.5)
17,926
86,329
Depreciation, amortization and impairment (Notes 3.1, 3.2,
3.3)
348
13,709
Total research and development expenses
36,660
329,980
External costs comprise mainly expenses related to third party vendors providing services related to
our research and development activities and facility costs. Research and development expenses include costs
relating to products sold under the French early access compassionate use program.
As of June 2022, all research and development activity were transferred to KemPharm as part of the
sale of substantially all of the Company’s assets and business activities. All research and development
expenses are therefore presented as discontinued operations (Note 1.7).
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 2022,
Orphazyme has received grant and other funding of DKK 0.0 million (2021: DKK 1.4 million).
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.
As of June 2022, substantially all of the Company’s assets and business activities was transferred to
KemPharm as part of the sale. Governments grants are therefore presented as discontinued operations (Note
1.7).
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
2022
2021
External costs
70,737
192,913
Employee costs (Note 2.5)
28,548
142,201
Depreciation (Notes 3.2 and 3.3)
1,471
4,402
Total general and administrative expenses
100,756
339,516
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,
35
external costs comprise expenses related to administrative services such as legal and accounting support, IT,
and investor relations. In 2022 costs as well comprise expenses related to restructuring activities, i.e.
employee redundancies and termination of onerous contracts.
As of June 2022, general and administrative activity was partly transferred to KemPharm as part of
the sale of substantially all of the Company’s assets and business activities. General and administrative
expenses are therefore presented as both continued operations, DKK 41.2 million (2021: DKK 83.5 million) and
discontinued operations (Note 1.7), DKK 59.5 million (2021: DKK 256.0 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.
The following table presents Employee Costs, including remuneration to the Board of Directors and
Executive Management, for the years ended December 31, 2022, 2021. Refer to note 4.5 for more discussion
on remuneration of Board of Directors and Executive Management.
DKK 000
Employee costs
2022
2021
Salaries
28,185
167,316
Cash bonus
9,046
16,663
Share-based compensation (Note 2.6)
1,773
15,576
Pension
2,184
12,963
Other social security contributions
402
4,113
Other staff costs
3,004
8,066
Total employee costs excluding board remuneration
44,594
224,696
Board remuneration (Note 4.5)
2,211
3,391
Board share-based compensation (Note 2.6 and Note 4.5)
(331)
443
Total employee costs
46,474
228,530
Recognized as follows in the statement of Profit or Loss
Research and development expenses
17,926
86,329
General and administrative expenses
28,548
142,201
Total employee costs
46,474
228,530
Average number of full-time employees
21
130
Year-end number of full-time employees
1
62
As of June 2022, substantially all of the Company’s assets and business activities were transferred to
KemPharm as part of the sale. Employee costs are therefore presented as both continued operations, DKK 10.5
million (2021: DKK 24.1 million) and discontinued operations (Note 1.7), DKK 36.0 million (2021: DKK 204.4
million).
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 Black-Scholes or Monte-Carlo model depending on the
terms and conditions of the respective award. 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
36
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.
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
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”).
Under the post-IPO long-term incentive program (2017 LTIP), the Executive Management as well as
certain Key Employees of Orphazyme had subscribed to 14,875 ordinary shares (Investment Shares). In 2018,
a Key Employee subscribed to 4,300 Investment Shares.
The participants in the 2017 LTIP had the opportunity to 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. 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. 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.
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, respectively, and
vesting among other things also being subject to the participants having maintained ownership of their
Investment Shares and continued employment. 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 design ation 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.
37
In April 2021, the Group initiated a 2021 new long-term sha re-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.
No long-term share-based incentive program was announced in 2022 because of the restructuring of
the Company and subsequent sale of substantially all of its assets and business activities. 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
38
Matching Shares under all of the LTIP programs were fully vested as of January 1, 2021.
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 :
2022
2021
Program
2020 LTIP
1.0
2.0
2019 LTIP
0.7
1.7
The exercise price for each LTIP award outstanding as of December 31, 2022 was DKK 1 (2021: DKK
1).
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, 2020
52,865
118,686
172,488
172,488
Granted
—
—
—
—
Exercised
(52,865
)
(118,686
)
(172,488
)
Expired
—
—
—
—
Forfeited
—
—
—
—
Outstanding at December 31, 2021
—
—
—
—
Granted
—
—
—
—
Exercised
—
—
—
—
Expired
—
—
—
—
Forfeited
—
—
—
—
Outstanding at December 31, 2022
—
—
—
—
For the year ended December 31, 2022, DKK 1.9 million (2021: DKK 17.1 million) was recognized as
compensation expense related to the LTIP awards. Of the total expense, DKK 1.4 million (2021: DKK 6.8
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. Leavers are entitled to keep already granted phantom shares and will receive a pro-rata grant
compared to the time of employment in the applicable granting year.
39
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, 2022 and 2021, the programs are expected to consist of up to a total of 41,351
phantom shares.
As of December 31, 2022, 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, 2022, an aggregate
amount of DKK 0.1 million (2021: DKK 0.3 million) was recognized as compensation income 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. The expected volatility is determined based on the Company’s own
historical volatility over a period corresponding to the remaining lifetime of the option.
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, 2022
December 31, 2021
Program:
2020
Program
2019
Program
2018
Program
2020
Program
2019
Program
2018
Program
Fair value at valuation date
(DKK 000)
—
—
—
40
48
12
Dividend yield (%)
—
—
—
—
—
—
Expected volatility (%)
86.6
%
105.9
%
86.6
%
77.4
%
101.1
%
101.1
%
Risk-free interest rate (%)
(2.70
%)
(2.56
%)
(2.52
%)
(0.48
%)
(0.60
%)
(0.60
%)
Expected life of awards (years)
2.08
1.08
0.08
3.08
2.08
1.08
Weighted average share price
(DKK)
17.16
17.16
17.16
17.16
17.16
17.16
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 certain board members exercised their RSUs. As these RSUs were not cash-settled, the
corresponding liability of DKK 35 thousand 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 thousand.
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. 13,525 RSUs lapsed in 2021 in
connection with the exercise of grants under the new 2020-2 RSU program, while 1,652 RSUs expired in 2022.
Neither the lapses in 2021 nor the expiry in 2022 had any impact on the Statement of Profit or Loss as
Management had assessed that none of the options under the 2020 RSU program would ultimately vest as the
grants under the 2020-2 RSU program were more beneficial to exercise for the participants.
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.
40
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). The RSUs fully vested on the date of the general meeting in
2021. All RSUs except for 1,927 were exercised in 2021. The remaining 1,927 RSUs expired in March 2022
resulting a positive impact on the Statement of Profit or Loss of DKK 31 thousand.
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. 10,211 and RSUs 8,168 RSUs lapsed
during 2022 and 2021, respectively, as the participants resigned from the Board of Directors forfeiting the
vesting condition resulting a positive impact on the Statement of Profit or Loss of DKK 180 thousand and 96
thousand, respectively.
No RSU program was announced in 2022 because of the restructuring of the Company and
subsequent sale of substantially all of its assets and business activities.
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 income in the amount of DKK 0.3
million (2021: 0.7 million) and a corresponding short-term liability as of December 31, 2021. The Exercise
Period for all 2021 RSUs is one year following full vesting and for valuation purposes we have assumed
exercise three months upon full vesting.
As of December 31, 2022, 1,927 RSUs were expired, and 12,071 RSUs were eligible for exercise.
The following table presents the inputs to the Black-Scholes model used to estimate the fair value of
the 2021 RSUs at year-end, as they are classified as cash-settled:
Program
December 31, 2022
2021 RSUs
December 31, 2021
2021 RSUs
Fair value at valuation date (DKK 000)
0.2
16
Dividend yield (%)
—
—
Expected volatility (%)
152.3
%
146.9
%
Risk-free interest rate (%)
(2.52
%)
(0.63
%)
Expected life of awards (years)
0,00
0.75
Weighted average share price (DKK)
17.16
17.16
d) Sign-on bonus shares to previous 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 the share price increased to
DKK 75 per share, (ii) 12,000 shares provided that the share price increased to DKK 100 per share, and (iii)
40,000 shares provided that the 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 expense was
recognized in 2020 when the target price was achieved.
e) Sign-on bonus shares to former CEO
As part of the CEO service agreement made in 2021 with the former CEO, Christophe Bourdon was
granted 34,941 RSUs in connection with the on-boarding, which had 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 was 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 would be prorated and calculated through the date of release of the Participant’s work obligations.
The vested RSUs could only be exercised after the expiration of the total vesting period. 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 was 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
41
granted was 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 was classified as general and administrative expenses recognised in October 2021.
Summary of share-based compensation
The following amounts were recognized as share-based compensation for the years ended December
31. All share-based compensation costs are presented as discontinued operations (Note 1.7).
DKK 000
2022
2021
Share-based compensation included in R&D
—
3,879
Share-based compensation included in G&A
1,773
12,140
Total share-based compensation expense recognized
1,773
16,019
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.
The following table presents the various items of financial income and expense recognized for the
years end December 31:
DKK 000
2022
2021
Interest income on cash balances
193
37
Foreign currency exchange gains
6,354
11,849
Gain on embedded call option (Note 3.7)
—
546
Total financial income
6,547
12,432
Interest expense on Loan Agreement (Note 3.7)
5,959
7,350
Write-off of transaction costs for Loan Agreement tranche 2
(Note 3.7)
—
—
Loss on embedded call option (Note 3.7)
—
—
Interest expense on lease liabilities (Note 3.2)
147
624
Loss on lease modification (Note 3.2)
—
(365
)
Interest expense on cash balances
158
1,484
Foreign currency exchange loss
2,843
1,369
Bank fees and other charges
77
147
Total financial expenses
9,185
10,609
As of June 2022, the Group transferred substantially all of the Company’s assets and business
activities to KemPharm. Financial income and financial expenses are therefore presented as both continued
operations, net income DKK 0.2 million (2021: DKK 0.0 million) and discontinued operations (Note 1.7), net
expense DKK 2.8 million (2021: DKK 1.8 million).
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.
42
As of December 31, 2022 and 2021, 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 in lack of significant activity in the
Group, 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 8.9 million of taxable income plus 60% of taxable income
above DKK 8.9 million.
For the years ended December 31, 2022 and 2021, the Company has unrecognized net tax loss carry-
forwards in the Danish entity in the amount of DKK 2,186 million, DKK 1,454 million, and DKK 877 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
2022
2021
Current tax benefit on net result
(5,133
)
144,379
Adjustments prior years
(14
)
(385
)
Tax credit research and development expenses
2,750
5,500
Change in unrecognized deferred tax before tax credit
(27,107
)
(155,700
)
Permanent differences
32,240
11,147
Total income tax benefit for the year
2,736
4,941
The following table presents the reconciliation of the effective tax rate to the statutory corporate
income tax rate in Denmark.
DKK 000
2022
2021
Net result before tax from continuing operations
(41,048
)
(83,436
)
Net result before tax from discontinued operations
64,381
(548,044
)
Corporate income tax rate in Denmark
22
%
22
%
Computed income tax benefit
(5,133
)
138,926
Tax effect of:
Adjustments prior years
(14
)
(385
)
Other non-deductible expenses, including US listing-
related costs and share-based compensation
32,240
11,14 7
Effect of different tax rate
(18
)
892
Deferred tax asset not recognized after tax credit
(24,338
)
(145,639
)
Total income tax benefit for the year
2,736
4,941
43
The following table presents the carrying amount of deferred tax in the Statement of Financial
Position:
DKK 000
2022
2021
Tax deductible losses
482,595
319,811
Deferred tax on intangible assets
-
132,310
Other temporary differences
4,419
6,069
487,015
458,190
Deferred tax asset not recognized
487,015
458,190
Carrying amount included in the Statement of
Financial Position
—
—
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 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.
44
As of June 2022 the all software and licenses was transferred to KemPharm as part of the sale of
substantially all of the Company’s assets and business activities.
Impairment losses recognized in 2021 corresponding to the, at the time, remaining carrying amount
for the license agreement with KLSDC and UCL (DKK 7.6 million), license agreement with the university of
Miami (DKK 0.5 million) and software related to research and development (DKK 2,7 million).
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, 2020
2,736
12,083
14,819
Additions
902
—
902
Cost at December 31, 2021
3,638
12,083
15,721
Disposals
(3,638
)
(12,083
)
(15,721
)
Cost at December 31, 2022
—
—
—
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
Amortization expense
514
—
514
Disposal accumulated amortization
(3,603
)
(10,480
)
(14,083
)
Accumulated amortization at December 31, 2022
—
—
—
Net carrying value at
December 31, 2021
549
1,603
2,152
December 31, 2022
—
—
—
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.
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
45
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.
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, within discontinued operations.
As of June 2022 the lease contracts were transferred to KemPharm as part of the sale of substantially
all of the Company’s assets and business 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, 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
Disposals
(3,910
)
—
(3,910
)
Depreciation expense
(1,524
)
—
(1,524
)
At December 31, 2022
—
—
—
46
The following table presents the carrying amounts of lease liabilities and the movements during the
period:
DKK 000
2022
2021
At January 1
6,503
13,534
Additions
—
—
Accretion of interest
—
624
Disposals
(6,503
)
(1,212
)
Payments
—
(4,127
)
Exchange rate adjustments
—
180
Modifications
—
(2,496
)
At December 31
—
6,503
Current
—
2,578
Non-current
—
3,925
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
2022
2021
Depreciation and impairment expense of right-of-use assets (R&D)
1,236
5,386
Depreciation and impairment expense of right-of-use assets (G&A)
288
844
Interest expense on lease liabilities
127
624
Gain on lease modification and disposals
—
(365
)
Total amount recognized in the Statement of Profit or Loss within
discontinued operations
1,651
6,489
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.
Gross carrying amount of any fully depreciated property, plant and equipment that is still in use is
DKK 0.0 million.
As of June 2022 the all property, plant and equipment was transferred to KemPharm as part of the
sale of substantially all of the Company’s assets and business activities.
47
The following table presents the Company’s Property, plant and equipment as of the years presented:
DKK 000
Furniture
and
equipment
Lease
improvements
Total
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
Additions
—
—
—
Disposals
(6,823
)
(2,635
)
(9,458
)
Cost at December 31, 2022
—
—
—
Accumulated depreciation at December 31, 2020
4,609
667
5,276
Depreciation expense
1,156
429
1,585
Disposals
(389
)
—
(389
)
Exchange rate adjustments
1
—
1
Accumulated depreciation at December 31, 2021
5,377
1,096
6,473
Depreciation expense
342
122
464
Disposals
(5,719
)
(1,218
)
(6,937
)
Exchange rate adjustments
—
—
—
Accumulated depreciation at December 31, 2022
—
—
—
Net carrying value at
December 31, 2021
1,446
1,539
2,985
December 31, 2022
—
—
—
There has been no impairment of property, plant and equipment for the years ended December 31,
2022 and 2021. Depreciation expense is included within discontinued operations as follows:
DKK 000
2022
2021
Research and development expenses
357
1,301
General and administrative expenses
108
285
Total depreciation expense included within discontinued
operations
464
1,585
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
• when receivables and payables are stated with the amount of sales tax included
48
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.
The following items comprised non-current prepayments and deposits as of December 31:
DKK 000
2022
2021
Deposits with vendors
—
215
Prepayments to vendors
—
749
Total non-current prepayments and deposits
—
964
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
2022
2021
Prepayments to vendors
1,802
12,872
VAT receivable, net
662
2,903
Foreign VAT receivable
1,275
1,627
Other current receivables
479
2,790
Total current prepayments and other receivables
4,217
20,192
Current prepayments to vendors include prepayments made to CROs for clinical trial costs of DKK 1.7
million (2021: DKK 2.4 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, 2022 trade receivables in the amount of DKK 4.1 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, due to
all receivables at December 31, 2022 have been received at the reporting date.
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.
49
June 2022 all pre-launch inventory was transferred to KemPharm as part of the sale of substantially
all of the Company’s assets and business activities.
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.
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
Financial assets 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. The Group did not incur any credit losses on financial assets
for either of the years ended December 31, 2022 or 2021.
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.
50
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.
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 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, 2022 or 2021.
The Group’s financial liabilities comprise the following as of the years ended December 31:
DKK 000
2022
2021
Borrowings
—
33,465
Lease liabilities (Note 3.2)
—
6,503
Trade payables
4,362
41,780
Accruals
6,177
15,743
Total liabilities measured at amortized cost
10,539
97,491
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%.
As of June 2022 the Kreos debt facility was paid off as part of the sale of substantially all of the
Company’s assets and business activities to KemPharm. The following describes the terms etc. of the repaid
debt facility.
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 2022
Dec 2021
Fair value of call option
—
326
Dividend yield (%)
—
—
Expected volatility (%)
—
147
%
Risk-free interest rate (%)
—
(0.63
)%
Expected life (years)
—
1.2
Share price (DKK)
—
17.2
51
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, 2022, the Company recognized a gain of DKK 0.0
million (2021: DKK 0.5 million).
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
10,540
—
—
10,540
10,540
Total non-derivatives
10,540
—
—
10,540
10,540
Total derivatives
—
—
—
—
—
Total changes in liabilities arising from financing activities are comprised as follows:
Non-cash changes
DKK 000
December 31,
2021
Cash
flows
Disposals
Adjustments
and
modifications
Accumulated
interest
Exchange
rate
adjustments
December 31,
2022
Borrowings
33,465
(39,155
)
—
—
5,959
(269
)
—
Lease
liabilities
6,503
(1,233
)
(5,417)
—
147
—
—
Total
liabilities
from
financing
activities
39,968
(40,388
)
(5,417)
—
6,106
(269)
—
Non-cash changes
DKK 000
December 31,
2020
Cash
flows
Additions
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
52
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.
December 31, 2022 accrued discount and rebates relates to rebates granted to co-financing
healthcare authorities for 2021 and 2022.
December 31, 2021 accrued discount and rebates relates to the clawback in accordance with nATU
program. June 2022 the clawback liability was transferred to KemPharm as part of the sale of substantially all
of the Company’s assets and business activities.
Total changes in liabilities arising from accrued discounts and rebates are comprised as follows:
DKK 000
December 31,
2021
Cash
flows
Accruals
December 31,
2022
Discount and rebate liabilities
36,193
—
(31,736
)
4,457
Total liabilities from accrued discount and
rebates
36,193
—
(31,736
)
4,457
Total current other liabilities are comprised of the following as of the years ended December 31:
DKK 000
2022
2021
Remuneration to the Board of Directors
213
293
Payroll and employee-related costs
862
29,230
Total current other liabilities
1,075
29,523
In addition, the Group has the following total other non-current liabilities as of the years ended
December 31:
DKK 000
2022
2021
Phantom shares liability to employees
98
98
Total non-current other liabilities
98
98
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
2022
2021
DKK
14,987
53,291
USD
13,962
43,340
EUR
13,209
4,070
CHF
—
662
GBP
306
892
Total cash
42,464
102,255
3.9 COMMITMENTS AND CONTINGENCIES
Class Action Lawsuit
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 laws.
While Management does not believe the class action lawsuit claims have any merit, and therefore the Company
has not recorded any provisions related to the class action lawsuit as of December 31, 2022, the Company
decided, for cost control reasons and because of the risks inherent in any litigation, to engage in settlement
discussions. In April 2023, the Parties reached an agreement in principle to settle this action in its entirety. The
parties are now undertaking to prepare mutually agreeable settlement documents, and the Court has stayed all
53
proceedings in the action pending the filing of the parties’ settlement documents. The parties currently
anticipate that a motion seeking the Court’s preliminary approval of the settlement will be filed in May 2023
and that, if the Court grants preliminary approval, final court approval will be sought after members of the
proposed settlement class have been afforded an opportunity to object to or opt out of the settlement.
As the legal process is ongoing and no settlement has yet been concluded or approved by the Court,
material uncertainty remains with regards to the final outcome. The Company has not recorded any provisions
related to the class action lawsuit as of December 31, 2022. Moreover, the Company assesses the criteria of
IAS 37.92 as met because it believes that premature disclosure of additional information regarding the parties’
agreement in principle would be detrimental to the Company’s ability to conclude and obtain final approval of
the settlement. Whether or not the parties’ proposed settlement is ultimately concluded and approved by the
Court, the Company believes it will be able to continue its operations until at least December 31, 2023. The
Company expects to end 2023 with DKK 6 – 10 million in cash.
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, 2022, the Group held cash totaling DKK 42.5 million (2021: DKK 102.3 million).
With reference to note 3.9 management therefore considers it appropriate to prepare these financial
statements on a going concern basis.
For the full-year 2023 the Group anticipates an operating loss in the range of DKK 30 – 35 million. It
expects to end 2023 with DKK 6 - 10 million in cash. There are inherent risks and uncertainties in our Outlook
for 2023 given the limited nature of the business activities, the class action lawsuit in the United States and the
future prospects. Whether or not the parties’ proposed settlement is ultimately concluded and approved by the
Court, the Company believes it will be able to continue its operations until at least December 31, 2023.
4.2 EQUITY
The following table summarizes the Company’s share activity:
Ordinary shares
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
Capital increase, U.S. At-the-Market Offering Program
360,000
December 31, 2022
35,312,241
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 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.
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)
In February 2022, the Company completed a capital increase of 360,000 shares as a result of the
utilization of the U.S. At-the-Market Offering Program.
54
As a result of the above transactions, the total nominal share capital of the Company as of
December 31, 2022 was DKK 35,312,241, divided into 35,312,241 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, 2022 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 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, 2022 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.
Following the license agreement with Kansas Life Sciences Development Inc. and UCL Business PLC
was transferred to KemPharm, as part of the sale of substantially all of the Company’s assets and business
activities to KemPharm, the reserve for Share-based compensation– acquisition of intangible assets have been
reversed in 2022.
4.3 PROFIT/LOSS PER SHARE
Basic profit/loss per share for the year is calculated by dividing the net result for the year by the
weighted average number of ordinary shares outstanding during the year. The diluted profit/loss per share is
calculated by dividing the net result 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. 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.
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:
2022
2021
Net result for the year from continuing operations (DKK 000)
(38,312
)
(78,495
)
Weighted-average shares outstanding
35,268,725
34,924,702
Profit/loss per share from continuing operations
(1.08
)
(2.25
)
Net result for the year from discontinued operations (DKK 000)
64,382
(548,044
)
Weighted-average shares outstanding
35,268,725
34,924,702
Profit/loss per share from discontinued operations
1.83
(15.69
)
Profit/ loss per share, basic and diluted (DKK)
0.74
(17.94
)
55
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, 2022, 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, 2022, 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.
For the full-year 2023 the Group anticipate an operating loss in the range of DKK 30 – 35 million. It
expects to end 2023 with DKK 6 - 10 million in cash. There are inherent risks and uncertainties in our Outlook
for 2023 given the limited nature of the business activities, the class action lawsuit in the United States and the
future prospects. For further information please refer to note 3.9 to the consolidated Financial Statements.
Whether or not the parties’ proposed settlement is ultimately concluded and approved by the Court, the
Company believes it will be able to continue its operations until at least December 31, 2023. The Company
expects to end 2023 with DKK 6 – 10 million in cash.
Foreign Currency Risk
The Group’s foreign currency risk is assessed to be low. 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 is only of the DKK against the USD exposure for the Group to currency gains or losses that
will impact the reported amounts of assets, liabilities, income and expenses.
Interest Rate Risk
The Group’s interest rate risk is assessed to be low. The Group has no borrowing of December 31,
2022
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 in one Danish bank 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 USD exchange rates against the DKK and the impact for the possible
fluctuations in the interest rate on bank deposits in Denmark. The methods and assumptions used are
consistent with prior year and consider increases and decreases in the Group’s 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, 2022 would have been approximately DKK 0 thousand (2021: DKK 14 thousand).
The currency fluctuations would have fluctuated by +/- 10%, the impact on the Group’s net loss for
the year ended December 31, 2022 would have been approximately DKK 2,938 thousand (2021: DKK 19,239
thousand).:
4.5 REMUNERATION OF BOARD OF DIRECTORS AND EXECUTIVE MANAGEMENT
Executive Management consists of the Company’s Chief Executive Officer, also the registered
management of the Company. In February 20 22, Orphazyme announced that the Board of Directors appointed
Chief Financial Officer Anders Vadsholt as the new Chief Executive Officer in addition to his existing position as
Chief Financial Officer, succeeding Christophe Bourdon on March 1, 2022.
Mr. Bourdon resigned from his position at Orphazyme on February 28, 2022. The resignation entails a
forfeiture of the vesting conditions attached to the RSUs and PSUs under the modified and extraordinary
granted in October 2021 except for the modified sign-on bonus shares that immediately vested when granted
in March 2021. For any ongoing RSU vesting period, Mr. Bourdon was entitled to receive a pro rata allocation of
RSUs until the date of release of his work obligations.
The Executive Management was up until and including 2021 eligible to receive an annual
performance-based cash bonus subject to certain predefined corporate and individual goals as determined by
56
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. 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, 2022 and 2021.
REMUNERATION TO INDIVIDUAL
MEMBERS OF EXECUTIVE MANAGEMENT (DKK 000)
2022
2021
Anders Vadsholt (CEO from March 1, 2022 and CFO since 2016)
Salary
2,908
2,376
Bonus
4,134
585
Share-based compensation
(1)
1,657
2,164
Other employee benefits
(3)
294
277
Total
8,993
5,402
Christophe Bourdon (CEO from April 1, 2021 until February 2022)
Salary
650
2,925
Bonus
—
1,330
Share-based compensation
(1,2)
231
4,967
Other employee benefits
186
107
Total
1,067
9,329
Total remuneration to the Executive Management
10,060
14,731
(1) Investing expense on grants in prior years measured at fair value at grant date
(2) includes two times share based compensation. Both sign-on bonus and LTIP 2021 program, both described in
note 2.6
(3) Board fee shown of DKK 231 thousand not included
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:
57
REMUNERATION TO INDIVIDUAL MEMBERS OF THE
OF THE BOARD OF DIRECTORS (DKK 000)
2022
2021
Bo Jesper Hansen (Chairman since June 2022)
Board and committee fees
606
447
Ad hoc board fees
—
—
Travel allowance
33
97
Share-based compensation
(50
)
68
Total
589
612
Georges Gemayel (Chairman until June 2022)
Board and committee fees
370
659
Ad hoc board fees
(1)
—
1,312
Travel allowance
—
30
Share-based compensation
(161
)
164
Total
209
2,165
Martin Bonde (resigned in May 2022)
Board and committee fees
176
318
Travel allowance
—
—
Share-based compensation
(24
)
48
Total
152
366
Martijn Kleijwegt (resigned in June 2021)
Board and committee fees
—
161
Travel allowance
—
—
Share-based compensation
—
25
Total
—
186
Rémi Droller (resigned in June 2021)
(2)
Board and committee fees
—
(828
)
Travel allowance
—
(90
)
Share-based compensation
—
(89
)
Total
—
(1,007
)
Sten Verland
Board and committee fees
—
81
Travel allowance
—
—
Share-based compensation
—
25
Total
—
106
Anders Hedegaard (resigned in June 2021)
Board and committee fees
—
153
Travel allowance
—
—
Share-based compensation
—
25
Total
—
178
Catherine Moukheibir (resigned in December 2021)
Board and committee fees
—
353
Ad hoc board fees
—
—
Travel allowance
—
—
Share-based compensation
—
25
Total
—
378
Carrolee Barlow (resigned in May 2022)
Board and committee fees
176
320
Travel allowance
—
—
Share-based compensation
(24
)
80
Total
152
400
Stephanie Okey (resigned in May 2022)
Board and committee fees
176
247
Ad hoc board fees
—
107
Share-based compensation
(72
)
72
Total
104
426
Andrew Mercieca (resigned in June 2022)
Board and committee fees
212
24
Total
212
24
John Sommer Schmidt (since June 2022)
Board and committee fees
231
-
Total
231
Anders Fink Vadsholt (DK) (since June 2022)
Board and committee fees
231
-
Total
231
Total remuneration to the Board of Directors
1,880
3,834
(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.
58
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, 2022 and 2021, 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, the 2020 LTIP and the
2021 LTIP (Note 2.5)
• Participation of the Board members in the 2019 RSU, 2020 RSU and 2021 RSU programs (Note
2.5)
• 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, 2022 and 2021, 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.
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
shares
owned
shares owned
2022
2021
Anders Vadsholt
159,517
160,717
December 31,
2022
December 31,
2021
Number of
Number of
Number of
MEMBERS OF THE
Number of
Unvested
Unexercised
Number of
Unvested
BOARD OF DIRECTORS:
shares
owned
RSUs 2021
RSUs 2020
shares
owned
RSUs 2021
Bo Jesper Hansen
143,234
2,849
—
143,234
2,849
John Sommer Schmidt
—
—
—
—
—
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
2022
2021
Audit services
692
2,743
Audit-related services
493
430
Other assistance
—
753
Total fees to auditors
1,185
3,926
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.
59
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 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.
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.
60
2022 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
2022
2021
Net revenue
2.1
—
—
Research and development expenses
2.2
—
—
General and administrative expenses
2.3
(41,241
)
(66,381
)
Operating loss
(41,241
)
(66,381
)
Financial income
2.5
185
365
Financial expenses
2.5
—
—
Loss before tax
(41,056
)
(66,017
)
Income tax benefit
2.6
2,750
5,550
Loss from continuing operations
(38,306
)
(60,517
)
Net result from discontinued operations
1.3
73,378
(567,607)
Net result for the year
1.3
35,072
(628,123
)
Items that will be reclassified subsequently to the
Statement of Profit or Loss:
Exchange difference from translation of foreign operations
(141
)
(57
)
Other comprehensive Profit/loss
(141
)
(57
)
Total comprehensive Profit/loss
34,931
(628,181
)
The accompanying notes form an integral part of these consolidated financial statements
61
STATEMENTS OF FINANCIAL POSITION
DKK 000
ASSETS
Note
2022
2021
Non-current assets
Intangible assets
2.7
—
2,152
Right-of-use assets
2.8
—
3,726
Property, plant, and equipment
2.9
—
2,205
Corporation tax receivable
—
2,750
Investment in subsidiaries
2.10
—
—
Prepayments and deposits
2.11
—
593
Total non-currents assets
—
11,426
Current assets
Corporation tax receivable
2.6
5,500
5,500
Trade receivables
4,103
29,268
Prepayments and other receivables
2.11
8,305
25,056
Inventory
—
—
Cash
2.13
38,918
85,693
Total current assets
56,826
145,517
Total assets
56,826
156,943
EQUITY AND LIABILITIES
Note
2022
2021
Equity
Share capital
35,312
34,952
Share premium
2,087,437
2,082,487
Other reserves
(303
)
2,324
Accumulated deficit
(2,081,472
)
(2,120,884
)
Total equity
40,974
(1,121
)
Non-current liabilities
Borrowings
2.12
—
2,482
Lease liabilities
2.8
—
2,427
Discount and rebate liabilities
2.12
—
28,293
Other non-current liabilities
2.12
98
98
Total non-current liabilities
98
33,300
Current liabilities
Borrowings
2.12
—
30,983
Lease liabilities
2.8
—
2,122
Trade payables and accruals
2.12
9,206
49,445
Discount and rebate liabilities
2.12
4,457
7,900
Other liabilities
2.12
2,090
34,314
Total current liabilities
15,753
124,764
Total equity and liabilities
56,826
156,943
The accompanying notes form an integral part of these consolidated financial statements.
62
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Notes
Share
capital
Share
premium
Foreign
currency
translation
reserve
Share-based
compensation
– acquisition
of intangible assets
Accumulated
deficit
Total
Balance as of 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)
—
—
(57
)
—
—
(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
)
Net loss for the year
—
—
—
—
35,072
35,072
Other comprehensive income
—
—
(141
)
—
—
(141
)
Total other comprehensive income (loss)
—
—
(141
)
—
35,072
34,931
Transactions with owners:
Capital increase, exercise of RSUs
360
5,091
—
—
—
5,451
Transaction cost related to capital increase
—
(141)
—
—
—
(141
)
Reserve for bonus shares reversed
—
—
—
(2,486
)
2,486
—
Share-based compensation expense
—
—
—
—
1,853
1,853
Total transactions with owners
360
4,950
—
(2,486
)
4,339
7,163
Balance as of December 31, 2022
35,312
2,087,437
(303
)
—
(2,081,472)
40,974
63
STATEMENTS OF CASH FLOWS
DKK 000
Note
2022
2021
Operating result from continuing operations
(41,241
)
(66,381
)
Operating result from discontinued operations
(67,278
)
(568,788
)
Adjustments to reconcile operating result to
cash flows from operating activities:
Equity-settled share-based compensation expense
1,773
12,493
Depreciation and amortization
2.2,2.3
782
14,870
Change in prepayments, deposits, and other
receivables
2.11
41,393
2,344
Change in trade payables, accruals, and other
liabilities
2.12
(37,889
)
12,638
Change in intercompany receivables
2.11
1,117
206,578
Change in intercompany payables
2.12
(7,794
)
544
Exchange rate adjustments on intercompany
balances
1,949
9,055
Cash generated by operating activities before
financial items and tax
(107,188
)
(376,648
)
Interest paid
(1,064
)
(6,098
)
Interest received
185
0
Income taxes received
5,500
5,500
Cash flow from operating activities
(102,567
)
(377,246
)
Investment in intangible assets
2.7
—
(85
)
Investment in property, plant and equipment
2.9
—
—
Proceeds from sale of property, plant and equipment
1,460
1,040
Proceeds from sale of activity
1.3
88,887
Cash flow from investing activities
90,347
955
Proceeds from issue of shares and exercise of RSUs
5,451
(1,184
)
Transaction cost related to issuance of shares
(141
)
—
Repayment of borrowing
(39,155
)
(25,657
)
Repayment of leasing liabilities
(1,233
)
(3,090
)
Cash flow from financing activities
(35,078
)
(29,931
)
Changes in cash and cash equivalents
(47,298
)
(406,221
)
Cash and cash equivalents at the beginning of the
period
85,692
487,322
Exchange rate adjustment on cash and cash
equivalents
523
4,592
Cash and cash equivalents at the end of the
period
38,918
85,693
64
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.
The Parent Company applies the same disclosed information as disclosed in the Group’s consolidated
financial statements. Therefore, only disclosed information specific to the Parent Company or that differ from
the disclosed information applied by the Group are disclosed in these notes to the parent statements. If a
specific information is not mentioned, the disclosed information in the Group is applied.
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.
1.3 SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD
The Parent Company applies the same disclosed information as disclosed in the Group’s consolidated
financial statements in note 1.6.
1.4 DISCONTINUED OPERATIONS
DKK 000
Note
2022
2021
Net revenue
2.1
17,867
36,193
Research and development expenses
2.2, 2.3
(36,660
)
(331,046
)
General and administrative expenses
2.4
(48,485
)
(273,934
)
Operating loss
(67,278
)
(568,788
)
Financial income
2.7
4,106
11,983
Financial expenses
2.7
(9,116
)
(10,802
)
Net result before tax
(72,288
)
(567,607
)
Income tax benefit
2.8
—
—
Net result for the period
(72,288
)
—
Gain from disposal of discontinued operations
145,666
—
Net result from discontinued operations
73,378
(567,607
)
65
Cash flow from operating activities
(6,973
)
(545,926
)
Cash flow from investing activities
90,347
—
Cash flow from financing activities
(40,388
)
(25,657
)
Net cash flow from discontinued operations
42,986
(571,583
)
Gain on disposal/carrying amount of disposed assets
DKK 000
Note
2022
2021
Carrying values of intangible assets
1,603
—
Carrying values of property, plan and equipment
134
—
Carrying values of liabilities
(58,370
)
—
Carrying values of assets and liabilities
(56,633
)
—
Gain on disposal – net
145,520
—
Gain on disposal
145,520
—
Net cash inflow from disposal of business
88,887
—
SECTION 2 Notes
2.1 NET REVENUE
2.2 RESEARCH AND DEVELOPMENT EXPENSES
DKK 000
2022
2021
External costs
18,38 5
229,252
Employee costs
17,926
79,388
Intercompany expenses
—
8,697
Depreciation and amortization
349
13,709
Total research and development expenses
36,660
331,046
2.3 GENERAL AND ADMINISTRATIVE EXPENSES
DKK 000
2022
2021
External costs
59,650
136,148
Employee costs
20,699
64,294
Intercompany expenses
8,944
138,713
Depreciation and amortization
433
1,161
Total research and development expenses
89,726
340,316
DKK 000
2022
2021
Revenue by type
Revenue from sale of goods
17,867
36,193
Revenue by partner
Clinigen Health Limited
17,867
36,193
Geographical areas
France
17,867
36,193
66
2.4 EMPLOYEE COSTS
DKK 000
Employee costs
2022
2021
Salaries
21,488
99,110
Cash bonus
9,046
10,886
Share-based compensation
1,853
12,050
Pension
1,588
8,306
Other social security contributions
108
1,900
Other staff costs
1,474
7,596
Total employee costs excluding board remuneration
35,557
139,848
Board remuneration
3,148
3,391
Board share-based compensation
(80
)
443
Total employee costs
38,625
143,683
Recognized as follows in the statement of Profit or Loss
Research and development expenses
17,926
79,388
General and administrative expenses
20,699
64,294
Total employee costs
38,625
143,683
Average number of full-time employees
19
99
Year-end number of full-time employees
1
49
2.5 FINANCIAL INCOME AND FINANCIAL EXPENSES
DKK 000
2022
2021
Interest income on cash balances
185
—
Foreign currency exchange gains
4,106
11,438
Gain on embedded call option
—
546
Total financial income
4,291
11,983
Interest expense on Loan Agreement
5,959
7,350
Interest expense on lease liabilities
96
490
Interest expense on cash balances
158
(330
)
Foreign currency exchange loss
2,843
1,364
Bank fees and other charges
60
80
Total financial expenses
9,116
10,438
2.6 INCOME TAXES
The following table presents the total income tax benefit for the years ended December 31:
DKK 000
2022
2021
Current tax benefit on net loss
7,111
139,397
Adjustments prior years
—
—
Tax credit research and development expenses
2,750
5,500
Change in unrecognized deferred tax before tax credit
(25,129
)
(150,544
)
Permanent differences
32,240
11,147
Total income tax benefit for the year
2,750
5,500
The following table presents the reconciliation of the effective tax rate to the statutory corporate
income tax rate in Denmark.
67
DKK 000
2022
2021
Net result before tax from continuing operations
(41,056
)
(66,017
)
Net result before tax from discontinued operations
73,378
(567,607
)
Corporate income tax rate in Denmark
22
%
22
%
Computed income tax benefit
7,111
139,397
Tax effect of:
Other non-deductible expenses, including US listing-related costs and share-based
compensation
32,240
11,147
Deferred tax asset not recognized after tax credit
(22,379
)
(145,044
)
Total income tax benefit for the year
2,750
5,500
The following table presents the carrying amount of deferred tax in the Statement of Financial
Position:
DKK 000
2022
2021
Tax deductible losses
480,554
319,811
Deferred tax on intangible assets
—
132,310
Other temporary differences
44
1,882
480.588
454,003
Deferred tax asset not recognized
480.588
454,003
Carrying amount included in the Statement of Financial Position
—
—
2.7 INTANGIBLE ASSETS
DKK 000
Software
Licenses
Total
Cost at December 31, 2020
896
12,083
12,979
Additions
85
—
85
Cost at December 31, 2021
981
12,083
13,064
Additions
—
—
—
Cost at December 31, 2022
981
12,083
13,064
Accumulated amortization at December 31, 2020
42
2,256
2,298
Amortization expense
391
119
510
Impairment expense
—
8,105
8,105
Accumulated amortization at December 31, 2021
433
10,480
10,912
Amortization expense
464
—
464
Depreciation reversed on disposals during the year
(896
)
(10,480)
(11,376
)
Accumulated amortization at December 31, 2022
—
—
—
Net carrying value at
December 31, 2021
549
1,603
2,152
December 31, 2022
—
—
—
68
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, 2020
9,456
3,406
12,862
Disposals
(1,177
)
-
(1,177
)
Depreciation expense
(2,387
)
(167
)
(2,554
)
Impairment expense
-
(3,239
)
(3,239
)
Modifications
(2,166
)
-
(2,166
)
At December 31, 2021
3,726
-
3,726
Disposals
(2,405
)
-
(2,405
)
Depreciation expense
(1,321
)
-
(1,321
)
At December 31, 2022
-
-
-
The following table presents the carrying amounts of lease liabilities and the movements during the
period:
DKK 000
2022
2021
At January 1
4,549
11,346
Accretion of interest
-
490
Disposals
(4,549
)
(1,212
)
Payments
-
(3,579
)
Modifications
-
(2,496
)
At December 31
-
4,549
Current
-
2,122
Non-current
-
2,427
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
2022
2021
Depreciation and impairment expense of right-of-use assets (R&D)
1,057
5,386
Depreciation and impairment expense of right-of-use assets (G&A)
264
407
Interest expense on lease liabilities
96
490
Gain on lease modification and disposals
-
(330
)
Total amount recognized in the Statement of Profit or Loss
1,417
5,953
69
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, 2020
6,791
2,066
8,857
Disposals
(597
)
-
(597
)
Cost at December 31, 2021
6,194
2,066
8,260
Disposals
(6,194
)
(2,066)
(8,260
)
Cost at December 31, 2022
-
-
-
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
)
-
(411
)
Accumulated depreciation at December 31, 2021
5,121
934
6,055
Depreciation expense
266
123
389
Depreciation reversed on disposals during the year
(5,387
)
(1,057)
(6,444
)
Accumulated depreciation at December 31, 2022
-
-
-
Net carrying value at
December 31, 2021
1,073
1,132
2,205
December 31, 2022
-
-
-
There has been no impairment of property, plant and equipment for the years ended December 31,
2022 and 2021. Depreciation expense is included within operating loss as follows:
DKK 000
2022
2021
Research and development expenses
143
1,031
General and administrative expenses
246
285
Total depreciation expense
389
1,316
2.10 INVESTMENT IN GROUP COMPANIES
§ ACCOUNTING POLICIES
Investments in subsidiaries are measured in the Parent Company financial statements at the lower of
cost or recoverable amount. Any distributed dividends are recognized in the income statement of the Parent
Company.
DKK 000
2022
2021
Cost at January 1
3,942
1,346
Additions
-
2,596
Cost end of year December 31
3,942
3,942
Adjustment January 1
(3,942
)
(1,207
)
Impairment
-
(2,735
)
End of year December 31
(3,942
)
(3,942
)
Carrying amount of investment
-
-
70
DKK 000
Registered
office
Ownership
interest
(%)
Share
capital
Equity
Net result
Orphazyme US, Inc.
Delaware,
USA
100 %
USD 1
(USD 000)
1,403
(227
)
Orphazyme GmhH (CH)
Zug,
Switzerland
100 %
CHF 20,000
(CHF 000)
355
(237
)
2.11 PREPAYMENTS, DEPOSITS, AND OTHER RECEIVABLES
DKK 000
2022
2021
Leasehold deposit
-
593
Total non-current prepayments and deposits
-
593
DKK 000
2022
2021
Prepayments to vendors
1,706
12,436
VAT receivable, net
662
2,903
Foreign VAT receivable
1,275
1,627
Receivables from group entities
4,183
5,300
Other current receivables
479
2,790
Total current prepayments and other receivables
8,305
25,056
2.12 FINANCIAL ASSETS AND LIABILITIES
DKK 000
2022
2021
Borrowings
-
33,465
Lease liabilities (Note 3.2)
-
4,549
Trade payables
4,357
41,395
Accruals
4,849
8,050
Total liabilities measured at amortized cost
9,206
87,459
DKK 000
2022
2021
Remuneration to the Board of Directors
213
293
Payables to group entities
657
8,451
Payroll and employee-related costs
1,220
25,570
Total current other liabilities
2,090
34,314
Non-cash changes
DKK 000
December 31,
2021
Cash
flows
Disposals
Adjustments
and
modifications
Accumulated
interest
Exchange
rate
adjustments
December 31,
2022
Borrowings
33,466
(39,155)
-
-
5,959
(269
)
-
Lease
liabilities
4,549
(1,233)
(3,412)
-
96
-
-
Total
liabilities
from
financing
activities
38,015
(40,388)
(3,412)
-
6,055
(269)
-
71
DKK 000
December 31,
2021
Cash flows
Accruals
December 31,
2022
Discount and rebate liabilities
36,193
—
(31,736
)
4,457
Total liabilities from accrued
discount and rebates
36,193
—
(31,736
)
4,457
2.13 CASH
DKK 000
2022
2021
DKK
14,794
53,291
USD
10,609
27,440
EUR
13,209
4,070
CHF
-
-
GBP
306
892
Total cash
38,918
85,693
2.14 COMMITMENTS AND CONTINGENCIES
The Parent Company applies the same disclosed information as disclosed in the Group’s consolidated financial
statements in note 3.9.
2.15 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
2022
2021
Transaction with subsidiaries
Service fee costs
8,944
147,410
Balances with subsidiaries
Current receivables
4,183
5,300
Current payables
657
8,451
Please refer to note 4.6 in the consolidated financial statements for additional information regarding
transactions with related parties of the Group.
2.16 CAPITAL MANAGEMENT
The Parent Company applies the same disclosed information as disclosed in the Group’s consolidated financial
statements in note 4.1.
72
2.17 REMUNERATION OF BOARD OF DIRECTORS AND EXECUTIVE MANAGEMENT
The Parent Company applies the same disclosed information as disclosed in the Group’s consolidated financial
statements in note 4.5.
2.18 FEES TO AUDITORS
The Parent Company applies the same disclosed information as disclosed in the Group’s consolidated financial
statements in note 4.7.
73
Statements and Signatures
Statements by Board of Directors and Executive Management
The Board of Directors and Executive Management have today considered and approved the annual report of
Orphazyme A/S for the financial year January 1-December 31, 2022.
The consolidated financial statements of the Group and the Parent Company’s financial statements have been
prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International
Accounting Standards Board (IASB) and in accordance with IFRS as endorsed by the EU as well as additional
disclosure requirements under the Danish Financial Statements Act.
In our opinion, the Group’s consolidated financial statements and the Parent Company financial statements
provide a fair presentation of the assets, liabilities, and financial position at December 31, 2022 and the results
of the Group’s and Parent Company’s operations and cash flows for the financial year January 1–December 31,
2022.
In our opinion, Management’s Review provides a fair presentation of the development in the Group’s
operations and financial circumstances, the results of the year, and the overall financial position of the Group
as well as a description of the most significant risks and elements of uncertainty facing the Group.
We recommend that the annual report be adopted at the Annual General Meeting scheduled to be held on 17
May 2023.
Copenhagen, 25 April 2023
BOARD OF DIRECTORS
Bo Jesper Hansen John Sommer Schmidt
Chairman of the Board Deputy Chairman of the Board
Anders Vadsholt
EXECUTIVE MANAGEMENT
Anders Vadsholt
Chief Executive Officer
and Chief Financial Officer
74
Independent Auditors’ Report
To the Shareholders of Orphazyme A/S
Report on the audit of the Consolidated Financial Statements and Parent Company Financial
Statements
Opinion
We have audited the consolidated financial statements and the parent company financial statements of
Orphazyme A/S for the financial year 1 January – 31 December 2022, which comprise income statement,
statement of comprehensive income, balance sheet, statement of changes in equity, cash flow statement and
notes, including accounting policies, for the Group and the Parent Company. The consolidated financial
statements and the parent company financial statements are prepared in accordance with International
Financial Reporting Standards as adopted by the EU and additional requirements of the Danish Financial
Statements Act.
In our opinion, the consolidated financial statements and the parent company financial statements give a true
and fair view of the financial position of the Group and the Parent Company at 31 December 2022 and of the
results of the Group's and the Parent Company's operations and cash flows for the financial year 1 January –
31 December 2022 in accordance with International Financial Reporting Standards as adopted by the EU and
additional requirements of the Danish Financial Statements Act.
Our opinion is consistent with our long-form audit report to the Audit Committee and the Board of Directors.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs) and additional
requirements applicable in Denmark. Our responsibilities under those standards and requirements are further
described in the "Auditor's responsibilities for the audit of the consolidated financial statements and the parent
company financial statements" (hereinafter collectively referred to as "the financial statements") section of our
report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the International Ethics Standards Board for Accountants'
International Code of Ethics for Professional Accountants (IESBA Code) and the additional ethical requirements
applicable in Denmark, and we have fulfilled our other ethical responsibilities in accordance with these
requirements and the IESBA Code.
To the best of our knowledge, we have not provided any prohibited non-audit services as described in article
5(1) of Regulation (EU) no. 537/2014.
Emphasis of matter in the financial statements
We draw attention to note 3.9 to the financial statements, which describes the material uncertainty associated
with the outcome of a class action lawsuit that was filed against the Company and certain of its current and
former officers and directors. We have not modified our opinion in respect of this matter.
Appointment of auditor
We were initially appointed as auditor of Orphazyme A/S on 4 December 2015 for the financial period 1 July to
31 December 2015. We have been reappointed annually by resolution of the general meeting for a total
consecutive period of 8 years up until the financial year 2022.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit
of the financial statements for the financial year 2022. These matters were addressed during our audit of the
financial statements as a whole and in forming our opinion thereon. We do not provide a separate opinion on
these matters. For each matter below, our description of how our audit addressed the matter is provided in
that context.
We have fulfilled our responsibilities described in the "Auditor's responsibilities for the audit of the financial
statements" section, including in relation to the key audit matters below. Accordingly, our audit included the
75
design and performance of procedures to respond to our assessment of the risks of material misstatement of
the financial statements. The results of our audit procedures, including the procedures performed to address
the matters below, provide the basis for our audit opinion on the financial statements.
Accounting for discontinued Operations (IFRS 5)
In May 2022, as a part of the restructuring proposal to the Danish Maritime and Commercial High Court and
Orphazyme’s known creditors, the Company announced that it had sold 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 for a total of
DKK 88.8 million (USD 12.8 million) in cash and assumed liabilities estimated to equal approximately DKK 36.2
million (USD 5.2 million). The sale of assets and business activities was completed on May 31, 2022. The net
result of discontinued operations amounts to DKK 64.4 million in 2022, including a gain from disposal of the
discontinued operations of DKK 145.5 million.
Management concluded that the sale of the assets and business activities should be reported in accordance
with IFRS 5 - Non-Current Assets Held for Sale as discontinued operations in the 2022 financial statements.
The application of IFRS 5 is significant to our audit because the transaction and its accounting is non-routine
and involves significant management judgements regarding the presentation of the net result as discontinued
operations.
As a result of these conclusions, there are requirements around the presentation in the financial statements
and disclosure notes, the identification of income and expenses allocated to the discontinued operations and
continued operations, including assumptions and estimates made with regard to the allocation an d
presentation, and adjustments to be recorded, e.g. common cost allocations.
How our audit addressed the matter
Our audit procedures included an evaluation of the Company’s conclusions on the classification and
presentation of the business activities as discontinued operations. Our audit procedures on the accounting and
disclosure of reported net result from discontinued operations focused on the validation with the underlying
sales documents and related contracts, agreed the elements of the gain calculations to them, testing of
received proceeds per bank statements, performing cut-off procedures on material balance sheet items and
income statement items and assessing the assumption applied by management to reassess the potential
exposure on the continued operations.
We assessed the presentation of discontinued and continuing operations by reference to its size and nature.
We also tested whether the comparative figures in the statement of comprehensive income for the
discontinued operations were accurately and fully adjusted. We refer to note 1.7 in the financial statements
regarding discontinued operations.
Statement on the Management's review
Management is responsible for the Management's review.
Our opinion on the financial statements does not cover the Management's review, and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the Management's review
and, in doing so, consider whether the Management's review is materially inconsistent with the financial
statements or our knowledge obtained during the audit, or otherwise appears to be materially misstated.
Moreover, it is our responsibility to consider whether the Management's review provides the information
required under the Danish Financial Statements Act.
Based on the work we have performed, we conclude that the Management's review is in accordance with the
financial statements and has been prepared in accordance with the requirements of the Danish Financial
Statements Act. We did not identify any material misstatement of the Management's review.
Management's responsibilities for the financial statements
Management is responsible for the preparation of consolidated financial statements and parent company
financial statements that give a true and fair view in accordance with International Financial Reporting
Standards as adopted by the EU and additional requirements of the Danish Financial Statements Act and for
such internal control as Management determines is necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to fraud or error.
76
In preparing the financial statements, Management is responsible for assessing the Group's and the Parent
Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting in preparing the financial statements unless Management
either intends to liquidate the Group or the Parent Company or to cease operations, or has no realistic
alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance as to whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with ISAs and additional requirements applicable in Denmark will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial statements.
As part of an audit conducted in accordance with ISAs and additional requirements applicable in Denmark, we
exercise professional judgement and maintain professional scepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting
a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group's and the Parent Company's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by Management.
• Conclude on the appropriateness of Management's use of the going concern basis of accounting in
preparing the financial statements and, based on the audit evidence obtained, whether a materi al
uncertainty exists related to events or conditions that may cast significant doubt on the Group's and
the Parent Company's ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures
in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor's report. However,
future events or conditions may cause the Group and the Parent Company to cease to continue as a
going concern.
• Evaluate the overall presentation, structure and contents of the financial statements, including the
note disclosures, and whether the financial statements represent the underlying transactions and
events in a manner that gives a true and fair view.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the consolidated financial statements.
We are responsible for the direction, supervision and performance of the group audit. We remain
solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control that
we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that
may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate
threats or safeguards applied.
From the matters communicated with those charged with governance, we determine those matters that were
of most significance in the audit of the consolidated financial statements and the parent company financial
statements of the current period and are therefore the key audit matters. We describe these matters in our
auditor's report unless law or regulation precludes public disclosure about the matter.
Report on compliance with the ESEF Regulation
As part of our audit of the Consolidated Financial Statements and Parent Company Financial Statements of
Orphazyme A/S, we performed procedures to express an opinion on whether the annual report of Orphazyme
77
A/S for the financial year 1 January – 31 December 2022 with the file name 54930025OZD2GGSQ7L42-2022-
12-31-en is prepared, in all material respects, in compliance with the Commission Delegated Regulation (EU)
2019/815 on the European Single Electronic Format (ESEF Regulation) which includes requirements related to
the preparation of the annual report in XHTML format and iXBRL tagging of the Consolidated Financial
Statements including notes.
Management is responsible for preparing an annual report that complies with the ESEF Regulation. This
responsibility includes:
• The preparing of the annual report in XHTML format;
• The selection and application of appropriate iXBRL tags, including extensions to the ESEF taxonomy
and the anchoring thereof to elements in the taxonomy, for all financial information required to be
tagged using judgement where necessary;
• Ensuring consistency between iXBRL tagged data and the Consolidated Financial Statements
presented in human readable format; and
• For such internal control as Management determines necessary to enable the preparation of an annual
report that is compliant with the ESEF Regulation.
Our responsibility is to obtain reasonable assurance on whether the annual report is prepared, in all material
respects, in compliance with the ESEF Regulation based on the evidence we have obtained, and to issue a
report that includes our opinion. The nature, timing and extent of procedures selected depend on the auditor’s
judgement, including the assessment of the risks of material departures from the requirements set out in the
ESEF Regulation, whether due to fraud or error. The procedures include:
• Testing whether the annual report is prepared in XHTML format;
• Obtaining an understanding of the company’s iXBRL tagging process and of internal control over the
tagging process;
• Evaluating the completeness of the iXBRL tagging of the Consolidated Financial Statements including
notes;
• Evaluating the appropriateness of the company’s use of iXBRL elements selected from the ESEF
taxonomy and the creation of extension elements where no suitable element in the ESEF taxonomy
has been identified;
• Evaluating the use of anchoring of extension elements to elements in the ESEF taxonomy; and
• Reconciling the iXBRL tagged data with the audited Consolidated Financial Statements.
In our opinion, the annual report of Orphazyme A/S for the financial year 1 January – 31 December 2022 with
the file name 54930025OZD2GGSQ7L42-2022-12-31-en is prepared, in all material respects, in compliance
with the ESEF Regulation.
Copenhagen, 25 April 2023
EY Godkendt Revisionspartnerselskab
CVR no. 30 70 02 28
Hans B. Vistisen
State Authorised
Public Accountant
mne23254
Anders Roe Eriksen
State Authorised
Public Accountant
mne46667
78
Other Information
79
Disclaimer
This annual report contains certain “forward-looking statements”, within the meaning of the “safe harbor” provisions of the U.S. Private Securities
Litigation Reform Act of 1995, including, without limitation, statements about the Company’s financial outlook, the class action lawsuit in the United
States and future prospects. Although the Company believes its expectations are based on reasonable assumptions, all statements other than
statements of historical fact included in this Annual Report 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 Annual 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.
80
Orphazyme A/S
Company registration no.: 32266355
Ole Maaløes Vej 3, DK-2200
Copenhagen N, Denmark
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