Pharma Mar S.A.

Annual / Quarterly Financial Statement • Feb 28, 2023

Pharma Mar, S.A.

Financial statements and directors' report As of 31 December 2022

Pharma Mar, S.A. Balance sheet as of 2022 year-end (thousand euro)

	ASSETS	Note	31/12/2022	31/12/2021
	A) Non-current assets		189,931	134,709
	I. Intangible assets		2,328	2,806
1.	Development	6	1,404	2,106
2.	Computer software	6	924	700
	II. Property, plant and equipment		29,316	23,635
1.	Land and structures	7	17,793	11,867
2.	Technical installations and other tangible fixed assets	7	10,032	8,182
3.	Advances & construction in progress	7	1,491	3,586
	III. Investment property		845	845
1.	Land	8	845	845
	IV. Non-current investment in group and associated undertakings		85,638	75,345
1.	Equity instruments	11	80,404	53,967
2.	Loans to Group undertakings	10.14 & 30	5,234	21,378
	V. Non-current financial assets		49,302	10,495
1.	Equity instruments	10 & 12	335	335
2.	Loans to third parties		6	6
3.	Other financial assets	10.14 & 15	48,961	10,154
	VI. Deferred tax assets	22	22,502	21,583
	B) Current assets		264,739	279,734
	II. Inventories		26,934	9,619
1.	Raw materials and other supplies	13	1,744	174
2.	Products in process	13	24,966	9,048
3.	Finished products	13	224	397
	III. Trade and other accounts receivable		55,761	74,704
1.	Customer receivables for sales and services	10 & 14	25,420	44,166
2.	Receivable from group and associated undertakings	10.14 & 30	2,489	4,296
3.	Sundry debtors	10 & 14	197	195
4.	Personnel	14	113	113
5.	Current tax assets	24	23,023	22,538
6.	Other receivables from public authorities	24	4,519	3,396
	IV. Current investment in group and associated undertakings		56	97
2.	Other financial assets	10.14 & 30	56	97
	V. Current financial assets		32,341	88,030
1.	Other financial assets	10 & 15	32,341	88,030
	VI. Accruals	14	5,870	3,750
	VII. Cash and cash equivalents		143,777	103,534
1.	Cash	16	115,650	103,534
2.	Cash equivalents	16	28,127	-
	Total assets (A+B)		454,670	414,443

Pharma Mar, S.A. Balance sheet as of 2022 year-end (thousand euro)

TOTAL EQUITY AND LIABILITIES	Note	31/12/2022	31/12/2021
A) Equity		293,051	238,619
A-1) Capital and reserves		292,065	237,433
I. Capital		11,013	11,013
1. Share capital	17	11,013	11,013
II. Share premium account	17	71,278	71,278
III. Reserves		283,002	285,377
1. Legal and bylaw reserves	18	2,203	2,203
2. Other reserves	18	280,799	283,174
IV. (Own shares and equity instruments)	17	(15,865)	(25,679)
V. Prior years' income		(116,317)	(207,919)
1. (Prior years' loss)	18	(116,317)	(207,919)
VII. Profit or loss for the year		58,954	103,363
A-2) Value adjustments		18	18
II. Hedge transactions		18	18
A-3) Subsidies, donations and legacies received	6 & 19	968	1,168
B) Non-current liabilities		69,358	95,823
I. Long-term provisions		150	150
1. Other provisions		150	150
II. Non-current debt		25,033	27,645
1. Bonds and other marketable securities	10 & 20	16,710	16,653
2. Bank debt	10 & 20	231	456
3. Other financial liabilities	10 & 20	8,092	10,536
IV. Deferred tax liabilities	22	845	830
V. Long-term accruals	20	43,330	67,197
C) Current liabilities		92,261	80,002
II. Short-term provisions	21	15,155	-
III. Current debt		8,788	11,404
1. Bonds and other marketable securities	10 & 20	405	405
2. Bank debt and debt to official authorities	10 & 20	7,375	10,154
3. Other financial liabilities	10 & 20	1,008	845
IV. Current accounts payable to group and associated undertakings	10.20 & 30	6,165	4,093
V. Trade and other accounts payable		37,494	34,665
1. Suppliers	10 & 20	707	379
2. Suppliers - group and associated undertakings	10.20 & 30	3,256	2,212
3. Sundry creditors	10 & 20	24,492	23,933
4. Personnel (compensation payable)	10 & 20	6,499	5,872
5. Other debt to public authorities	24	1,094	1,044
6. Customer advances	10 & 20	1,446	1,225
VI. Short-term accruals	20	24,659	29,840
Total net equity and liabilities (A+B+C)		454,670	414,443

Pharma Mar, S.A. Statement of income for the year ended 31 December 2022 (thousand euro)

STATEMENT OF INCOME	Note	31/12/2022	31/12/2021
A) Continuing operations
1. Net revenues	23.1 & 23.2	179,734	215,405
a) Product sales		88,738	108,992
b) Licensing and co-development agreements		40,169	64,787
c) Royalties		50,254	40,995
d) Other revenues		573	630
2. Variation in finished goods and work-in-process inventories	13	15,159	(1,962)
4. Purchases		(27,370)	(16,808)
b) Raw materials and other consumables consumed	23,4	(3,293)	(3,840)
c) Outside work		(24,077)	(12,968)
5. Other operating revenues		64	62
a) Ancillary and other current revenues		64	62
6. Staff expenses	23,5	(38,064)	(34,826)
a) Wages, salaries and similar		(31,722)	(29,096)
b) Employee welfare expenses		(6,342)	(5,730)
7. Other operating expenses	23,6	(65,758)	(55,009)
a) Outside services		(65,189)	(54,453)
b) Taxes other than income tax		(569)	(556)
8. Depreciation and amortization	6 & 7	(3,001)	(2,681)
9. Recognition of subsidies for non-financial assets and other	19	1,062	694
10. Impairment losses and income from disposal of assets	6.1 & 23.7	58	144
a) Impairments and losses	6.1 & 23.7	58	144
A.1) OPERATING PROFIT (1+2+3+4+5+6+7+8+9+11)		61,884	105,019
11. Finance income	25	1,585	777
b) Marketable securities and other financial instruments		1,585	777
b 1) Group and associated undertakings		706	402
b 2) Third parties		879	375
12. Finance costs	25	(3,629)	(2,249)
a) Debts to third parties		(3,629)	(2,249)
13. Exchange differences	25	3,259	5,836
14. Impairment losses and income from disposal of financial instruments	25	(4,940)	-
a) Impairments and losses		(4,940)	-
A.2) FINANCIAL INCOME (11+12+13+14)		(3,725)	4,364
A.3) PROFIT BEFORE INCOME TAX (A.1 + A.2)		58,159	109,383
15. Income tax	24	795	(6,020)
A.5) PROFIT FOR THE YEAR (A.4+16)		58,954	103,363

Pharma Mar, S.A. Statement of changes in equity for the year ended 31 December 2022

A) STATEMENT OF RECOGNIZED REVENUES AND EXPENSES FOR THE YEAR ENDED 31 DECEMBER 2022 (thousand euro)

STATEMENT OF CHANGES IN NET EQUITY	Note	31/12/2022	31/12/2021
A) INCOME, PER INCOME STATEMENT		58,954	103,363
Revenues and expenses recognized directly in equity
I. Valuation of financial instruments		2	5
II. Subsidies, donations and legacies received	19	796	338
III. Tax effect	19	(200)	(86)
B) TOTAL REVENUES AND EXPENSES RECOGNIZED DIRECTLY IN EQUITY (I+III+V)		598	257
Transfers to profit or loss
I. Subsidies, donations and legacies received	19	(1,062)	(694)
II. Tax effect	19	266	174
C) TOTAL TRANSFERS TO PROFIT OR LOSS (VIII+IX)		(796)	(520)
TOTAL RECOGNIZED REVENUES AND EXPENSES (A + B + C)		58,756	103,100

Pharma Mar, S.A. Statement of changes in equity for the year ended 31 December 2022

B) TOTAL STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2022 (thousand euro)

	Share capital (Note 17)	Share premium account (Note 17)	Reserves (Note 18)	(Own shares and equity instruments) (Note 17.3)	Prior years' income	Income for the year (Note 3)	Subsidies, donations and legacies received (Note 19)	Value adjustments	Total
Closing balance 2020	11,013	71,278	287,875	(21,453)	(225,999)	28,952	1,435	14	153,116
Total recognized revenues and expenses	-	-	-	-	-	103,363	(267)	-	103,096
Other changes in net equity	-	-	-	-	-	-	-	4	4
Share ownership plans (Note 17.3 & 26)	-	-	(31)	751	-	-	-	-	720
Transactions with shares (purchases) (Note 17.3)	-	-	-	(40,660)	-	-	-	-	(40,660)
Transactions with shares (sales) (Note 17.3)	-	-	(2,467)	35,683	-	-	-	-	33,216.00
Distribution of dividend (Note 3)	-	-	-	-	-	(10,872)	-	-	(10,872)
Distribution of income (Note 3)	-	-	-	-	18,080	(18,080)	-	-	-
Closing balance 2021	11,013	71,278	285,377	(25,679)	(207,919)	103,363	1,168	18	238,619
Total recognized revenues and expenses	-	-	-	-	-	58,954	(200)	-	58,754
Share ownership plans (Note 17.3 & 26)	-	-	83	571	-	-	-	-	654
Transactions with shares (purchases) (Note 17.3)	-	-	-	(47,707)	-	-	-	-	(47,707)
Transactions with shares (sales) (Note 17.3)	-	-	(2,458)	56,950	-	-	-	-	54,492
Distribution of dividend (Note 3)	-	-	-	-	-	(11,761)	-	-	(11,761)
Distribution of income (Note 3)	-	-	-	-	91,602	(91,602)	-	-	-
Closing balance 2022	11,013	71,278	283,002	(15,865)	(116,317)	58,954	968	18	293,051

Pharma Mar, S.A. Statement of Cash Flows for the year ended 31 December 2022 (thousand euro)

	Notes	31/12/2022	31/12/2021
A) OPERATING CASH FLOW
1. Income before taxes		58,159	109,383
2. Adjustments to income		21,412	(1,801)
a) Depreciation and amortization (+)	6, 7, 8	3,001	2,681
b) Impairment losses		194	(183)
c) Change in provisions		15,155	-
d) Subsidies recognized (-)	19	(1,062)	(694)
e) Income from derecognitions and disposals of property, plant and equipment (+/-)	6 & 25	(60)	40
f) Income from derecognitions and disposals of financial instruments (+/-)		4,745	-
g) Share-based payments		654	718
h) Financial revenues (-)	25	(1,585)	(777)
i) Financial expenses (+)	25	3,629	2,250
j) Exchange differences (+/-)	25	(3,259)	(5,836)
3. Changes in working capital		(27,126)	(42,533)
a) Inventories (+/-)	13	(17,315)	1,499
b) Debtors and other accounts receivable (+/-).	14	13,943	(34,028)
d) Creditors and other accounts payable (+/-).	20	950	7,687
f) Other non-current assets and liabilities (+/-)		(24,704)	(34,880)
4. Other operating cash flow		605	(11,329)
a) Interest paid (-)		(3,629)	(2,256)
c) Interest received (+)		1,585	777
d) Corporate income tax receipts/payments	24	2,649	(8,192)
5. Operating cash flow (+/-1+/-2+/-3+/-4)		53,050	38,189
B) INVESTING CASH FLOW
6. Investment payments (-)		(243,141)	(19,923)
a) Group and associated undertakings.		(15,800)	(13,406)
b) Intangible assets	6	(488)	(248)
c) Property, plant and equipment	7	(7,654)	(6,270)
e) Other financial assets		(219,199)	1
7. Divestment receipts (+)		239,357	25,363
a) Other financial assets		239,357	25,363
8. Investing cash flow (7-6)		(3,784)	5,440
C) FINANCING CASH FLOW
9. Receipts and payments in connection with equity instruments		7,580	(7,106)
a) Acquisition of own equity instruments (-)		(50,165)	(40,669)
b) Disposal of own equity instruments (+)		56,949	33,225
c) Subsidies, donations and legacies received (+)	19	796	338
10. Receipts and payments in connection with instruments representing
financial liabilities		(4,630)	(8,970)
a) Issuance		2,994	1,904
1. Bank debt and debt to official authorities (+)	20	2,233	1,904
2. Suppliers - group and associated undertakings (+)	20	761	-
b) Refund and amortization of:		(7,624)	(10,874)
1. Bank debt and debt to official authorities (-)	20	(7,624)	(10,874)
11. Payment of dividends and remuneration on other equity instruments.		(11,761)	(10,873)
12. Financing cash flow (+/-9+/-10-11)		(8,811)	(26,949)
D) EFFECT OF EXCHANGE RATE VARIATIONS E) NET INCREASE/DECREASE IN CASH AND CASH EQUIVALENTS (+/-5+/-		(212)	(409)
8+/-12+/-D)		40,243	16,271
Beginning cash and cash equivalents		103,534	87,262
Ending cash and cash equivalents		143,777	103,534

Pharma Mar, S.A.

NOTES TO FINANCIAL STATEMENTS (thousand euro)

1. COMPANY BUSINESS

Pharma Mar, S.A. (hereafter "PharmaMar" or the "Company") was incorporated on 30 April 1986 as a limited company (sociedad anónima) for an indefinite period. Its registered offices are at Avenida de los Reyes nº 1 (Pol. Industrial La Mina – Norte ), Colmenar Viejo (Madrid).

PharmaMar's main activity is research, development and marketing of bio-active principles, particularly those of marine origin, for application in human medicine, especially in the antitumor, antiviral and immunomodulation fields and the area of tropical diseases, as well as management, support and development of its investees in the biopharmaceutical business (diagnostics and RNAi) and the subsidiaries whose object is to market oncology products (Yondelis) in Europe.

The products developed by PharmaMar that, as of 31 December 2022, were being marketed or had received authorization to be marketed from the regulatory authorities were as follows:

Yondelis (trabectedin)

On 20 September 2007, PharmaMar received authorization from the European Commission to commercialize its first compound, Yondelis, to treat soft tissue sarcoma; commercial sales began in the fourth quarter of 2007.

On 2 November 2009, the European Commission granted authorization for PharmaMar to commercialize Yondelis (trabectedin) in combination with pegylated liposomal doxorubicin to treat relapsed platinumsensitive ovarian cancer in the 27 EU countries plus Norway, Iceland and Liechtenstein. The first sales for this therapeutic use were made at the end of 2009.

In 2015, Yondelis was authorized for sale for treating certain types of soft tissue sarcoma by the Japanese regulatory authorities, via PharmaMar partner Taiho Pharmaceutical Co, and by the US Food and Drug Administration (FDA), via PharmaMar partner Janssen Biotech Inc.

After fifteen years on the market, the first generics of trabectedin began to be marketed in Europe in the fourth quarter of 2022.

Aplidin (plitidepsin)

In December 2018, Australia's Therapeutic Goods Administration (TGA) informed Specialised Therapeutics Asia Pte. Ltd. (STA) that it had approved Aplidin for use in treating multiple myeloma in combination with dexamethasone. The approval covers treating patients who have relapsed after three lines of treatment. PharmaMar licensed Aplidin to its partner STA for Australia, New Zealand and several Southeast Asian countries from December 2015.

In December 2017, the Company received a negative opinion from the European Medicines Agency's Committee for Medical Products for Human Use (CHMP) with regard to the application for approval to market Aplidin in Europe for treating multiple myeloma. The Company brought an action against the European Commission before the General Court of the European Union requesting annulment of the decision. In October 2020, the Court upheld Pharma Mar's claim and annulled the Commission's decision. As a result, the European Commission asked that the European Medicines Agency re-examine the procedure. The aforementioned decision was not appealed by the European Commission but two Member States, Germany and Estonia, have filed appeals before the Court of Justice of the European Union which are currently awaiting a decision.

Zepzelca (lurbinectedin)

On 15 June 2020, the US Food and Drug Administration (FDA) approved Zepzelca (lurbinectedin) for treating patients with small-cell lung cancer who had experienced progression after platinum-based chemotherapy. Zepzelca received accelerated approval based on the Overall Response Rate (ORR) and Duration of Response (DoR).

As a result of that approval, Jazz Pharmaceuticals Ireland Limited (hereinafter "Jazz Pharmaceuticals"), with which PharmaMar had signed an exclusive licensing agreement in December 2019 for marketing antitumor compound Zepzelca in the US to treat relapsed small-cell lung cancer, began marketing in that territory. By virtue of that agreement, PharmaMar collected USD 300 million (€269.5 million). It may receive additional payments up to USD 550 million if the FDA grants full approval for Zepzelca by specific deadlines or for fulfilling commercial milestones, in addition to royalties on net sales of Zepzelca.

At the date of this report, Zepzelca is approved for marketing in nine other countries outside the European Union, in addition to the United States.

The Company currently has three Phase III clinical trials under way with which it expects to apply for marketing approval in the European market.

PharmaMar created a new Virology business unit in 2020. Clinical development of plitidepsin for treating COVID-19 patients continued in 2022. The NEPTUNO multicenter, randomized, controlled Phase III clinical trial to determine the efficacy and safety of two dosages of plitidepsin versus control in adult patients requiring hospitalization for the treatment of moderate infection continued in 2022 in Europe and Latin America. Additionally, a new Phase II multicenter open randomized controlled basket and pragmatic clinical trial (NEREIDA) to determine the efficacy and safety of plitidepsin in immunocompromised adult patients with symptomatic COVID-19 requiring hospitalization commenced. Approximately €17 million were spent in 2022 (€19 million in 2021).

The other compounds are in the research and development phase.

Pharma Mar, S.A.'s shares are listed on the Madrid, Barcelona, Bilbao and Valencia Stock Exchanges and the Spanish electronic market (SIBE).

The Company's financial statements are presented in euro, which is the Company's functional and presentation currency.

The Company's directors consider that the 2022 financial statements, which were authorized on 27 February 2023, will be approved without changes by the Shareholders' Meeting.

In accordance with the provisions of Royal Decree 1.159/2010, of 17 September, on 27 February 2023, the Company authorized the Consolidated Financial Statements as of 31 December 2022 for the group of companies of which it is the controlling company, which disclose a consolidated net profit of €49,356 thousand, equity (including net profit for the year) of €222,957 thousand, assets amounting to €393,259 thousand and revenues amounting to €196,343 thousand.

Those Consolidated Financial Statements were drawn up in accordance with the International Financial Reporting Standards adopted by the European Union (IFRS-EU).

The Consolidated Financial Statements contain all the Group undertakings, using the applicable consolidation method in each case, in conformity with article 42 of the Commercial Code.

The COVID-19 pandemic did not have a material impact on the valuation of the Company's assets and liabilities in 2022 and 2021. There were no credit losses on trade or customer accounts receivable. The Company's revenues, production capacity and commercial activity were unaffected by the situation. All the Group's material agreements remain in force in the same terms. The Group did not need to avail itself of furlough or layoff measures.

Climate change: analysis of financial risk and impact

All companies face climate-related risks and opportunities and are having to make strategic decisions in this area.

The impacts of climate risks on financial statements are wide-ranging and potentially complex, and will depend on industry-specific risks. Scenario analysis is used to assess not only the physical consequences of climate change but also the changes in environmental regulations to deal with it. These are the so-called physical risks and transitional risks of climate change; and both have economic and financial consequences.

Physical risks are those relating to direct damage and business interruption caused by phenomena resulting from climate change. To this end, the company has adopted policies and actions aimed at mitigating climate change and is seeking to contribute to an economy with low greenhouse gas emissions. The transitional risks of climate change are very varied, ranging from the threat of closure or prohibition of some businesses to the need to comply with increasingly stringent rules and regulations that require additional investments that had not been contemplated initially.

Through two committees, the Audit Committee and the Remuneration, Appointments and Sustainability Committee, PharmaMar's Board of Directors oversees and monitors the sustainability and non-financial information provided by the company.

At PharmaMar, our goal is to provide solutions and improve the lives of patients with serious diseases through innovative treatments, always with a sense of responsibility, respect and commitment to the environment, society and our stakeholders.

PharmaMar's environmental objectives are to reduce greenhouse gas emissions, improve the energy efficiency of its facilities and production processes, promote the use of clean energy, use resources rationally, encourage recycling, and promote actions to protect marine biodiversity, since the marine environment is the basis of our business.

Pharma Mar belongs to the biopharmaceutical industry, which does not have a material impact on the environment: it does not use raw materials or intermediate products that involve complex transformation, its facilities are not intensive users of energy or water, and they do not produce significant emissions or discharges.

Therefore, the investments and expenses arising from PharmaMar's environmental sustainability objectives described above are perfectly feasible for the Company, from a financial standpoint, in the periods in which they are proposed.

Climate risk has been incorporated into the estimates and judgments regarding the future that are used for accounting purposes, although they do not differ materially from those used in previous years.

2. BASIS OF PRESENTATION

2.1 True and fair view

The financial statements were prepared from the Company's accounting records and are presented in accordance with the current mercantile legislation and the rules established in Spain's General Accounting Plan approved by Royal Decree 1514/2007 (GAP 2007), as amended by Royal Decree 1159/2010, Royal Decree 602/2016 and Royal Decree 1/2021, in order to present a true and fair view of the equity, financial position and income of the Company and the veracity of the cash flows set out in the cash flow statement.

The figures in the documents comprising these financial statements (balance sheet, income statement, statement of changes in equity, cash flow statement and these notes to financial statements) are expressed in thousand euro.

2.2 Critical aspects of measuring and estimating uncertainty

The preparation of the financial statements requires the Company to use certain estimates and judgments in connection with the future that are evaluated continuously and are based on past experience and other

factors, including expectations about future events that are considered to be reasonable in the circumstances.

By definition, these estimates seldom coincide with the actual results. The estimates and judgments with a significant risk of having a material impact on the carrying amounts of assets and liabilities in the next financial year are detailed below.

Deferred tax assets

The main source of information for assessing the recoverability of deferred tax assets is the projection of expected future taxable profits. Future taxable income takes into account the estimated likelihood of success for each ongoing research and development project, based on the current stage of development of the molecule in question.

Deferred tax assets due to tax losses carried forward and unused tax credits are recognized to the extent that the Company is likely to obtain future taxable income enabling them to be offset. Accordingly, for the purpose of the 2022 financial statements, the projections of revenues and expenses were re-estimated using management's best estimates about the Company's business and the current and foreseeable economic situation.

In calculating expected future income and assessing the recoverability of the tax credits, only the companies belonging to the consolidated tax group of which PharmaMar is the head are considered.

The Company assesses the recoverability of deferred tax assets on the basis of estimates of future taxable income. The recoverability of deferred tax assets depends ultimately on the Company's ability to generate sufficient taxable income in the periods in which those deferred taxes are deductible. Changes in future tax rates or in the prospects of generating taxable income against which to recover the carrying amount of deferred tax assets may result in changes in that carrying amount.

The main assumptions made in calculating expected future income and, therefore, the recoverability of the tax credits generated by the undertakings that belong to the tax group in Spain are as follows:

• Projections through 2032 are included for PharmaMar, and through 2027 for Sylentis.
• The information for preparing the tax budget is the budget presented to the Board of Directors, which includes projections through 2027, extended to 2032 using the Company's best estimates of future earnings based on past experience, and the assumptions made in the first 5 years of estimation.
• The main variables used in projections for the Oncology segment are as follows: a) the probability assigned to ongoing developments (revenue expected for each product under development is assigned a probability of occurrence based on the degree of progress with ongoing development); b) the estimated selling price; and c) a penetration rate as a function of the number of patients that could potentially be treated with the product under development.
• The tax budget also uses the following significant assumptions:
• o No revenues are assumed from products under development that have not yet reached Phase III.
• o Revenue growth in the oncology segment is assumed to average 10.23%. That growth is due mainly to the good sales prospects for Zepzelca, a product currently under development, by our partner in the US market.
• o Sustained growth in expenses in the oncology segment is assumed to average 5.74%.

Variations with respect to management's assumptions in estimating future taxable income, especially the assumptions used in the Oncology segment, may materially affect the amounts recognized as deferred tax assets. The main factors that may affect this estimate are: the probability of occurrence assigned to the revenues expected from compounds currently in development depending on their current phase of development, the estimated price of the medicine, the prevalence of the various potential indications in the population, the time of approval, and the market share:

• A 1% increase in the probability assigned to revenues from compounds in Phase III development would result in the recognition of an additional €586 thousand.
• A 5% reduction in the estimated price for the main compound under development (Zepzelca) would result in the derecognition of assets in the amount of €1,443 thousand.
• A 1-year delay in sales of the main compound under development, lurbinectedin, would result in derecognition of assets in the amount of €4,439 thousand.
• A 10% reduction in market share for the main compound under development (Zepzelca) would result in derecognition of assets in the amount of €2,396 thousand.
• A 10% reduction in market share for Zepzelca in the US market would result in derecognition of assets in the amount of €1,042 thousand.

Recognition of revenues under licensing and/or development agreements

PharmaMar enters into licensing and/or development agreements that generally include many factors, and the associated revenues must be matched with the costs and considerations to be paid.

When deciding how to recognize the revenues from those transactions (Note 4.14.2), the directors consider the following factors:

• The economic basis of the transaction.
• The nature of the components of the transaction (payments, asset swaps, etc.).
• The valuation and distribution, on a fair value basis, of each item of consideration.
• The transfer of material risks and benefits deriving from ownership of the goods and the assumption of future obligations.
• The degree of progress with the project (milestones).

2.3 Comparative information

The amounts for 2021 are presented alongside those for 2022 for comparison purposes.

2.4 Grouping of items

To facilitate comprehension of the balance sheet, income statement, statement of changes in equity and cash flow statement, those financial statements are presented in grouped form, and the necessary breakdown is given in the notes to financial statements.

3. APPLICATION OF RESULTS

The proposed distribution of 2022 income which will be presented to the Shareholders' Meeting, and the actual distribution approved for 2021 by the shareholders on 29 June 2022, are as follows:

(thousand euro)	2022	2021
BASIS OF DISTRIBUTION
Income for the year	58,954	103,363
	58,954	103,363
DISTRIBUTION
Dividend (*)	11,931	11,761
Prior years' losses	47,023	91,602
	58,954	103,363

(*) The ordinary dividend declared by the Board of Directors is €0.65 gross for each qualifying share on the date payment is made, less any applicable withholding tax. Based on the number of shares currently outstanding (18,354,907 shares) and in the absence of treasury stock, that distribution would entail distributing a dividend for a maximum total amount of €11,930,689.55. The total amount distributed as dividends will be determined at the time of distribution based on the shares that the Company holds in treasury stock at that time.

The distribution of income for the year ended 31 December 2022 which will be proposed to the Shareholders' Meeting, in accordance with article 274 of the Consolidated Text of the Capital Companies Act, approved by the Legislative Royal Decree of 2 July 2010, will consist of distributing a dividend of €11,931 thousand to the Company's shareholders and of offsetting "Prior years' losses" in the amount of €47,023 thousand.

4. ACCOUNTING AND VALUATION STANDARDS

The valuation standards applied for the various items are as follows:

4.1 Intangible assets

Intangible assets are recognized initially if:

• i) they fulfill the definition of asset contained in the Accounting Conceptual Framework: "Rights, goods and other resources controlled economically by the company as a result of past events and from which the company expects to obtain profits or economic yields in the future,"
• ii) they fulfill the condition of being recognized in the accounts, in line with the Accounting Conceptual Framework: "Assets must be recognized on the balance sheet where they are likely to provide profits or economic yields for the company in the future, and provided that they can be measured reliably,"
• iii) they fulfill the identifiability requirement "that the intangible asset fulfills either of the following two conditions:
• a. it must be possible to separate it from the company and sell, assign, deliver for exploitation, lease or exchange it, or
• b. it must arise from rights in rem or contractual rights, regardless of whether those rights are transferable or can be separated from the company or from its other rights or obligations.

4.1.1 Research & Development expenses

Research is planned original investigation in pursuit of new knowledge and greater understanding in scientific and technology.

Development is the specific application of research findings in a specific design or plan for the production of materials, products, processes, systems or services that are new or substantially improved, up to commencement of commercial production.

Research expenditure is expensed in the year it is incurred.

Development expenses in the year are capitalized when they meet the following conditions:

• i) there is a specific itemized project that enables the expenses attributable to the project to be measured reliably,
• ii) there are clear criteria for assignment, allocation and recognition of the costs of each project,
• iii) there are sound reasons, at all times, for expecting technical success,
• iv) the financial and commercial success of the project is reasonably assured,
• v) funding is reasonably assured to enable the project to be concluded, and the necessary technical resources are available, and
• vi) the company intends to complete the intangible asset in question for use or sale.

Fulfillment of those conditions is assessed each year.

Development expenses recognized under assets must be amortized in accordance with a systematic plan over their useful life, beginning in the year in which the project concluded. That useful life normally coincides with the term of the patent.

If a company is unable to distinguish between the research and development phases of an internal project to create an intangible asset, it must treat the expenses arising in that project as if they had been incurred solely in the research phase.

For the purposes of subsequent remeasurement:

• Impairment is assessed in the year-end close or whenever progress with projects gives any indication of impairment or there are doubts about fulfillment of the conditions for capitalization.
• Annual assessments of the recoverability of the amounts capitalized in ongoing development projects, which include, among others, (i) assessment of the recoverability of the compound based on the fair value of the agreements, or (ii) assessment of the recoverability of the asset based on the Company's specific business plans for the molecule.

As of 31 December 2022 and 2021, the only capitalized development expenses related to the registration dossier for Zepzelca in small-cell lung cancer, which received approval for marketing from the U.S. FDA in June 2020 (Note 6.1). As of 31 December 2022, there are no indications of impairment as the asset is generating economic returns that provide ample assurance of its recoverability.

Measurement of research and development projects

Where projects are carried out with the company's own resources, they are measured at production cost and include the directly attributable costs that are necessary to create, produce and prepare the asset. In particular, they include the following items:

• i) cost of personnel related directly to the project activities,
• ii) cost of raw materials, consumables and services used directly in the project,
• iii) depreciation and amortization of fixed assets assigned directly to the project, and
• iv) the part of indirect costs that can reasonably be assigned to the project activities, provided that such assignment is rational.

Costs of sub-activities and those of the company's general structure may not be assigned to research and development projects. Financial expenses related to research expenses may not be capitalized.

Where research and development projects are outsourced to other companies or institutions, they are measured at acquisition cost.

4.1.2 Computer software

Computer software licenses acquired from third parties are capitalized based on the costs incurred to acquire and prepare them for using the specific program. Those costs are amortized over their estimated useful lives, i.e. 4 or 5 years.

Computer program maintenance costs are recognized in profit or loss as incurred.

4.2 Property, plant and equipment

Property, plant and equipment are recognized at acquisition or production cost. Property, plant and equipment are presented on the balance sheet at cost less the accumulated amount of depreciation and impairments.

The amount of capitalized in-house work on property, plant and equipment is calculated as the sum of the acquisition costs of consumables and the direct and indirect costs allocable to those assets.

The costs of expanding, modernizing or improving property, plant and equipment are capitalized solely when they increase the assets' capacity or productivity or extend their useful life, provided that it is possible to ascertain or estimate the carrying amount of the items that are retired from inventory due to being replaced.

The cost of major repairs is capitalized and depreciated over their estimated useful lives, whereas recurring maintenance costs are recognized in profit or loss in the year in which they are incurred.

Apart from land, which is not depreciated, depreciation of property, plant and equipment is taken systematically on a straight-line basis over the asset's useful life, having regard to actual loss of functionality and usability. The estimated useful lives are as follows:

	Years
Buildings and structures	25-30
Technical installations and machinery	10
Vehicles	4-7
Furniture and fixtures	10
Computer hardware	4-7

The residual value and the useful life of an asset are measured, and adjusted if necessary, at each balance sheet date.

When the carrying amount of an asset exceeds its estimated recoverable amount, its value is written down immediately to the recoverable amount.

Losses and gains on the disposal of property, plant and equipment are calculated by comparing the revenue from the sale with the carrying amount, and are recognized in profit or loss.

4.3 Investment property

Investment property comprises land held for rental over the long term that is not occupied by the Company. The items in this heading are presented at acquisition cost less accumulated depreciation and impairment losses.

4.4 Leases

Where the Company is the lessee - Operating lease

Leases where the lessor retains substantially all the risks and rewards incidental to ownership are classified as operating leases. Operating lease payments (net of any incentive received from the lessor) are recognized in profit or loss on a straight-line basis over the lease term.

Where the Company is the lessor

Assets leased under operating leases are recognized in the balance sheet on the basis of their nature. The revenues from the lease are recognized on a straight-line basis over the lease term.

4.5 Impairment of non-financial assets

Amortizable assets are measured for impairment whenever an event or change in circumstances indicates that the carrying amount may not be recoverable.

An impairment loss is recognized for the amount by which the carrying amount exceeds the recoverable amount, the latter being understood to mean the lower of the fair value less the selling cost or the value in use.

To perform the impairment tests, assets are grouped at the lowest level of cash flow that cannot be identified separately (cash-generative units - CGU). Non-financial assets other than goodwill that have suffered impairment are measured at each balance sheet date to ascertain whether the loss has been reversed.

4.6 Financial assets

4.6.1 Financial assets at amortized cost

This category includes financial assets, including those listed on an organized market, where the Company holds the investment for the purpose of collecting the cash flows derived from the performance of the contract, and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Contractual cash flows that are solely receipts of principal and interest on the principal amount outstanding are inherent to an agreement that is an ordinary or common loan, notwithstanding that the transaction is arranged at a zero or below-market interest rate.

This category includes trade accounts receivable and non-trade accounts receivable:

• a) Trade accounts receivable: financial assets arising from the sale of goods and the delivery of services as part of the company's business operations where payment is deferred, and
• b) Non-trade accounts receivable: financial assets, other than equity instruments and derivatives, that are not commercial in origin and represent the receipt of a determined or determinable amount arising from loans or credit granted by the company.

Initial measurement

Financial assets in this category are measured initially at fair value, which, unless there is evidence to the contrary, is the transaction price, i.e. the fair value of the consideration given, plus directly attributable transaction costs.

Nevertheless, trade accounts receivable maturing at not more than one year which do not have an explicit contractual interest rate, and loans to personnel, dividends receivable and capital calls, which are expected to be collected in the short term, are measured at nominal value to the extent that the effect of not discounting the cash flows can be considered to be non-material.

Subsequent re-measurement

Financial assets in this category are measured at amortized cost. Accrued interest is recognized in profit or loss using the effective interest rate method.

However, receivables maturing in less than one year which, in accordance with the provisions of the preceding paragraph, are initially measured at nominal value, continue to be measured on that basis except in the event of impairment.

When the contractual cash flows of a financial asset change due to financial difficulties on the part of the issuer, the company analyzes whether an impairment loss should be recognized.

Impairment

The necessary valuation adjustments are made, at least at accounting close and whenever there is objective evidence that the value of a financial asset, or of a group of financial assets with similar risk characteristics measured together, has been impaired as a result of one or more events occurring after initial recognition that cause a reduction or delay in the estimated future cash flows, which may be due to the debtor's insolvency.

The amount of impairment loss in these financial assets is generally the difference between their carrying amount and the present value of estimated future cash flows, including those from executing any collateral or other guarantees, discounted at the effective interest rate applying at the time of initial recognition. In the case of financial assets at floating rates, the effective interest rate used is that in force under the contractual terms on the closing date of the financial statements.

Impairment losses, and their reversal when the amount of such loss is reduced by a subsequent event, are recognized as an expense or revenue, respectively, in profit or loss. Reversal of impairment is capped at the carrying amount of the asset that would have been recognized at the date of reversal if no impairment had been recognized.

4.6.2 Financial assets at fair value through equity

This category includes financial assets whose contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding and that are not held for trading and do not qualify as "Financial assets at amortized cost". This category also includes investments in equity instruments for which the irrevocable option to classify them as "Financial assets at fair value through profit or loss" has been exercised.

Initial measurement

Financial assets in this category are measured initially at fair value, which is generally the transaction price, i.e. the fair value of the consideration given, plus directly attributable transaction costs, including the amount of any pre-emptive subscription or similar rights that were acquired.

Subsequent re-measurement

Financial assets in this category are measured at fair value without deducting the transaction costs that might be incurred in their disposal. Fair value changes are recognized directly in equity until the financial asset is derecognized or impaired, at which point the amount so recognized is transferred to profit or loss.

Nevertheless, impairment losses and foreign exchange gains and losses on monetary financial assets in foreign currencies are recognized in profit or loss.

Accrued interest, calculated using the effective interest rate method, and accrued dividends are recognized in profit or loss.

When such assets must be measured due to derecognition or other reasons, the weighted average value by homogeneous groups approach is used.

In the exceptional case that the fair value of an equity instrument is no longer reliable, prior adjustments recognized directly in equity are treated in the same way as for impairment of financial assets at cost.

In the case of the sale of pre-emptive subscription and similar rights or the segregation of such rights for exercise, the amount of the rights is netted off the carrying amount of the respective assets. This amount corresponds to the fair value or cost of the rights, calculated in a way that is consistent with the measurement of the associated financial assets.

Impairment

At least at year-end, the necessary valuation adjustments are made whenever there is objective evidence that the value of a financial asset, or of a group of financial assets included in this category with similar risk characteristics that are measured together, has been impaired as a result of one or more events that occurred after initial recognition and result in:

a) In the case of acquired debt instruments, a reduction or delay in the estimated future cash flows due to the debtor's insolvency; or

b) In the case of investments in equity instruments, a lack of recoverability of the assets' carrying amount as a result of a material or prolonged decline in fair value. An instrument is generally considered to have been impaired after a fall in value lasting one and a half years or amounting to forty percent of its market price, where the value has not recovered, without prejudice to the possibility that it may be necessary to recognize an impairment loss before this period has elapsed or the market price has fallen by the aforementioned percentage.

The valuation adjustment for impairment of these financial assets is the difference between their cost or amortized cost less any impairment losses recognized previously in profit or loss and the fair value at the time of measurement.

If there is objective evidence of impairment, the accumulated losses previously recognized in equity as a reduction in fair value are recognized in profit or loss.

Fair value gains in subsequent years are credited to profit or loss against the valuation adjustment recognized in prior years. This does not apply to fair value gains on equity instruments with changes through equity.

4.6.3 Financial assets at fair value through profit or loss

This category includes equity instruments that are not held for trading and that may not be measured at cost over which an irrevocable choice was made at the time of initial recognition to present subsequent fair value changes directly in equity.

This category also includes financial assets designated irrevocably at the time of initial recognition as being measured at fair value through profit or loss that would otherwise have been included in another category, in order to eliminate or significantly reduce measurement inconsistency or accounting asymmetry that would otherwise arise from measuring of assets or liabilities on another basis.

Initial measurement

Financial assets in this category are measured initially at fair value, which, unless there is evidence to the contrary, is the transaction price, i.e. the fair value of the consideration given. Directly attributable transaction costs are recognized in profit or loss.

Subsequent re-measurement

After initial recognition, the financial assets in this category are measured at fair value through profit or loss.

4.6.4 Financial assets at cost

This measurement category includes:

a) Investments in the equity of group, multi-group and associated undertakings.

b) Other investments in equity instruments whose fair value cannot be determined by reference to a quoted price in an active market for an identical instrument or cannot be reliably estimated, and derivatives whose underlyings are such investments.

c) Any other financial asset that initially qualifies for measurement at fair value through profit or loss, when it is not possible to estimate fair value reliably.

Initial measurement

Investments in this category are measured initially at cost, which is equivalent to the fair value of the consideration provided plus directly attributable transaction costs; the latter are not included in the cost of investments in group undertakings.

Nevertheless, where the investment preceded its classification as a group, multi-group or associated undertaking, the cost of the investment is taken to be the carrying amount that should have applied before it was so classified.

Initial measurement includes the amount of any acquired pre-emptive subscription and similar rights.

Subsequent re-measurement

Equity instruments in this category are measured at cost less any accumulated impairment losses.

When such assets must be measured due to derecognition or other reasons, the weighted average cost by homogeneous groups approach is used, such groups comprising securities that have the same rights.

In the case of the sale of pre-emptive subscription and similar rights or the segregation of such rights for exercise, the cost of the rights is netted off the carrying amount of the respective assets.

Impairment

At least at year-end, the necessary value adjustments are made if there is objective evidence that the carrying amount of an investment will not be recoverable. The amount of the valuation adjustment is the difference between the carrying amount and the recoverable amount, the latter being understood as the higher of fair value less selling costs and the present value of the future cash flows arising from the investment, which, in the case of equity instruments, is calculated either by estimating those expected to be received as a result of the distribution of dividends by the investee and the disposal or derecognition of the investment in the investee, or by estimating the share in the future cash flows expected to be generated by the investee both from its ordinary activities and from its disposal or derecognition.

Except where there is better evidence of the recoverable value of investments in equity instruments, impairment of this class of investments is estimated as a function of the investee's equity and any unrealized capital gains existing at the measurement date, net of the tax effect. Where the investee has, in turn, invested in another company, this value will measured taking account of the equity reported in the consolidated financial statements produced in accordance with the standards of the Commercial Code and its secondary legislation.

Impairments and any reversals of impairment are recognized as an expense or revenue, respectively, in profit or loss. Reversal of impairment is capped at the carrying amount of the investment that would have been recognized at the date of reversal if no impairment had been recognized.

However, if the investment in the company was made before it was classified as a group, multi-group or associated undertaking, and value adjustments were recognized for that investment directly in equity before the investment was so classified, such impairment is maintained after such classification until the investment is disposed of or derecognized, at which point it is recognized in profit or loss, or until the following circumstances arise:

a) In the case of previous valuation adjustments representing an increase in value, the value adjustments are recognized in the equity item where the previous valuation adjustments are recognized, and up to the amount thereof, and any excess is taken to profit or loss. Impairment losses recognized directly in equity may not be reversed.

b) In the case of pre-existing valuation adjustments representing a loss in value, where the amount subsequently recoverable exceeds the investment's carrying amount, the latter is incremented up to the limit of the aforementioned impairment against the account where the pre-existing value adjustments were recognized; any new amount arising thereafter is recognized as a cost of investment. However, if there is objective evidence of impairment, the losses accumulated in equity are recognized in profit or loss.

Assets that are designated as hedged items are subject to the measurement requirements of hedge accounting.

4.7 Inventories

Inventories are measured at the lower of cost or net realizable value. Where the net realizable value of inventories is lower than cost, the appropriate valuation adjustments are recognized as an expense in profit or loss. If the circumstances leading to the valuation adjustment cease to exist, the adjustment is reversed and recognized as revenue in profit or loss.

The cost price is obtained as follows:

• Raw materials and other supplies: weighted average cost price.
• Finished and semi-finished products and products in process: weighted average cost of the raw and ancillary materials used, plus the applicable amount of direct labor and general manufacturing expenses valued at standard costs (based on normal production capacity). No adjustment to inventory is recognized if the difference between standard cost and actual cost is not material.

The net realizable value is the estimated sale price in the normal course of business less the estimated costs required for the sale and, in the case of raw materials and products in process, the estimated costs required to complete production.

4.8 Equity

Share capital is represented by ordinary shares.

The cost of issuing new shares or options is presented directly under equity as a reduction of reserves.

In the case of acquisition of own shares by the Company, the consideration paid, including any directly attributable incremental cost, is deducted from equity until the shares are canceled, re-issued or disposed of. If the shares are sold or re-issued, any amount received, net of any directly attributable incremental cost of the transaction, is recognized in equity.

4.9 Financial liabilities

4.9.1 Liabilities assets at amortized cost

This category generally includes trade accounts payable and non-trade accounts payable:

a) Trade accounts receivable: financial liabilities arising from the purchase of goods and services as part of the company's business operations where payment is deferred, and

b) Non-trade accounts payable: financial liabilities other than derivatives that are not commercial in origin but arise from loans or credit received by the company.

Participation loans that have the characteristics of an ordinary or common loan are also included in this category, without prejudice to the agreed interest rate (zero or below market).

Initial measurement

Financial liabilities in this category are measured initially at fair value, which is the transaction price, i.e. the fair value of the consideration received, adjusted for directly attributable transaction costs.

Nevertheless, trade accounts payable maturing at over one year which do not have a contractual interest rate, and capital calls by third parties whose amount is expected to be paid in the short term, are measured at their nominal value provided that the effect of not discounting the cash flows is not material.

Subsequent re-measurement

Financial liabilities in this category are measured at amortized cost. Accrued interest is recognized in profit or loss using the effective interest rate method.

Nevertheless, debts maturing in less than one year that are measured initially at nominal value continue to be valued at that amount. This category includes both trade and non-trade accounts payable. This debt is classified under current liabilities unless the Company has an unconditional right to defer the liability settlement for at least twelve months from the balance sheet date, in which case it is classified under non-current liabilities.

These debts are recognized initially at fair value adjusted for directly-allocable transaction costs, and are subsequently recognized at amortized cost in accordance with the effective interest rate method. The effective interest rate is the discount rate that matches the carrying amount of the instrument with the projected flow of future payments up to the liability's maturity.

Nevertheless, trade accounts payable maturing at over one year which do not have a contractual interest rate are measured, both initially and subsequently, at their nominal value provided that the effect of not discounting the cash flows is not material.

If existing debts are renegotiated, no material changes are considered to exist if the new lender is the same as the initial lender and the present value of the cash flows, including net fees, does not differ by more than 10% from the present value of the outstanding cash flows payable on the original liability calculated using the same method.

4.10 Subsidies received

Repayable subsidies are recognized as liabilities until the conditions rendering them non-repayable are met; non-repayable subsidies are recognized as revenues directly in equity and are recognized as revenues on a systematic, rational basis in line with the expenses arising from the subsidy. Non-repayable subsidies from shareholders are recognized directly in equity.

For these purposes, a subsidy is considered to be non-repayable when there is an individual agreement to grant the subsidy, all the conditions established for granting it have been fulfilled, and there are no reasonable doubts that it will be collected.

Monetary subsidies are recognized at the fair value of the amount granted and non-monetary subsidies at the fair value of the received asset, at the time of recognition in both cases.

Non-repayable subsidies related to the acquisition of intangible assets, property, plant and equipment and investment property are recognized in profit or loss in proportion to the depreciation/amortization of the related assets or when the asset is disposed of, impaired or derecognized.

Non-repayable subsidies related to specific expenses are recognized in profit or loss in the year in which the corresponding expenses accrue, and those granted to offset an operating deficit are recognized in the year in which they are granted, except where they are allocated to offset operating deficits in future years, in which case they are recognized in those years.

Additionally, implicit interest on zero-rate loans from the Ministry of Industry is recognized as a nonrefundable subsidy in equity. These subsidies are recognized as revenue for the year in proportion to the associated expenses.

4.11 Current and deferred taxes

The income tax expense (revenue) is the amount accruing under this heading in the year and comprises the expense (revenue) for current and deferred taxes.

The expense (revenue) for current and deferred taxes is recognized in profit or loss. Nevertheless, the tax effect of items that are recognized directly in equity is recognized in equity.

Current tax assets and liabilities are recognized for the amount expected to be paid to, or recovered from, the tax authorities, in accordance with the legislation enacted or substantively enacted at year-end.

Deferred taxes are measured, in accordance with the liability method, based on the temporary differences arising between the tax base of the assets and liabilities and their carrying amounts. However, deferred taxes arising from the initial recognition of an asset or liability in a transaction other than a business combination that does not affect the accounting result or the tax base at the time of recognition are not recognized. The deferred tax is determined by applying the tax regulations and rates enacted or substantively enacted on the balance sheet date and which are expected to apply when the corresponding deferred tax asset is realized or the deferred tax liability is settled.

Deferred tax liabilities are recognized insofar as it is probable that there will be future taxable income to offset temporary differences (Note 2.2).

At each accounting close, deferred tax assets are remeasured and impairment is recognized to the extent that there are doubts as to their recovery in the future. Also, at each accounting close, the deferred tax assets not recognized on the balance sheet are remeasured and are recognized to the extent that they are likely to be recovered against future taxable income.

As a result of the application of Spanish Act 27/2014, of 17 December, on Corporate Income Tax, certain deductions for research and development may be monetized with a 20% discount on the tax payable, subject to certain conditions. The Company recognizes this tax incentive for investment at the time that it is deemed to have been materialized, which normally coincides with the collection date.

Consolidated income tax

Pharma Mar, S.A. is the leading company of the group of companies for corporate income tax purposes with number 29/93.

The companies comprising the tax group in 2022 are: Genómica, S.A.U. en liquidación and Sylentis, S.A.U., with Pharma Mar, S.A. as leading company.

It is consolidated Group policy to recognize the tax expense at individual undertakings in accordance with the resolution of the ICAC (Spanish Accounting and Audit Institute) dated 9 February 2016.

4.12 Employee benefits

4.12.1 Share-based compensation

The company operates share-based incentive plans for employees. Those plans are subject to a lock-up period during which employees must continue to work for the Company.

The fair value of the services provided by the employees in exchange for the shares is recognized under personnel expenses as the services are provided, during the lock-up period, and a reserve for the incentive plans is recognized simultaneously in equity for the same amount.

The fair value of the services to be provided by those employees is determined with respect to the fair value of the shares granted. That amount is recognized in profit or loss during the lock-up period. The Company regularly reviews its assumptions and adjusts any deviation resulting from employee rotation.

4.12.2 Termination indemnities

Termination indemnities are paid to employees as a result of the Company's decision to terminate the employment contract before the normal retirement age or when the employee agrees to resign in exchange for those benefits.

The Company recognizes these benefits when it has demonstrably decided to terminate the employees in accordance with an irrevocable formal detailed plan or to provide termination indemnities as a result of an offer to encourage voluntary retirement. Benefits that are not to be paid in the twelve months following the balance sheet date are discounted to their present value.

4.13 Provisions and contingent liabilities

Provisions for environmental restoration, restructuring costs and litigation are recognized when the Company has a present obligation, either legal or implicit, as a result of past events, an outflow of funds is likely to be necessary in the future to settle the obligation, and the amount can be estimated reliably. Restructuring provisions include lease cancellation penalties and employee termination indemnities. No provisions are recognized for future operating losses.

Provisions are calculated at the present value of the disbursement expected to be needed to settle the obligation, using a pre-tax rate that reflects current market measurements of the time value of money and the specific risks attached to the obligation. Adjustments due to updating the provision are recognized as a financial expense as they accrue.

Provisions maturing at one year or less that do not have a material financial effect are not discounted.

When part of the disbursement required to settle the provision is expected to be paid by a third party, the reimbursement is recognized as a separate asset provided that its collection is practically assured.

Obligations arising as a result of past events whose materialization is conditional upon the occurrence or nonoccurrence of one or more future events outside the Company's control are treated as contingent liabilities. Those contingent liabilities are not recognized in the accounts but are disclosed in detail in the notes to financial statements.

4.14 Recognition of revenues

Revenues are recognized when control of the goods or services is transferred to the customer. At that time, revenue is recognized for the amount of the consideration expected to be received in exchange for the transfer of committed goods and services under the contracts with customers, as well as other revenue not arising from contracts with customers that constitute the Company's ordinary business. The amount to recognize is determined by deducting, from the amount of the consideration for the committed transfer of goods or services to customers or other revenues from the Company's ordinary activities, the amount of discounts, refunds, price reductions, incentives or rights granted to customers, as well as value added tax and other directly related taxes that must be charged to customers.

Where the price set in contracts with customers includes variable consideration, the best estimate of the variable consideration is included in the price to be recognized to the extent that it is very likely that there will not be a significant reversal of the amount of revenue recognized when the uncertainty associated with the variable consideration is subsequently resolved. The Company bases its estimates on historical information, taking into account the type of customer, the type of transaction and the specific terms of each agreement.

4.14.1 Revenue from the sale of products

The Company sells in the European Union by virtue either of the marketing approval received from the European Medicines Agency (EMA) for soft tissue sarcoma (since 2007) and relapsed platinum-sensitive ovarian cancer (since 2009), or of the Temporary Authorizations for Use (TAU) granted by some European Union countries such as France (Autorisation d'accés compassionel — AAC).

Sales are recognized when control of the products has been transferred, i.e., when the products are delivered to the end customer, who has full discretion over the channel and price for selling the products, and there are no unfulfilled obligations that might affect customer acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, the customer has accepted the products in accordance with the sale contract, and the acceptance period has ended or the Company has objective evidence that all acceptance criteria have been met.

Where the Company sells to subsidiaries, it recognizes the amount of sales at the time of product delivery to the subsidiary.

Where sales are made through distributors, two different situations may arise:

• sales to the distributor in Portugal: sales are recognized once the product is delivered to that distributor, since that is the point at which control over the goods is transferred.
• sales to distributors in the Nordic countries, Eastern Europe, Greece, Cyprus, Ireland and the United Kingdom, with which the Company has agreements for promotion and commercial distribution. In this model, the sale occurs once the product is shipped from the Company's warehouse in Spain to the distributors, since that is the point at which control over the goods is transferred. The commission collected by the aforementioned partners is recognized as a reduction in the amount of the sale when it occurs.

Distribution costs are recognized as period expenses.

4.14.2 Licensing, development and other similar agreements

Revenues under licensing and development agreements are recognized in accordance with the accrual of the identified performance obligations, which have been previously assigned a price in a process of analyzing the agreement, and of milestones attained.

In the normal course of its business, the Company has developed intellectual property on certain compounds and has signed licensing and development agreements with certain pharmaceutical companies. Under these agreements, third parties are granted licenses to use the products developed by the Company and/or are given access to products under development. The agreements under which these transfers, assignments or accesses are granted are generally complex and include multiple components in two distinct phases: development and marketing. The associated revenues must be matched with the costs and considerations to be paid by the Company.

The Company takes account of the following factors when analyzing licensing, development and marketing contracts:

• Identification of the performance obligations.
• Determination of the transaction price, taken as the value of the contract signed with the counterparty.
• Allocation of the transaction price to the various performance obligations.
• The estimate of when those obligations are considered to have been discharged and, therefore, when the consideration received is accrued and subsequently recognized.

This revenue is recognized at the point at which control of the asset is transferred to the client, which may be at a certain point in time (as in the sale of licenses for use), or over a period of time (as in the case of the transfer of services, or where what is being transferred is a right of access).

Revenues from licensing, development and similar agreements may arise during the compound's development phase:

• Upfront payments collected by PharmaMar, which are generally non-refundable.
• Milestone payments, which accrue when the compound to which the agreement refers (Yondelis, Aplidin or Zepzelca) attains development milestones, generally of a regulatory or commercial nature.

Or they may arise during the commercialization phase:

• Royalty payments,
• Revenues from the supply of products (raw materials),
• Milestone payments, which may refer to technical, regulatory or accumulated sales milestones.

As a general rule, upfront payments are not recognized as revenue in the year that the agreement is signed. They are recognized as revenue in the year that they are collected provided that:

• they are not refundable,
• the Group does not assume material future obligations (except those for which separate consideration is provided for under arm's-length conditions), and
• substantially all of the risks and benefits inherent to the asset are transferred.

In the event that the conditions are not met, they are recognized as deferred revenues.

Deferred revenues are recognized in profit or loss over the term of the related commitments as a function of the degree of progress of the project, measured using an input model, as and when the obligations set out in the contract are met.

Additionally, any consideration linked to fulfillment of certain technical, regulatory or accumulated sales requirements (milestones) in the framework of cooperation agreements with third parties is recognized on the basis of the same rules as for upfront payments set out above.

The Company does not recognize revenues in excess of the amount to which it is entitled.

Receipts attributed to the marketing phase, i.e. royalties and revenues for the supply of raw materials, are recognized on an accrual basis once marketing commences.

Royalties are set on an arm's-length basis and supply contract prices are based on market manufacturing margins.

4.14.3 Royalties

Royalty revenue is recognized on the basis of the agreed percentage of sales at a given point in time by the counterparty to the agreement.

4.14.4 Interest revenues

Interest revenues on financial assets at amortized cost are recognized using the effective interest rate method. Where an account receivable is impaired, the Company writes the carrying amount down to the recoverable value, by discounting estimated future cash flows at the instrument's original effective interest rate, and carries the discount as a reduction in interest revenues. Interest revenues on loans that have suffered impairment are recognized using the effective interest rate method.

4.14.5 Dividends

Dividend revenues are recognized in profit or loss when the Company becomes entitled to collect them. Nevertheless, if the dividends paid are from profits obtained prior to the acquisition date, they are not recognized as revenues but, rather, are deducted from the carrying amount of the investment.

4.14.6 Provision of services

The Company provides advisory and support services to Group undertakings.

4.15 Foreign currency transactions

4.15.1 Functional and presentation currency

The financial statements are presented in euro, which is the Company's functional and presentation currency.

4.15.2 Transactions and balances

Foreign currency transactions are translated to the functional currency at the exchange rates ruling on the transaction date. Exchange gains or losses arising on the settlement of those transactions and on translating monetary assets and liabilities denominated in foreign currency at the year-end exchange rate are recognized in profit or loss, except when deferred in equity as a qualifying cash flow hedge or qualifying net investment hedge.

Fair value changes in available-for-sale financial assets denominated in foreign currency are analyzed as the exchange differences resulting from changes in the amortized cost of the instrument and other changes in the security's carrying amount. Exchange differences are recognized in profit or loss and other changes to the carrying amount are recognized in equity.

Exchange differences on non-monetary items, such as equity instruments at fair value through profit or loss, are presented as part of that gain or loss in fair value. Exchange differences on non-monetary items, such as available-for-sale equity instruments, are recognized in equity.

4.16 Related-party transactions

Related-party transactions are generally recognized initially at fair value. If the agreed price differs from fair value, the difference is recognized on the basis of the economic reality of the transaction. Subsequent measurements are performed in accordance with the applicable standards.

Nevertheless, in mergers, demergers and contributions of business lines, the items comprising the acquired business line are recognized for the amount that would correspond to them, upon completion of the transaction, in the consolidated financial statements of the group or subgroup.

When the controlling company of the group or subgroup, and its subsidiary, are not involved, the financial statements to be considered for this purpose will be those of the largest group or subgroup into which the equity items are integrated whose controlling company is Spanish.

In these cases, any difference disclosed between the net value of the acquiree's assets and liabilities, adjusted for the balance of grants, donations and bequests received, impairments, and any amount of capital and issue premium issued by the acquiring company, is recognized in reserves.

4.17 Business combinations

Mergers, demergers and non-monetary contributions of a business between group undertakings are recognized in accordance with the rules for related-party transactions (Note 4.16).

Mergers and demergers other than the above and business combinations arising from the acquisition of all the equity of a company or of a part comprising one or more businesses are recognized in accordance with the acquisition method.

4.18 Non-recourse factoring

The Company derecognizes financial assets when it assigns/sells the rights to the cash flows of the financial asset and has transferred the risks and rewards inherent to ownership, such as factoring of trade accounts receivable in which the Company does not retain any credit or default risk (Note 14.3).

5. RISK POLICY AND MANAGEMENT

5.1 Financial risk factors

The Company's activities are subject to a number of financial risks: market risk (including exchange rate risk, interest rate risk and price risk), credit risk, and liquidity risk. The Company's overall risk management program focuses on the uncertainty of the financial markets and tries to minimize the potential adverse effects on the Company's returns. The finance department is responsible for risk management in accordance with the guidelines provided by the Board of Directors. That department identifies, assesses and hedges financial risks. The Board establishes guidelines for overall risk management and for specific areas such as interest rate risk, liquidity risk, the use of derivatives and non-derivatives, and investment of surplus liquidity.

5.1.1 Market risk

5.1.1.1 Price risk

The Company's long-term financial assets are securities of biopharmaceutical companies. The volume of investment in this type of asset is not material in the context of the Company's operations; accordingly, the related price risk is very low.

The Company's policy with regard to financial assets is to place cash in low-risk highly-liquid financial assets in order to ensure the availability of funds. For this reason, those financial assets are almost entirely government bonds and deposits at banks with good credit quality, with the result that their value does not fluctuate significantly.

5.1.1.2 Exchange rate risk

The Company operates internationally and, therefore, is exposed to exchange rate risk on transactions in foreign currencies, particularly the US dollar. Exchange rate risks arise from future commercial transactions, recognized assets and liabilities, and net investments in foreign operations.

Transactions denominated in currencies other than the euro, basically in US dollars, Japanese yen, Swiss francs and pounds sterling, amounted to €99,770 thousand in the year ended 31 December 2022 (€126,670 thousand in 2021) (Note 23.3). The main transactions in foreign currency in 2022 related to revenue (both royalties and commercial milestone payments) under the licensing agreements with Jazz Pharmaceuticals and with Janssen Products LP.

If, as of 31 December 2022, the euro had appreciated by 5% with respect to the US dollar while all other variables remained constant, income after taxes for the year would have been lower by €2,987 thousand (€3,523 thousand in 2021), mainly as a result of translation into euro of customer and other accounts receivable and debt denominated in US dollars.

If, as of 31 December 2022, the euro had depreciated by 5% with respect to the US dollar while all other variables remained constant, income after taxes for the year would have been higher by €3,136 thousand (€3,699 thousand in 2021).

Management does not consider it necessary to establish any policy for hedging the foreign currency risk vs. the functional currency.

5.1.1.3 Interest rate risk on cash flows and fair values

The Company's interest rate risk arises from remunerated financial assets that can be converted into cash. Remunerated financial assets consist basically of government bonds and deposits remunerated at floating interest rates referenced to Euribor and Libor.

The Company's interest rate risk arises from interest-bearing debt. Floating-rate debt exposes the Company to interest rate risk. Fixed-rate debt exposes the Company to interest rate risk on the fair value. A sizable part of the debt is in the form of repayable advances from official bodies that are not subject to interest rate risk.

The Company analyses its exposure to interest rate risk dynamically. It simulates a number of scenarios considering refinancing, roll-overs, alternative financing and hedging. Based on those scenarios, the Company calculates the effect on income of a given variation in interest rates. In a given simulation, it assumes the same change in interest rates in all currencies. The scenarios are applied only to the largest interest-bearing liability positions.

5.1.2 Credit risk

Credit risk is managed in groups. Credit risk arises from cash and cash equivalents placed with banks and financial institutions, and from customer balances.

The banks and financial institutions with which the Company works generally have independent ratings. Where customers have an independent rating, that rating is used; otherwise, the Company assesses the risk based on the customer's financial position, past experience and other factors. Where there is no doubt about a customer's solvency, no credit limits are set.

Where the Company acquires financial assets other than government bonds, it must apply the following policies:

• Acquisition of fixed-income funds that invest in public- or private-sector debt (government bonds, treasury bills and commercial paper), generally secure, which pay periodic coupons.

• Acquisition of money market funds comprising fixed-income securities where security is prioritized in exchange for a slightly lower yield than other investments.

The credit quality of the financial assets and of customers with which the Company had balances as of 31 December 2022 and 2021 is set out in Note 10.3.

5.1.3 Liquidity risk

Prudent liquidity risk management entails having sufficient cash and marketable securities, financing via sufficient committed credit facilities, and the capacity to settle market positions.

The Company's goal is to maintain flexible financing by having sufficient funds in financial assets to settle its obligations.

The net cash position, defined as cash and cash equivalents and current financial assets (€176,118 thousand in 2022, €191,564 thousand in 2021) less short-term borrowings (€8,788 thousand in 2022, €11,404 thousand in 2021), was positive in the amount of €167,330 thousand at the end of 2022 (€180,160 thousand in 2021).

Long-term interest-bearing debt as of 31 December 2022 amounted to €25,032 thousand (€27,645 thousand in 2021), of which €8,083 thousand (€10,527 thousand in 2021) was in the form of research and development loans from official bodies which are repayable over 10 years, with a three-year grace period, at zero or below-market interest rates.

Operating cash flow amounted to €53,050 thousand in 2022 and €38,189 thousand in 2021. Operating cash flow in 2022 was due mainly to the receipt of commercial milestone payments under the licensing agreements with Jazz Pharmaceuticals (€22,323 thousand) and Janssen (€9,471 thousand) and royalties from sales by our partners in their respective territories.

The following should be noted in connection with PharmaMar's liquidity position as of 2022 year-end:

• PharmaMar ended 2022 with cash and cash equivalents plus current financial assets amounting to €176,118 thousand.
• PharmaMar had unused credit lines in the amount €10,892 thousand as of 31 December 2022.
• Working capital is positive in the amount of €172,478 thousand.

PharmaMar regularly monitors liquidity projections on the basis of expected cash flows, and Management considers that it has sufficient cash, tradeable securities and credit lines available to meet its liquidity needs and payment commitments within the time horizon that is considered to be necessary.

At least once per year, the Company's finance department presents the directors with a business plan for the next five years, together with cash flow estimates for the following year, including a range of scenarios for the source and application of funds, based on progress with ongoing research.

The directors estimate that R&D expenditure in 2023 will be higher than in 2022 but that the other operating expenses will not increase significantly.

Consequently, at the time of authorizing these financial statements, the directors of PharmaMar consider that PharmaMar has ample liquidity to cover its research and development projects and honor its future payment obligations.

The table below shows an analysis of the Company's financial liabilities grouped by maturity based on the period remaining between the balance sheet date and the contractual maturity date, excluding the corresponding interest. The amounts in the table are the contractual cash flows, which have not been discounted. Since these amounts are not discounted, they are not comparable to the amounts recognized as interest-bearing debt on the balance sheet.

31/12/22						2028 and	Total
(thousand euro)	2023	2024	2025	2026	2027	thereafter	Non current	TOTAL
Bonds and other marketable securities	405	-	-	-	17,000	-	17,000	17,405
Bank loans	4,325	231	-	-	-	-	231	4,556
Debt to official authorities	3,435	2,590	1,825	1,559	1,290	1,757	9,021	12,456
Bank debt and debt to official authorities	7,760	2,821	1,825	1,559	1,290	1,757	9,252	17,012
Other financial liabilities	1,008	-	-	-	-	-	-	1,008
Current accounts payable to group and associated undertakings	6,165	-	-	-	-	-	-	6,165
Suppliers	707	-	-	-	-	-	-	707
Suppliers - group and associated undertakings	3,256	-	-	-	-	-	-	3,256
Sundry creditors	24,492	-	-	-	-	-	-	24,492
Personnel (compensation payable)	6,499	-	-	-	-	-	-	6,499
Balances with public authorities	1,094	-	-	-	-	-	-	1,094
Customer advances	1,446	-	-	-	-	-	-	1,446
TOTAL	52,832	2,821	1,825	1,559	18,290	1,757	26,252	79,084

31/12/21						2027 and	Total
(thousand euro)	2022	2023	2024	2025	2026	thereafter	Non-current	TOTAL
Bonds and other marketable securities	405	-	-	-	-	17,000	17,000	17,405
Bank loans	6,725	225	231	-	-	-	456	7,181
Debt to official authorities	3,885	3,316	2,487	1,755	1,479	2,657	11,694	15,579
Bank debt and debt to official authorities	10,610	3,541	2,718	1,755	1,479	2,657	12,150	22,760
Other financial liabilities	845	-	-	-	-	-	-	845
Current accounts payable to group and associated undertakings	4,093	-	-	-	-	-	-	4,093
Suppliers	379	-	-	-	-	-	-	379
Suppliers - group and associated undertakings	2,212	-	-	-	-	-	-	2,212
Sundry creditors	23,933	-	-	-	-	-	-	23,933
Personnel (compensation payable)	5,872	-	-	-	-	-	-	5,872
Balances with public authorities	1,044	-	-	-	-	-	-	1,044
Customer advances	1,225	-	-	-	-	-	-	1,225
TOTAL	50,618	3,541	2,718	1,755	1,479	19,657	29,150	79,768

5.2 Fair value estimates

The fair value of financial instruments that are traded in an active market (e.g. securities held for trading and available for sale) is based on the market price on the balance sheet date. The market price used for financial assets is the current bid price.

The fair value of financial instruments that are not traded in an active market is determined by using measurement techniques. The Company uses a variety of methods and makes assumptions based on the market conditions at each balance sheet date. Listed market prices or agent quotations are used for longterm debt. Other techniques, such as discounting estimated cash flows, are used to determine the fair value of the other financial instruments. The fair value of forward exchange rate contracts is determined by using the exchange rates quoted in the market on the balance sheet date.

The carrying amount of trade accounts payable and receivable is assumed to approximate to their fair value. The fair value for the purposes of presenting the financial information is estimated by discounting the contractual future cash flow at the current market interest rate available to the Company for similar financial instruments.

The fair value of repayable advances that are interest-free or at a subsidized interest rate is determined by applying, to the repayments to be made, the yield curve in force on the date of receipt of the advance plus the spread normally paid by the Company on loans.

The fair value of floating-rate loans is estimated to coincide with the carrying amount.

6. INTANGIBLE ASSETS

The breakdown and changes in the "Intangible Assets" account as of 31 December 2022 and 2021 are as follows:

2022
(thousand euro)	Development	Computer software	TOTAL
Cost
Balance as of 31/12/21	264,332	4,621	268,953
Recognitions	-	488	488
Derecognitions (Notes 23.7 & 6.1)	-	(834)	(834)
Balance as of 31/12/22	264,332	4,275	268,607
Impairment
Balance as of 31/12/21 (Notes 23.7 & 6.1)	(356)	-	(356)
Balance as of 31/12/22	(356)	-	(356)
Accumulated amortization
Balance as of 31/12/21	(261,870)	(3,921)	(265,791)
Provisions	(702)	(264)	(966)
Derecognitions	-	834	834
Balance as of 31/12/22	(262,572)	(3,351)	(265,923)
Net carrying amount 31/12/22	1,404	924	2,328

2021

(thousand euro)	Development	Computer software	TOTAL
Cost
Balance as of 31/12/20	291,004	4,745	295,749
Recognitions	-	248	248
Derecognitions (Notes 23.7 & 6.1)	(26,672)	(334)	(27,006)
Transfers	-	(38)	(38)
Balance as of 31/12/21	264,332	4,621	268,953
Impairment
Balance as of 31/12/20 (Notes 22.7 & 6.1)	(27,028)	-	(27,028)
Transfer to derecognition due to impairment (Note 23.7)	26,672	-	26,672
Balance as of 31/12/21	(356)	-	(356)
Accumulated amortization
Balance as of 31/12/20	(261,169)	(3,933)	(265,102)
Provisions	(701)	(298)	(999)
Derecognitions	-	310	310
Balance as of 31/12/21	(261,870)	(3,921)	(265,791)
Net carrying amount 31/12/21	2,106	700	2,806

6.1 Development

The Company continued to develop the molecules in its pipeline during 2022.

Recoverability analysis

"Development" expenses are measured at cost, corrected at year-end if there is objective evidence that the investment will not be recovered. The carrying amount must be corrected to the recoverable amount, i.e. the fair value less selling costs or the present value of the future cash flows arising from the investment, whichever is higher.

The basis for the impairment test applied to capitalized "Development" expenses on the balance sheet varies depending on the available information, and the best evidence for each project is selected on the basis of its current phase of development.

Yondelis

As of 31 December 2022, there are no capitalized expenses relating to Yondelis as they have been fully amortized.

Zepzelca (lurbinectedin)

As of 31 December 2022, capitalized development expenses, which amount to €1,404 thousand, correspond to the amounts PharmaMar allocated to preparing the registration dossier for the Phase II basket clinical trial with lurbinectedin in small cell lung cancer, which was submitted to the US FDA in December 2019 to request approval to market that compound. In June 2020, a positive response was received from the FDA under the accelerated approval procedure, with the result that Zepzelca began to be marketed in the United States by our licensing partner for that territory, Jazz Pharmaceuticals. As a result of that agreement, up to 31 December 2022, PharmaMar had received USD 325,000 thousand in the form of upfront and milestone payments under the licensing agreement (€292,837 thousand) and sales royalties collected in 2022 in the amount of €46,881 thousand (€37,954 thousand in 2021).

Based on the foregoing information and the fact that the product will continue to generate revenues in the future, the directors do not consider there is any sign of impairment.

6.2 Capitalized financial expenses

There were no capitalized financial expenses as of 2022 and 2021 year-end.

6.3 Intangible assets located in other countries

There are no intangible assets located in other countries

6.4 Intangible assets acquired from group and associated undertakings

No assets were acquired from group or associated undertakings in 2022 and 2021.

6.5 Fully amortized assets

The assets that were fully amortized as of 31 December 2022 and 2021 are as follows:

FULLY AMORTIZED INTANGIBLE ASSETS
(thousand euro)	31/12/2022	31/12/2021
Development (Yondelis)	239,596	239,596
Computer software	2,748	3,265
TOTAL	242,344	242,861

6.6 Derecognitions

The amount of derecognitions in 2022 (€834 thousand) relates to Microsoft licenses that expired and were replaced with new licenses.

Derecognitions in 2021, amounting to €26,672 thousand, relate to the provision for impairment recognized in 2018 in relation to PM184, a compound under development. In 2021, after analyzing the latest results, the Company decided to discontinue the development of this molecule, and derecognized the previously impaired balance.

6.7 Assets designated as collateral and subject to ownership restrictions

As of 31 December 2022 and 2021, there were no intangible assets subject to ownership restrictions or pledged as collateral for liabilities.

6.8 Subsidies received to finance research and development

As of 31 December 2022, the Company had €968 thousand (€1,168 thousand in 2021) under "Official capital subsidies" to finance research and development activities. €211 thousand of that balance (€1,042 thousand in 2021) relate to the subsidy component that is calculated to exist in repayable loans obtained at zero or below-market interest rates from official authorities to finance research and development activities, as compared with finance obtained at market rates. (Notes 5.1.1 & 19).

7. PROPERTY, PLANT AND EQUIPMENT

The detail and changes in the Property, Plant and Equipment account as of 31 December 2022 and 2021 are as follows:

(thousand euro)	Land and structures	Installations	Construction in progress and advances	TOTAL
Cost
Balance as of 31/12/21	22,588	35,512	3,586	61,686
Recognitions	4,450	1,282	1,929	7,661
Transfers	2,004	2,020	(4,024)	-
Derecognitions	-	(176)	-	(176)
Balance as of 31/12/22	29,042	38,638	1,491	69,171
Impairment
Balance as of 31/12/21	(1,308)	-	-	(1,308)
Impairment (Note 23.7)	60	-	-	60
Balance as of 31/12/22	(1,248)	-	-	(1,248)
Accumulated amortization
Balance as of 31/12/21	(9,413)	(27,330)	-	(36,743)
Provisions	(588)	(1,446)	-	(2,034)
Other transfers	-	-	-	-
Derecognitions	-	170	-	170
Balance as of 31/12/22	(10,001)	(28,606)	-	(38,607)
Net carrying amount 31/12/22	17,793	10,032	1,491	29,316

2021

			Construction in progress and
(thousand euro)	Land and structures	Installations	advances	TOTAL
Cost
Balance as of 31/12/20	21,988	33,321	754	56,063
Recognitions	-	1,312	5,088	6,400
Transfers	600	1,536	(2,125)	11
Derecognitions	-	(657)	(131)	(788)
Balance as of 31/12/21	22,588	35,512	3,586	61,686
Impairment
Balance as of 31/12/20	(1,491)	-	-	(1,491)
Reversal of impairment (Note 23.7)	183	-	-	183
Balance as of 31/12/21	(1,308)	-	-	(1,308)
Accumulated amortization
Balance as of 31/12/20	(8,895)	(26,834)	-	(35,729)
Provisions	(518)	(1,163)	-	(1,681)
Other transfers	-	(29)	-	(29)
Derecognitions	-	696	-	696
Balance as of 31/12/21	(9,413)	(27,330)	-	(36,743)
Net carrying amount 31/12/21	11,867	8,182	3,586	23,635

As of 31 December 2022, the net carrying amount of land and structures was €7,113 thousand and €10,679 thousand, respectively (€5,392 thousand and €6,479 thousand, respectively, in 2021).

The most significant recognition in 2022 relates to the acquisition of a 7,000 square meter industrial building at Calle Progreso 3, Getafe (Madrid) on a 10,580 square meter plot. That building is recognized at €4,450 thousand, of which €1,662 thousand relates to "Land" and €2,788 thousand to "Structures".

Other recognitions in 2022 and 2021 relate mainly to the 1,093 square meter expansion of the offices at PharmaMar's facilities, the warehouse expansion, and the laboratory equipment upgrade.

7.1 Partial reversal of impairment

In 2022, the Company reversed €60 thousand of impairment on a plot of land in Colmenar Viejo based on an external appraisal (€183 thousand in 2021).

7.2 Assets acquired from Group and associated undertakings

No fixed assets were acquired from Group or associated undertakings in 2022 and 2021.

7.3 Fully depreciated assets

As of 31 December 2022, the Company was using assets with a carrying amount of €23,051 thousand which had been fully depreciated (€22,784 thousand as of 31 December 2021).

7.4 Property, plant and equipment pledged as collateral

As of 31 December 2022 and 2021, none of the Company's property, plant and equipment was encumbered.

7.5 Assets acquired under finance leases

There were no finance leases outstanding as of the end of 2022 and 2021.

7.6 Subsidies received

No fixed assets financed by subsidies from public authorities were acquired in 2022 and 2021.

7.7 Insurance

The Company has arranged insurance policies to cover the risks to which its property, plant and equipment are subject. The cover of these policies is deemed to be sufficient.

7.8 Assets located in other countries

There is no property, plant and equipment located outside Spanish territory.

8. INVESTMENT PROPERTY

As of 31 December 2022, the Company had land which was held for appreciation and rental income as "Investment property" for a total net amount of €5,295 thousand (€845 thousand in 2021).

It is a plot of land located at Avda. de la Industria no. 52, in Polígono Industrial de Tres Cantos (Madrid), which is under a 25-year lease that may not be terminated in the first 10 years.

Revenues under this heading amounted to €64 thousand in 2022 (€62 thousand in 2021).

9. OPERATING LEASES

The Company has equipment leases (vehicles, computers and software) and operating leases (laboratories, offices, cold stores, document archives and material stores). The equipment leases can be canceled upon payment of the established penalty and the operating leases can be canceled subject to advance notice.

The minimum total future payments for non-cancelable operating leases are as follows:

OPERATING LEASE COMMITMENTS
(thousand euro)	31/12/2022	31/12/2021
Less than 1 year	1,945	1,866
1 to 5 years	1,622	1,064
TOTAL	3,567	2,930

The expense recognized in profit or loss amounted to €1,990 thousand in 2022 (€1,850 thousand in 2021).

10. ANALYSIS OF FINANCIAL INSTRUMENTS

10.1 Analysis by category

The carrying amount of each category of financial instrument established in the accounting and measurement rules for "Financial Instruments", except for investments in the equity of group, multi-group and associated undertakings (Note 11) and assets and liabilities with public authorities (Note 24), is as follows:

10.1.1 Current and non-current financial assets and liabilities

2022 (thousand euro)	Financial assets at amortized cost	Financial assets at fair value through equity	Financial assets at fair value through profit or loss	Financial assets at cost	TOTAL
Non-current financial assets
Financial assets – Group undertakings (Note 14.2)	5,234	-	-	-	5,234
Non-current financial assets (Notes 12 & 14)	-	335	-	6	341
Other financial assets (Notes 14.1 & 15)	45,355	-	3,606	-	48,961
Current financial assets
Customer and other accounts receivable (Note 14.3)	25,420	-	-	-	25,420
Customer and other accounts receivable - Group and associated undertakings (Notes 14 & 30)	2,489	-	-	-	2,489
Financial assets – Group undertakings (Notes 14 and 30)	56	-	-	-	56
Current financial assets (Note 15)	32,341	-	-	-	32,341
Other financial assets (Note 14)	6,179	-	-	-	6,179
	117,074	335	3,606	6	121,022

	Financial liabilities at amortized cost	TOTAL
Non-current financial liabilities
Bonds and other marketable securities (Note 20.1)	16,710	16,710
Bank loans (Note 20.2)	231	231
Other financial liabilities (Note 20.3)	8,092	8,092
Current financial liabilities
Bonds and other marketable securities (Note 20.1)	405	405
Bank loans (Notes 20.2 & 20.3)	7,375	7,375
Other financial liabilities	1,008	1,008
Current accounts payable – Group and associated undertakings (Notes 20 & 30) Supplier accounts payable - Group and associated undertakings	6,165	6,165
(Notes 20 & 30)	3,256	3,256
Suppliers	707	707
Sundry creditors	24,492	24,492
Personnel (compensation payable)	6,499	6,499
Customer advances	1,446	1,446
	76,386	76,386

2021 (thousand euro)	Financial assets at amortized cost	Financial assets at fair value through equity	Financial assets at cost	TOTAL
Non-current financial assets
Financial assets – Group undertakings (Note 14.2)	21,378	-	-	21,378
Non-current financial assets (Notes 12 & 14)	-	335	6	341
Other financial assets (Notes 14.1 & 15)	10,154	-	-	10,154
Current financial assets
Customer and other accounts receivable (Note 14.3)	44,166	-	-	44,166
Customer and other accounts receivable - Group and associated undertakings (Notes 14 & 30)	4,296	-	-	4,296
Financial assets – Group undertakings (Notes 14 and 30)	97	-	-	97
Current financial assets (Note 15)	88,030	-	-	88,030
Other financial assets (Note 14)	4,058	-	-	4,058
	172,179	335	6	172,520

	Financial liabilities at amortized cost	TOTAL
Non-current financial liabilities
Bonds and other marketable securities (Note 20.1)	16,653	16,653
Bank loans (Note 20.2)	456	456
Other financial liabilities (Note 20.3)	10,536	10,536
Current financial liabilities
Bonds and other marketable securities (Note 20.1)	405	405
Bank loans (Notes 20.2 & 20.3)	10,154	10,154
Other financial liabilities	845	845
Current accounts payable – Group and associated undertakings (Notes 20 & 30)	4,093	4,093
Supplier accounts payable - Group and associated undertakings (Notes 20 & 30)	2,212	2,212
Suppliers	379	379
Sundry creditors	23,933	23,933
Personnel (compensation payable)	5,872	5,872
Customer advances	1,225	1,225
	76,763	76,763

10.2 Analysis by maturity

The amounts of financial instruments with a fixed or determinable maturity, by year of maturity, are as follows:

FINANCIAL ASSETS / LIABILITIES
BY MATURITY						Subsequent	Total non-
(thousand euro) 2022	2023	2024	2025	2026	2027	years	Current	TOTAL
FINANCIAL ASSETS AT FAIR VALUE THROUGH EQUITY	-	-	-	-	-	335	335	335
Equity instruments (Note 12)	-	-	-	-	-	335	335	335
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS	-	-	-	-	-	3,606	3,606	3,606
Other financial assets	-	-	-	-	-	3,606	3,606	3,606
FINANCIAL ASSETS AT COST	-	-	-	-	-	6	6	6
Loans to third parties	-	-	-	-	-	6	6	6
FINANCIAL ASSETS AT AMORTIZED COST	66,486	38,966	3,097	1,631	-	6,895	50,589	117,075
Financial assets – Group undertakings (Notes 14.2 & 29)	56	-	-	-	-	5,234	5,234	5,290
Other financial assets (Note 14.1)	-	159	-	-	-	-	159	159
Sundry debtors	197	-	-	-	-	-	-	197
Personnel	113	-	-	-	-	-	-	113
Accruals	5,870	-	-	-	-	-	-	5,870
Customer receivables for sales and services (Note 14.3)	25,420	-	-	-	-	-	-	25,420
Customer receivables - Group and associated undertakings (Notes 14.4 & 29)	2,489	-	-	-	-	-	-	2,489
Other financial assets (Note 15)	-	2,807	3,097	1,631		1,661	9,196	9,196
Short-term deposits (Note 15)	32,341	36,000	-	-	-	-	36,000	68,341
TOTAL	66,486	38,966	3,097	1,631	-	10,842	54,536	121,022
LIABILILITIES AT AMORTIZED COST Bonds and other marketable securities (Note 20.1)	405	-			16,710		16,710	17,115
			-	-		-
Bank loans and credit lines (Note 20.2)	4,324	231	-	-	-	-	231	4,555
Debt to official authorities (Note 20.3)	3,051	2,275	1,604	1,400	1,184	1,629	8,092	11,143
Bank debt and debt to official authorities	7,375	2,506	1,604	1,400	1,184	1,629	8,323	15,698
Current accounts payable – Group and associated undertakings (Notes 20 & 30)	6,165	-	-	-	-	-	-	6,165
Supplier accounts payable - Group and associated undertakings (Notes 20 & 30)	3,256	-	-	-	-	-	-	3,256
Suppliers	707	-	-	-	-	-	-	707
Sundry creditors	24,492	-	-	-	-	-	-	24,492
Personnel (compensation payable)	6,499	-	-	-	-	-	-	6,499
Customer advances	1,446	-	-	-	-	-	-	1,446
Other financial liabilities	1,008	-	-	-	-	-	-	1,008
TOTAL	51,353	2,506	1,604	1,400	17,894	1,629	25,033	76,386

FINANCIAL ASSETS / LIABILITIES
BY MATURITY						Subsequent	Total non-
(thousand euro) 2021	2022	2023	2024	2025	2026	years	Current	TOTAL
FINANCIAL ASSETS AT FAIR VALUE THROUGH EQUITY	-	-	-	-	-	335	335	335
Equity instruments (Note 12)	-	-	-	-	-	335	335	335
FINANCIAL ASSETS AT COST	-	-	-	-	-	6	6	6
Loans to third parties	-	-	-	-	-	6	6	6
FINANCIAL ASSETS AT AMORTIZED COST	140,647	10,154	-	-	-	21,378	31,532	172,179
Financial assets – Group undertakings (Notes 14.2 & 30)	97	-	-	-	-	21,378	21,378	21,474
Other financial assets (Note 14.1)	-	154	-	-	-	-	154	154
Sundry debtors	195	-	-	-	-	-	-	195
Personnel	113	-	-	-	-	-	-	113
Accruals	3,750	-	-	-	-	-	-	3,750
Customer receivables for sales and services (Note 14.3)	44,166	-	-	-	-	-	-	44,166
Customer receivables - Group and associated undertakings (Notes 14.4 & 30)	4,296	-	-	-	-	-	-	4,296
Other financial assets (Note 15)	-	10,000	-	-	-	-	10,000	10,000
Short-term deposits (Note 15)	88,030	-	-	-	-	-	-	88,030
TOTAL	140,647	10,154	-	-	-	21,719	31,873	172,520
LIABILILITIES AT AMORTIZED COST
Bonds and other marketable securities (Note 20.1)	405	-	-	-	-	16,653	16,653	17,058
Bank loans and credit lines (Note 20.2)	6,726	225	231	-	-	-	456	7,181
Debt to official authorities (Note 20.3)	3,428	2,918	2,219	1,565	1,347	2,487	10,536	13,964
Bank debt and debt to official authorities Current accounts payable – Group and associated undertakings (Notes	10,154	3,143	2,450	1,565	1,347	2,487	10,992	21,145
20 & 30)	4,093	-	-	-	-	-	-	4,093
Supplier accounts payable - Group and associated undertakings (Notes 20 & 30)	2,212	-	-	-	-	-	-	2,212
Suppliers	379	-	-	-	-	-	-	379
Sundry creditors	23,933	-	-	-	-	-	-	23,933
Personnel (compensation payable)	5,872	-	-	-	-	-	-	5,872
Customer advances	1,225	-	-	-	-	-	-	1,225
Other financial liabilities	845	-	-	-	-	-	-	845
TOTAL	49,118	3,143	2,450	1,565	1,347	19,140	27,645	76,763

The "Non-current financial assets - Group undertakings" account as of 31 December 2022 and 2021 contained the loans indicated in Note 14.2. Those loans were classified as non-current since they have no fixed maturity and the directors do not intend to repay them in the short term.

10.3 Credit quality of financial assets

The credit quality of financial assets that have not yet matured and have not suffered impairment can be assessed on the basis of credit ratings provided by external bodies or by the past history of default:

ACCOUNTS RECEIVABLE (thousand euro)	31/12/2022	31/12/2021
Customers without an external credit rating
New customers (under 6 months)	685	106
Pre-existing customers (over 6 months)	24,735	44,060
TOTAL CUSTOMER RECEIVABLES FOR SALES AND SERVICES	25,420	44,166
Moody's rating
A+	10	-
A1	992	-
A2	69,763	50,605
A3	41,042	83,198
Ba1	1,536	1,498
Baa1	-	10,104
Baa2	19,284	11,837
Baa3	18,416	14,038
Unrated	25,075	20,285
TOTAL CASH AND CASH EQUIVALENTS PLUS CURRENT FINANCIAL ASSETS	176,118	191,565
Baa1	-	10,000
Baa3	20,000	-
Unrated	28,802	-
TOTAL CASH AND CASH EQUIVALENTS PLUS NON-CURRENT FINANCIAL ASSETS	48,802	10,000

11. HOLDINGS IN GROUP UNDERTAKINGS

11.1 Description of Group undertakings: registered offices and line of business

The registered office and line of business of each of PharmaMar's direct and indirect investees as of 31 December 2022 are summarized below:

Company	Registered offices	Line of business
Genómica, S.A.U. en liquidación - Madrid (Spain)	Via de los Poblados, 1, Edif. B, Parq. Emp. Alvento, Madrid, Spain	Research, development and commercialization of biotechnology applications, diagnosis and services related to these activities.
Genómica, A.B. - (Sweden)	Medicon Village Scheelevage, 2-Lund Sweden	Research, development and commercialization of biotechnology applications, diagnosis and services related to these activities.
Genómica Trading Co. Ltd. (China)	No.401-421 (Wuhan Free Trade Area) 4/F, Office Building A, No.777, Guanggu 3 Road, Wuhan East Lake High-tech, Development Zone	Wholesale trade, import and export of Class III and Class I medical devices; R&D and sales of Class III IVD reagents; commission agency (excluding auctions) and supply of related support services.
Sylentis, S.A.U. - Madrid (Spain)	Pza. del Descubridor Diego de Ordás 3, Madrid, Spain	Research, development, production and sale of products with therapeutic activity based on reducing or silencing gene expression. The Company does not have any products on the market.
Pharma Mar, USA Inc. - NY (USA)	195 Montague St. 10th floor suite 1023. Brooklyn, NY 11201 USA	Marketing of pharmaceutical products.
PharmaMar, AG - Basel (Switzerland)	Aeschengraben 29, CH 4051 Basel (Switzerland)	Marketing of pharmaceutical products.
Pharma Mar, Sarl - Paris (France)	6 Rue de l'Est, 92100 Boulogne Billancourt, Paris, France	Marketing of pharmaceutical products.
Pharma Mar, GmbH - Berlin (Germany)	Uhlandstraße 14 - 10623 Berlin - Germany	Marketing of pharmaceutical products.
Pharma Mar, Srl - Milan (Italy)	Via Lombardia 2/A, Innov. Campus, Building B, Peschiera Borromeo, Milán, Italy	Marketing of pharmaceutical products.
Pharma Mar, Srl - Brussels (Belgium)	Rue de la Presse, 4 1000 Brussels, Belgium	Marketing of pharmaceutical products.
Pharma Mar Ges.m.b.H - Vienna (Austria)	Teinfaltstraße 9/7, 1010 Vienna, Austria	Marketing of pharmaceutical products.

11.2 PharmaMar stakes in Group undertakings

The detail of the holdings in group companies as of 31 December 2022 and 2021 is as follows:

		2022		2021
		ownership	Percentage of	Percentage of ownership
Name and domicile	Statutory auditor	Direct %	Indirect %	Direct %	Indirect %
Genómica, S.A.U. en liquidación- Madrid (Spain) (*)	KPMG	100.00%	-	100.00%	-
Genómica, A.B. - Sweden (**)	KPMG	-	100.00%	-	100.00%
Genómica Trading Co.Ltd. (China) (**)	-	-	100.00%	-	100.00%
Sylentis, S.A.U. - Madrid (Spain)	KPMG	100.00%	-	100.00%	-
Pharma Mar USA INC - NY (USA)	Walter & Shuffain	100.00%	-	100.00%	-
PharmaMar AG - Basel (Switzerland)	PwC	100.00%	-	100.00%	-
Pharma Mar Sarl - Paris (France)	PwC	100.00%	-	100.00%	-
Pharma Mar GmbH - Berlin (Germany)	-	100.00%	-	100.00%	-
Pharma Mar Srl - Milan (Italy)	PwC	100.00%	-	100.00%	-
Pharma Mar, Srl - Brussels (Belgium)	PwC	100.00%	-	100.00%	-
Pharma Mar Ges.m.b.H - Vienna (Austria) () In liquidation (*) Genómica A.B. and Genómica Ltd. are wholly-owned subsidiaries of Genómica, S.A.U. en	-	100.00%	-	100.00%	-

liquidación

The percentage of voting rights is proportional to the stake in capital.

Genomica, S.A.U. en liquidación is continuing its normal activity until the end of the first quarter of 2023 in order to fulfil commitments to customers.

The Company periodically receives economic and financial information from all its investees. In compliance with article 155 of the consolidated text of the Capital Companies Act, PharmaMar has presented the required notifications to the companies in which it has direct and/or indirect holdings of more than 10%.

11.3 Changes in holdings in Group undertakings: Capital increases, business combinations

The changes in the holdings in group companies in 2022 and 2021 are as follows:

Company	Cost	Recognition Balance as Provision due to capital Provision of 31/12/21 increase			Balance as of 31/12/22
Holdings in group undertakings
Genómica, S.A.U. en liquidación	20,860	(18,798)	2,062	3,058	(5,120)	-
Sylentis, S.A.U.	49,068	-	49,068	28,500	-	77,568
Pharma Mar, USA INC	5,010	(5,010)	-	-	-	-
PharmaMar, AG	107	(52)	55	-	-	55
Pharma Mar, Sarl	1,641	(38)	1,603	-	-	1,603
Pharma Mar, GmbH	500	(29)	471	-	-	471
Pharma Mar, Srl	500	-	500	-	-	500
Pharma Mar, Ltd	-	-	-	-	-	-
Pharma Mar, Srl (Belgium)	150	(43)	107	-	-	107
Pharma Mar Ges.m.b.H	100	-	100	-	-	100
Noscira, S.A.	-	-	-	-	-	-
	77,936	(23,970)	53,967	31,558	(5,120)	80,404

Company	Cost	Provision	Balance as of 31/12/20	Derecognition due to liquidation	Provision	Balance as of 31/12/21
Holdings in group undertakings
Genómica, S.A.U.	20,860	(18,798)	2,062	-	-	2,062
Sylentis, S.A.U.	49,068	-	49,068	-	-	49,068
Pharma Mar, USA INC	5,010	(5,010)	-	-	-	-
PharmaMar, AG	107	(52)	55	-	-	55
Pharma Mar, Sarl	1,641	(37)	1,604	-	-	1,604
Pharma Mar, GmbH	500	(29)	471	-	-	471
Pharma Mar, Srl	500	-	500	-	-	500
Pharma Mar, Ltd	70	(70)	-	(70)	70	-
Pharma Mar, Srl (Belgium)	150	(43)	107	-	-	107
Pharma Mar Ges.m.b.H	100	-	100	-	-	100
	78,006	(24,039)	53,967	(70)	70	53,967

In June 2022, Genómica, S.A.U. en liquidación increased capital by offsetting accounts payable to the Company in the amount of €3,058 thousand. The loan had been fully impaired; consequently, when the capital increase was performed, the provision for impairment of the loan was reclassified as impairment of the holding in the Group undertaking.

In September 2022, PharmaMar decided to discontinue the diagnostics business, which was conducted through its wholly-owned subsidiary Genómica, S.A.U. en liquidación. In view of the significant investment that would be necessary to grow this business segment in a context of falling prices and margins in the sector, after evaluating various alternatives, PharmaMar's Board of Directors decided to discontinue this business segment, which is not strategic for the group. As a result, the Board of Directors of PharmaMar resolved to initiate the procedures to dissolve and liquidate its subsidiary Genómica, S.A.U. en liquidación. As a result, the entire investment in Genómica S.A.U. en liquidación, amounting to €5,120 thousand, was written off. That company is continuing its normal activity until the end of the first quarter of 2023 in order to fulfil commitments to customers.

In December 2022, Sylentis, S.A.U. increased capital by offsetting accounts payable to the Company in the amount of €28,500 thousand.

In May 2021, Pharma Mar, Limited, a subsidiary in the United Kingdom, was definitively dissolved once all the legal formalities had been completed and it had been registered with the UK Companies House. The dissolution process had begun in 2019.

11.3.1 Disclosures on equity of the Group undertakings and their net carrying amount at PharmaMar. Valuation methods for the holdings in Group undertakings

The amounts of capital, reserves, period income and other information of interest as of 31 December 2022 and 2021, as stated in each company's separate financial statements, and the net carrying amount at which PharmaMar has recognized its holding in each subsidiary, are as follows:

				2022		Total
COMPANY	Capital	Reserves	Other items	Operating profit	2022 income	capital and reserves	Carrying amount at parent company
Genómica, S.A.U. en liquidación	787	120	5,515	(7,595)	(6,329)	93	-
Genómica, A.B. (**)	6	-	254	53	74	334	-
Genómica Trading Co. Ltd. (**)	195	-	(210)	(8)	(8)	(23)	-
Sylentis, S.A.U.	3,583	42,892	(11,846)	(4,538)	(3,763)	30,866	77,568
Pharma Mar, USA INC	5,010	(4,967)	-	20	11	54	-
Pharma Mar, Sarl	1,641	(260)	-	107	93	1,474	1,603
Pharma Mar, GmbH	25	1,048	-	288	228	1,300	471
PharmaMar, AG	107	2	-	4	3	112	55
Pharma Mar, Srl	500	1,921	-	295	117	2,538	500
Pharma Mar, Srl (Belgium)	150	18	-	56	42	210	107
Pharma Mar Ges.m.b.H	35	148	-	82	59	242	100
TOTAL	12,039	40,922	(6,287)	(11,236)	(9,473)	37,200	80,404

				2021
COMPANY	Capital	Reserves	Other items	Operating profit	2021 income	Total capital and reserves	Carrying amount at parent company
Genómica, S.A.U.	607	119	4,425	(2,442)	(1,788)	3,362	2,062
Genómica, A.B. (**)	6	-	280	(8)	(6)	280	-
Genómica Trading Co. Ltd. (**)	195	-	(168)	(41)	(43)	(16)	-
Sylentis, S.A.U.	2,443	17,891	(11,859)	(2,169)	(2,077)	6,397	49,068
Pharma Mar, USA INC	5,010	(4,977)	-	16	8	41	-
Pharma Mar, Sarl	1,641	(333)	-	80	73	1,381	1,604
Pharma Mar, GmbH	25	887	-	291	161	1,072	471
PharmaMar, AG	107	(6)	-	3	2	104	55
Pharma Mar, Srl	500	1,778	-	308	143	2,422	500
Pharma Mar, Srl (Belgium)	150	(9)	-	49	27	168	107
Pharma Mar Ges.m.b.H	35	141	-	8	7	183	100
TOTAL	10,718	15,491	(7,322)	(3,905)	(3,493)	15,394	53,967

(*) In liquidation

(**) Genómica A.B. and Genómica Trading Co. Ltd. are wholly-owned subsidiaries of Genómica, S.A.U. en liquidación

Under point 2.5 ("Investments in the equity of Group undertakings") of Accounting and Measurement Standard 9, "Financial Instruments", of Spain's New General Accounting Plan, these investments must be carried at cost, corrected at year-end if there is objective evidence that the investment is not recoverable. The carrying amount must be corrected to the recoverable amount, i.e. the fair value less selling costs or the present value of the future cash flows arising from the investment, whichever is higher.

The basis for the impairment test applied to investments in group undertakings varies depending on the available information and the best evidence for each investee.

In the case of other investees in the biopharmaceutical business whose research projects are at an early stage (e.g. Sylentis, S.A.U.), business projections do not provide the most reliable evidence of recoverable value. In this case, appraisals by independent experts have been used. The appraisals use a range of methods, each of which provides values subject to different degrees of probability, resulting in the following valuation ranges: low, medium and high. Finally, a weighted average of the results obtained from each appraisal method is calculated. The methods are as follows: i) Sum of the parts, using the rNPV method and discounted cash flows, in relation to each of the open projects; ii) Market comparables; iii) Recent transactions; and iv) Using the valuations obtained with the above methods, a possible exit price is calculated in three years' time.

Taking the lower range of the average of the valuations obtained, the Company would have to recognize a provision of €6,602 thousand for impairment of the investment. Conversely, at the high end, there would be a gain of €24,298 thousand. The average valuation exceeds the recognized cost of the investment and the loans granted to it (€82,802 thousand). Accordingly, management does not consider that the holding needs to be impaired.

12. FINANCIAL ASSETS AT FAIR VALUE THROUGH EQUITY

Holdings in companies

		Percentage of ownership 2022	Percentage of ownership 2021
Holding in the capital of	Line of business	Direct %	Direct %
Instituto BIOMAR	Pharmaceutical research	3.49%	3.49%
Pangaea Biotech SA	Consulting services	0.07%	0.10%
Johnson & Johnson	Manufacture of pharmaceuticals, consumer products, and medical devices and diagnostics	0.00001%	0.00001%

The value of those holdings is as follows:

(thousand euro)	31/12/2022	31/12/2021
Instituto BIOMAR	252	252
Pangaea Biotech SA	50	50
Johnson&Johnson	33	33
	335	335

Those holdings are as follows:

• Unlisted securities: Instituto Biomar y Pangaea Biotech, available-for-sale financial investments in biopharmaceutical companies. The balance of these securities as of 31 December 2022 and 2021 was €302 thousand.
• Listed securities: Johnson&Johnson. The available-for-sale financial assets consist of biopharmaceutical company shares that are listed on the US market. Their fair value matches their listed market price. The balance of this item as of 31 December 2022 and 2021 was €33 thousand.

No impairment losses were recognized in 2022 and 2021 on available-for-sale financial assets.

13. INVENTORIES

The Group classifies inventories as follows:

(thousand euro)	31/12/2022	31/12/2021
Raw materials and other supplies Semi-finished products and products in	1,744	174
process	24,966	9,048
Finished products	224	397
	26,934	9,619

The increase in the balance of inventories is the result of the need to advance production in preparation for launches in new territories, and of an increase in demand from licensees.

No financial expenses have been capitalized as the inventory production cycle does not exceed one year.

No material impairment losses were recognized for inventories in 2022 and 2021. No inventories have been committed as collateral for obligations or debt.

The Company has arranged an insurance policy to cover the risks to which the inventories are exposed. The cover of this policy is deemed to be sufficient.

14. FINANCIAL ASSETS AT AMORTIZED COST

Financial assets at amortized cost are classified as follows:

(thousand euro)	31/12/2022	31/12/2021
LONG-TERM FINANCIAL ASSETS AT AMORTIZED COST	5,399	21,538
Long-term deposits and guarantees provided (Note 14.1)	159	154
Loans to third parties	6	6
Loans to Group undertakings (Notes 14.2 & 30)	5,234	21,378
SHORT-TERM FINANCIAL ASSETS AT AMORTIZED COST	34,147	52,619
Customer receivables (Note 14.3)	25,420	44,166
Customer receivables - Group and associated undertakings (Notes 14.4 & 30)	2,489	4,296
Current investment – Group and associated undertakings (Notes 14.2 & 30)	56	97
Sundry debtors	197	195
Personnel	113	113
Accruals	5,870	3,750
Long-term deposits and guarantees provided	2	2
TOTAL	39,546	74,156

14.1 Deposits and sureties

Long-term deposits and guarantees as of 31 December 2022 and 2021 include deposits for leases.

14.2 Loans to Group undertakings

The "Non-current financial assets - Group undertakings" account as of 31 December 2022 contained the following loans to Group undertakings:

(thousand euro)	31/12/2022	31/12/2021
Sylentis, S.A.U.	5,234	19,934
Genómica, S.A.U. en liquidacion	-	1,819
Impairment	-	(375)
	5,234	21,378

Those loans were classified as non-current since they have no fixed maturity and the directors do not intend them to be repaid in the short term.

The reduction in the balance of the loan from the Company to Sylentis is due to partial capitalization of same in December 2022 (Note 11.3).

In 2021, the loan to Genómica, S.A.U. was impaired in its entirety due to doubts about its recoverability.

The "Current financial assets – Group undertakings" account comprises the following items:

(thousand euro)	31/12/2022	31/12/2021
Current financial assets
VAT receivable (Note 22)	-	44
Current accounts with Group undertakings	56	53
	56	97

The balances with Group undertakings under current financial assets and liabilities in 2022 arose between the parent company and its subsidiaries as a result of interest on intercompany loans (Note 30).In 2021, they also contained the balance between the parent company and its subsidiaries as a result of tax consolidation for value added tax.

14.3 Customer receivables

The detail of customer balances by age is as follows:

(thousand euro) 31/12/2022 31/12/2021

Current balances	20,350	42,117
Balances past-due but not provisioned	5,070	2,049
Up to 3 months	3,846	1,509
3-6 months	688	244
Over 6 months	536	296
TOTAL CUSTOMER RECEIVABLES	25,420	44,166

The change in the total balance of customer receivables between years is due to the collection in February 2022 of €22,323 thousand corresponding to the commercial milestone accrued in December 2021 in connection with the Zepzelca license agreement with our partner Jazz Pharmaceuticals.

Past-due receivables have not been impaired and the Company expects to recover the total amount due.

Balances with official authorities

As of 31 December 2022, accounts receivable from public authorities amounted to €6,800 thousand (€3,474 thousand in 2021).

The geographic breakdown of receivables from public authorities in Spain is as follows:

(thousand euro)	Credit rating	2022
Andalusia	BBB+	133
Madrid	Baa1	432
Balearic Islands	BBB+	90
Valencia	Ba1u	347
Castilla y León	Baa1	21
Castilla la Mancha	Ba1	9
Aragon	BBB+	211
Catalonia	Ba3	65
Galicia	Baa1	115
Canary Islands	BBB+	27
Basque Country	AA-	28
Murcia	Ba1	187
Navarra	AA-	15
Rioja	BBB	15
Asturias	Baa1	24
Ceuta and Melilla	-	14
TOTAL		1,733

(thousand euro)	Credit rating	2021
Andalusia	BBB+	169
Madrid	Baa1	21
Balearic Islands	BBB+	64
Valencia	Ba1u	13
Castilla y León	Baa1	37
Castilla la Mancha	Ba1	15
Aragon	BBB+	115
Catalonia	Ba3	43
Cantabria	BBB	25
Galicia	Baa1	37
Canary Islands	BBB+	29
Extremadura	Baa2	109
Basque Country	AA-	24
Murcia	Ba1	16
Navarra	AA-	188
Asturias	Baa1	39
TOTAL		944

Debt owed by public authorities as of 2022 and 2021 year-end in other territories outside Spain where the Company operates was as follows:

(thousand euro)	Credit rating	31/12/2022
France	Aaau	3,137
Austria	Aa1	11
Benelux	Aaau	29
TOTAL		3,177
(thousand euro)	Credit rating	31/12/2021
France	Aaau	2,225
Austria	Aa1	260
Benelux	Aaa	45

In 2021, the Company collected €2,711 thousand of debt owed by various public administrations by arranging non-recourse factoring contracts with financial institutions that specialize in transactions of this type. No advance collection arrangements were made in connection with any invoice in 2022.

Debt owed by official authorities that was more than three months past-due amounted to €788 thousand as of 31 December 2022 (€231 thousand in 2021), and no impairments had been recognized on those amounts.

14.4 Receivable from group and associated undertakings

The balances and transactions with group undertakings in 2022 and 2021 are detailed in Note 30.

15. FINANCIAL ASSETS

In 2022, other non-current financial assets at amortized cost totaling €48,802 thousand include several deposits totaling €30,000 thousand at fixed rates ranging from 0.89% to 2.77% per year and maturing between April and May 2024, as well as several portfolios containing mainly government and corporate fixed-income securities amounting to €18,802 thousand that repay the nominal amount at maturity and mostly pay coupons, held with a number of institutions. In 2021, this item totaled €10,000 thousand, comprising two investments worth €5,000 thousand maturing in April and October 2022 whose principal is guaranteed at maturity, net of interest (between

-0.15% and -0.05%).

Other current financial assets in 2022 amounting to €32,341 thousand (€88,030 thousand in 2021) mainly include term deposits amounting to €18,278 thousand maturing on 10 June 2023 and a deposit in dollars amounting to €14,063 thousand (€67,985 thousand in 2021) at various financial institutions tied to Libor and maturing between May and November 2023, with yields ranging from 0.89% to 4.04%, depending on when the investment was made and the maturity.

16. CASH AND CASH EQUIVALENTS

The detail of this caption as of 31 December 2022 and 2021 is as follows:

(thousand euro)	31/12/2022	31/12/2021
Cash on hand and at banks	115,650	103,534
Cash equivalents	28,127	-
TOTAL	143,777	103,534

The balance of "Cash equivalents" relates to a USD 30,000 thousand (€28,127 thousand) deposit that matures in less than 90 days.

17. SHARE CAPITAL AND SHARE PREMIUM

17.1 Share capital

As of 31 December 2022, the Company's capital stock was represented by 18,354,907 fully subscribed and paid ordinary shares (18,354,907 ordinary shares in 2021) with a par value of €0.60 each, which are listed on the four Spanish stock exchanges.

According to information in the official registers of the Spanish National Securities Market Commission as of 31 December 2022, holders of significant stakes in Pharma Mar, S.A., either directly or indirectly, amounting to over 10% are as follows:

		DIRECT STAKE		INDIRECT STAKE (1)	TOTAL
	No. of shares	%	No. of shares	%	%
José Mª Fernández Sousa-Faro	1,103,135	6.010	939,062	5.116	11.126

(1) Indirect stake held through his spouse, Ms Montserrat Andrade Detrell.

17.2 Share premium account

The share premium account may be used for the same purposes as the Company's voluntary reserves, including conversion into capital stock, there being no restrictions as to its use or distribution. As of 31 December 2022, the share premium account amounted to €71,278 thousand (€71,278 in 2021).

17.3 Own shares

Changes in own shares in 2022 and 2021 are as follows:

	No. of shares	Amount (euro)
Balance as of 31/12/21	344,366	(25,678,600)
Own shares purchased	761,615	(47,708,450)
Sales	(850,449)	56,950,425
Share ownership plan	(8,244)	571,375
Balance as of 31/12/22	247,288	(15,865,250)
	No. of shares	Amount (euro)
Balance as of 31/12/20	242,192	(21,453,361)
Own shares purchased	528,779	(40,659,428)
Sales	(418,579)	35,682,811
Share ownership plan	(8,026)	751,378
Balance as of 31/12/21	344,366	(25,678,600)

As of 31 December 2022, the Company held 247,288 own shares (344,366 in 2021) representing 1.35% of capital stock (1.88% in 2021).

In 2022, the Company acquired own shares worth €47,708 thousand (€40,659 thousand in 2021) and sold own shares worth €56,950 thousand (€35,683 thousand in 2021). Those sales resulted in a loss of €2,458 thousand (a loss of €2,468 thousand in 2021), which was recognized in the Company's reserves. The company has a liquidity contract in place with an external firm that provides independent management of the purchase and sale of own shares.

In the scope of the employee share ownership plan, a total of 8,244 shares were allocated in 2022 to 167 beneficiaries at a price of €71.5923 (8,026 shares in 2021 to 183 beneficiaries at a price of €103.0164), generating a gain of €19 thousand (€74 thousand in 2021). Additionally, a total of 224 shares were canceled under this Plan in 2022 (582 shares in 2021).

18. RESERVES AND PRIOR YEARS' INCOME

The detail of the Company's reserves as of 31 December 2022 and 2021 is as follows:

(thousand euro)	31/12/2022	31/12/2021
LEGAL AND BYLAW RESERVES	2,203	2,203
Legal reserve	2,203	2,203
OTHER RESERVES	280,799	283,174
Voluntary reserves	65,888	68,346
Merger reserve	215,160	215,160
Reserve for canceled capital	120	120
Other reserves Difference due to redenomination of share	31	31
capital in euro	2	2
Own shares and equity instruments	(402)	(485)
TOTAL	283,002	285,377

The balance of the "Prior years' loss" item is €116,317 thousand in 2022 (€207,919 thousand in 2021).

The changes in reserves in 2022 and 2021 were as follows:

(thousand euro)	31/12/2021	Gain/loss on own shares	Share ownership plan	31/12/2022
LEGAL RESERVE
Legal reserve	2,203	-	-	2,203
OTHER RESERVES
Voluntary reserves	68,346	(2,458)	-	65,888
Merger reserve	215,160	-	-	215,160
Reserve for canceled capital	120	-	-	120
Other reserves	31	-	-	31
Difference due to redenomination of share capital in euro	2	-	-	2
Own shares and equity instruments	(485)	-	83	(402)
TOTAL	285,377	(2,458)	83	283,002

(thousand euro)	31/12/20	Gain/loss on own shares	Share ownership plan	31/12/2021
LEGAL RESERVE
Legal reserve	2,203	-	-	2,203
OTHER RESERVES
Voluntary reserves	70,814	(2,467)	-	68,347
Merger reserve	215,160	-	-	215,160
Reserve for canceled capital	119	-	-	119
Other reserves	31	-	-	31
Difference due to redenomination of share capital in euro	2	-	-	2
Own shares and equity instruments	(454)	-	(31)	(485)
TOTAL	287,875	(2,467)	(31)	285,377

18.1 Legal reserve

Under article 274 of the Consolidated Text of the Capital Companies Act, approved by the Legislative Royal Decree of 2 July 2010, companies must transfer 10% of income for each year to the legal reserve until it amounts to at least 20% of capital stock.

The legal reserve may not be distributed and may only be used to offset losses if there are not sufficient unrestricted reserves available for this purpose, in which case it must be restored out of future income.

The legal reserve amounted to €2,203 thousand in 2022 (€2,203 thousand in 2021).

18.2 Other reserves

Voluntary reserves: In 2022, the balance of voluntary reserves was reduced by €2,458 thousand as a result of transactions with own shares (€2,467 thousand in 2021), with the result that the balance was €65,888 thousand as of 31 December 2022 (€68,347 thousand in 2021).

Merger reserve: The merger reserve, which arose in 2015 as a result of the reverse merger between PharmaMar and Zeltia (formerly the group parent company), amounts to €215,160 thousand. This reserve is unrestricted.

The reserve for canceled capital, which is restricted, amounted to €120 thousand as of 2022 year-end.

Other reserves: these consist of a reserve amounting to €31 thousand as of 31 December 2022 and 2021 for Differences in conversion to GAP 2007 because of the treatment of exchange gains that had accrued but not been realized.

Reserve for differences in converting capital to euro: this reserve amounts to €2 thousand and is restricted.

Own shares and equity instruments: this item, arising from the accrual of expenses during the lock-up period of the employee stock ownership plan, amounted to €402 thousand as of 31 December 2022, a decrease of €83 thousand with respect to 2021 (€485 thousand).

18.3 Limitations on dividend distribution

The distribution of reserves designated elsewhere in this note as unrestricted is subject to the limits established by law.

Under the Capital Companies Act, profits may not be distributed unless the amount of distributable reserves is at least equal to the amount of research and development expenses shown on the assets side of the balance sheet.

19. SUBSIDIES, DONATIONS AND LEGACIES RECEIVED

As of 31 December 2022, the "Subsidies, donations and other legacies received" item of the Company's equity includes €968 thousand of subsidies for loans from official authorities at zero or below-market interest rates (Notes 5.2 & 6.8). The balance of this item was €1,168 thousand in 2021.

Those subsidies were granted for the implementation of a number of development programs by the Company's projects, and the conditions under which they were granted have been met.

The changes in these subsidies are as follows:

(thousand euro)	31/12/2022	31/12/2021
BEGINNING BALANCE	1,168	1,435
Increase Recognized in profit or	596	253
loss	(796)	(520)
ENDING BALANCE	968	1,168

20. FINANCIAL LIABILITIES AT AMORTIZED COST

The detail of this caption as of 31 December 2022 and 2021 is as follows:

(thousand euro)	31/12/2022	31/12/2021
Bonds and other marketable securities (Note 20.1)	16,710	16,653
Bank loans (Note 20.2)	231	456
Debt to official authorities (Note 20.3)	8,092	10,536
Deferred revenues (Note 20.4)	43,330	67,197
NON-CURRENT FINANCIAL LIABILITIES AT AMORTIZED COST	68,363	94,842
Bonds and other marketable securities (Note 20.1)	405	405
Bank loans (Note 20.2)	4,324	6,635
Debt to official authorities (Note 20.3)	3,051	3,519
Other financial liabilities	1,008	845
Suppliers	707	379
Debt to group undertakings (Note 30)	3,256	2,212
Accounts payable to related parties (Notes 20.4 & 30)	6,165	4,093
Sundry creditors	24,492	23,933
Personnel	6,499	5,872
Customer advances	1,446	1,225
Deferred revenues (Note 20.4)	24,659	29,840
FINANCIAL LIABILITIES AT AMORTIZED COST	76,012	78,958

TOTAL FINANCIAL LIABILITIES AT AMORTIZED COST 144,375 173,800

The carrying amount of short-term debt is approximately the fair value since the effect of discounting is not material.

20.1 Bonds and other marketable securities

In 2015, the Company decided to issue non-convertible bonds for an amount of €17 million in order to strengthen its financial position and extend its debt maturity profile.

The principal terms and conditions of the bonds are as follows:

• a)The nominal amount of the issue is €17 million;
• b) Maturity: 12 years from disbursement;
• c) The issue was targeted at a single qualified Spanish investor via a private placement.
• d)The bonds, which are uncertificated, were issued at par, each with a nominal value of €100 thousand;
• e)The bonds bear a fixed coupon of 4.75% per annum payable in arrears every year from the date of disbursement;
• f) The Company is liable with all its assets for the obligations arising from the bonds and no specific guarantee is granted;
• g)The terms and conditions of the bonds are governed by Spanish law;
• h)The Company applied to list the bonds on the Alternative Fixed-Income Market (MARF) on 7 July 2015.

The debt is recognized at amortized cost under non-current liabilities.

Unpaid accrued interest amounted to €461 thousand as of 31 December 2022 (€458 thousand in 2021).

20.2 Bank debt

Current and non-current bank debt is broken down as follows:

		31/12/2022		31/12/2021
(thousand euro)	Non-current	Current	Non-current	Current
Bank loans	231	225	456	3,105
Credit lines	-	3,360	-	3,508
Interest payable	-	18	-	21
Other interest-bearing debt	-	721	-	-
TOTAL DEBTS AND ACCOUNTS PAYABLE	231	4,324	456	6,634

The Company did not arrange any bank debt in 2022.

The maturity calendar of the bank debt in 2022 and 2021 is detailed in Note 10.2.

"Other interest-bearing debt" includes a foreign trade financing line with a limit of €2,000 thousand against which we have drawn €721 thousand. This financing line was not used in 2021.

As of 31 December 2022, the limit of the credit lines is €14,000 thousand (€14,000 thousand in 2021), of which the Company had drawn, including credit cards, €3,360 thousand (€3,508 thousand in 2021). The credit lines bore average interest of 2.33% in 2022 (1.80% in 2021).

20.3 Debt to official authorities

The amounts under this item, recognized at amortized cost as non-current debt, amounted to €8,083 thousand as of 31 December 2022 (€10,527 thousand in 2021).

A total of €3,051 thousand were recognized as current under this heading in 2022 (€3,519 thousand in 2021).

These transactions do not accrue interest, except for €5,723 thousand that bear interest at between 0.06% and 1% (in 2021: €7,356 thousand bearing interest between 0.06% and 1%).

The difference between initial fair value and the nominal value is accrued on the basis of market interest rates (Euribor and Spanish government bond yields plus a spread based on the Group's risk).

In 2022, there were two subsidized loans for a nominal amount of €839 thousand, with an initial fair value of €627 thousand, repayable in 10 years with a three-year grace period.

The maturities of the amounts due to official authorities which are recognized at fair value as of 31 December 2022 and 2021 are detailed in Note 10.2.

20.4 Accruals

The long-term accruals account relates to current deferred revenues of €24,659 thousand and €29,840 thousand as of 31 December 2022 and 2021, respectively, primarily the portion of the upfront payment plus the FDA approval milestone for Zepzelca in the amount of USD 300 million (€269.5 million) received in 2020 under the Zepzelca licensing agreement entered into with Jazz Pharmaceuticals, which was not recognized as revenue in 2020 by application of the revenue recognition standards and is expected to be recognized in the twelve months following the end of each of the two years.

The balance of non-current deferred revenues (€43,330 thousand and €67,197 thousand, respectively, as of 31 December 2022 and 2021) relates mainly to the portion of the payments under the agreement with Jazz Pharmaceuticals that is expected to be recognized as revenues in a period of more than twelve months.

Total deferred revenue relating to the contract with Jazz Pharmaceuticals Ireland Ltd includes an amount of €64,954 thousand short- and long-term as of 31 December 2022 (€94,306 thousand as of 31 December 2021).

20.5 Due to Group undertakings

The detail of accounts payable to related parties is as follows:

Current financial liabilities

Corporate income tax payable (Note 24)	5,888	3,813
VAT payable (Note 24)	277	280
	6,165	4,093

The balances with Group undertakings under current financial assets and liabilities in 2022 consist mainly of those arising between the Company and its subsidiaries as a result of tax consolidation — both corporate income tax and value added tax (Note 24).

20.6 Information on deferral of payments to suppliers

Information on payments for commercial transactions performed in 2022 and 2021 and amounts pending payment at the end of the year in relation to the maximum legal payment periods envisaged in Law 18/2022 is as follows:

	2022	2021
Average time taken to pay suppliers (days)	52	59
Proportion of transactions paid (days)	56	64
Proportion of transactions outstanding (days)	28	32
Total payments made (thousand euro)	59,473	44,509
Total payments outstanding (thousand euro)	10,407	7,279
Total invoices received (number)	7,843	7,191
Total invoices received (thousand euro)	67,222	45,922
Total invoices paid in less than 60 days (number)	3,885	3,198
Total invoices paid in less than 60 days (thousand euro)	35,388	19,182
Percentage of total number of invoices paid	53.20%	47.46%
Percentage of total amount of invoices paid	59.50%	43.10%

21. SHORT-TERM PROVISIONS

The provision recognized in 2022 in the amount of €15,155 thousand relates mainly to discounts as a result of the change in the law in France regarding the use and sale of products under the "Autorisation d'accés compassionel (AAC)" compassionate use system. The amendments to the law include a scaling of discounts based on the amounts invoiced under the AAC system.

Zepzelca is currently covered by this system, under the very early access compassionate use system ("Autorisation d'accés compassionel trés précoce"), and is therefore subject to this new regulation. Once the product is approved by the European Commission and, therefore authorized for marketing in France, that regulation will no longer apply.

22. DEFERRED TAXES

The detail of this caption as of 31 December 2022 and 2021 is as follows:

(thousand euro)	31/12/2022	31/12/2021
DEFERRED TAX ASSETS	22,502	21,583
Temporary differences (Note 24)	1,062	1,478
Tax credits (Note 24)	11,323	9,632
Tax withholdings receivable	10,117	10,473
DEFERRED TAX LIABILITIES	845	830
Temporary differences	845	830
DEFERRED TAXES (NET)	21,657	20,753

The "Tax withholdings receivable" account as of 31 December 2022 and 2021 includes taxes withheld from royalties and payments received from the Johnson & Johnson Group by virtue of the agreements signed in 2001 and 2011, and from Taiho Pharmaceutical Co. Ltd. and Chugai Pharmaceutical Co., among others.

The changes in deferred tax assets and liabilities during the year were as follows:

DEFERRED TAX ASSETS (thousand euro)	Tax credits	Temporary differences	Withholdings	TOTAL
Balance as of 31 December 2020	16,231	1,895	11,560	29,686
Charge (credit) to profit or loss	(6,598)	(417)	-	(7,015)
Other movements	-	-	(1,087)	(1,087)
Balance as of 31 December 2021	9,632	1,478	10,473	21,583
Charge (credit) to profit or loss	1,691	(416)	-	1,275
Other movements	-	-	(356)	(356)
Balance as of 31 December 2022	11,323	1,062	10,117	22,502

DEFERRED TAX LIABILITIES (thousand euro)	Subsidies, donations and legacies received	Capitalized financial expenses	TOTAL
Balance as of 31 December 2020	478	366	844
Charge (credit) to profit or loss	-	72	72
Charge to equity	(89)	1	(88)
Balance as of 31 December 2021	389	441	830
Charge (credit) to profit or loss	-	82	82
Charge to equity	(67)	-	(67)
Balance as of 31 December 2022	322	523	845

Deferred taxes charged to equity in the year are as follows:

(thousand euro)	31/12/2022	31/12/2021
Subsidies, donations and legacies received	(66)	(88)
TOTAL	(66)	(88)

Deferred tax assets due to tax losses carried forward are recognized to the extent that the Company is likely to obtain future taxable income enabling them to be offset.

23. REVENUES AND EXPENSES

23.1 Net revenues

The net amount of revenues is broken down as follows:

(thousand euro)	31/12/2022	31/12/2021
Product sales	88,738	108,992
Royalty revenues	50,254	40,996
Licensing agreement revenues	40,169	64,787
Provision of corporate services	573	630
TOTAL	179,734	215,405
Point of recognition of revenues	31/12/2022	31/12/2021
At a point in time	149,952	172,691
Over a period of time	29,782	64,787
Total revenues from contracts with customers	179,734	237,478

23.1.1 Revenue from the sale of products

The "Revenue from the sale of products" item basically refers to commercial sales of Yondelis for treating soft tissue sarcoma and relapsed ovarian cancer, made by PharmaMar in the European Union (€51,814 thousand in 2022 and €59,560 thousand in 2021).

It also includes sales of intermediates or raw materials for Yondelis, Aplidin and Zepzelca (€21,423 thousand in 2022 compared with €19,198 thousand in 2021).

It also includes sales of Zepzelca in certain European countries, mainly under the AAC compassionate use program (Autorisation d'Accés Compassionnel) in France, amounting to €15,501 thousand (€30,234 thousand in 2021).

23.1.2 Royalties

Royalties on sales of Yondelis:

Royalties on sales of Yondelis by Janssen Products Lp. ("Janssen") in the US amounted to €2,688 thousand in 2022 (€2,314 thousand in 2021).

Royalties on sales of Yondelis in Japan by Taiho Pharmaceutical, Ltd. amounted to €685 thousand in 2022 (€728 thousand in 2021).

Royalties on Zepzelca sales:

Royalties on sales of Zepzelca by Jazz Pharmaceuticals in the United States amounted to €46,881 thousand in 2022 (€37,954 thousand in 2021).

23.1.3 Licensing revenues

The Company has the following licensing and development agreements with pharmaceutical companies. Revenues under this heading amounted to €40,169 thousand in 2022 (€64,787 thousand in 2021).

Revenues under licensing agreements in 2022 and 2021 are as follows:

(thousand euro)	31/12/2022	31/12/2021
Jazz Pharmaceuticals (Zepzelca)	29,547	60,954
Janssen Products LP (Yondelis)	10,087	-
Impilo (Zepzelca)	-	500
Eczacibasi (Zepzelca)	-	500
Lotus (Zepzelca)	-	500
Audium (Zepzelca)	-	2,000
STA (Zepzelca)	115	33
Boryung (Zepzelca)	120	-
MEGAPHARM (Yondelis)	100	-
STADA (Yondelis)	200	-
ONKO (Yondelis)	-	300
TOTAL	40,169	64,787

The licensing agreements for PharmaMar's compounds, their respective terms and conditions, their economic terms and the revenues received under them are described below.

Yondelis

Janssen Products LP

In 2001, the Company signed a licensing and development agreement with Ortho Biotech Products L.P. (OBP, now Janssen Products, L.P.), a subsidiary of US group Johnson & Johnson (J&J). That agreement provides for certain payments to PharmaMar, including an upfront payment that was collected on the date of the contract and certain payments connected with subsequent development and regulatory milestones for Yondelis. Those amounts (upfront and milestone payments), which are collected irrevocably once the corresponding dates and milestones are attained, are recognized initially as deferred revenue and subsequently as revenue over the term of the contract, which includes two distinct phases: development and marketing.

The commitments assumed by the Company as a result of the agreement include the following:

• Development of Yondelis from the date of signature of the agreement up to marketing, and financing of a percentage of total development costs incurred by the two parties;
• Assignment to OBP of the future marketing rights for the United States and the rest of the world except Europe (retained by the Group). For this assignment, the Group will collect royalties based on OBP's sales.
• The Company retains the exclusive right to manufacture the active ingredient, which will be supplied to OBP on a cost-plus basis.

The Company will retain the patents associated with Yondelis and is responsible for complying with the administrative requirements relating to maintaining the patents and any other requirements that may apply for their effective use.

The amounts attributed to the development phase are recognized as revenue during the development phase based on the degree of progress with development and the project's total estimated costs. The Company has fulfilled all the related obligations and has incurred all expenses required to be borne by PharmaMar. Consequently, PharmaMar did not recognize any amount under this heading.

The amounts attributed to the marketing phase are royalties, which are recognized on an accrual basis. In 2022, royalties for sales of Yondelis were recognized in the amount of €2,688 thousand (€2,314 thousand in 2021).

In December 2022, PharmaMar received a USD 10,000 thousand (€10,086 thousand) payment from Janssen Products LP on attaining a commercial milestone established in the licensing agreement for Yondelis in the United States.

In 2019, PharmaMar and Janssen signed a framework transfer agreement under which Janssen transferred to PharmaMar all rights to the compound in the other territories licensed to Janssen, i.e. all the countries in the world except the United States, Europe and Japan (the latter licensed to Taiho Pharmaceuticals Co. Ltd). Ltd).

New agreements

As a result, since that transfer agreement in 2019 and 2020 PharmaMar has entered into the following agreements to commercialize Yondelis with the result that they cover practically the entire world:

A total of seven agreements were signed in 2020: i) with Valeo for Canada; ii) with Adium Pharma, S.A. to market Yondelis in Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Curaçao, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Trinidad and Tobago, Uruguay and Venezuela; iii) with Onko Ilak San for marketing in Turkey; iv) with Key Oncologics for the Republic of South Africa, Namibia and Botswana; v) with TTY for marketing and distribution of Yondelis in Taiwan, Hong Kong and Macau; vi) with STADA for marketing Yondelis in the Middle East and North Africa; and vii) with R-Pharm for marketing Yondelis in Russia, the rest of the Commonwealth of Independent States and Georgia.

In 2019, PharmaMar signed two marketing agreements for Yondelis: with Specialised Therapeutics Asia, Pte. Ltd. (STA) for Australia, New Zealand and Southeast Asia, and with Megapharm Ltd. for Israel and the Palestinian territories.

In 2022, it collected €100 thousand under the agreement with Megapharm and €200 thousand under the agreement with STADA.

In all cases, PharmaMar retains exclusive rights to produce the product and will sell the product to its partners for commercial and clinical use.

Taiho Pharmaceutical Co

In 2009, PharmaMar signed a licensing agreement with Taiho Pharmaceutical Co. for development and commercialization of Yondelis in the Japanese market.

The commitments assumed by the Company as a result of the agreement include the following:

• Assignment to Taiho of future rights to market Yondelis in Japan. For this assignment, the Company will collect royalties based on Taiho's sales once authorization is obtained to market the drug in Japan.
• The Company retains the exclusive right to manufacture the active ingredient, which will be supplied to Taiho.
• Taiho assumes the responsibility, at its own expense, for researching, developing and obtaining regulatory approval for Yondelis in Japan.

In 2015, Taiho obtained authorization from the Japanese regulator (PMDA) to market Yondelis for the treatment of several subtypes of soft tissue sarcoma.

In 2022, PharmaMar recognized €685 thousand (€728 thousand in 2021) in revenue for royalties received from Taiho for sales of Yondelis in Japan.

Zepzelca (lurbinectedin)

As of 31 December 2022, the Company had entered into licensing, development and marketing agreements with a number of partners.

Jazz Pharmaceuticals

As described in Note 1, on 19 December 2019, PharmaMar and Jazz Pharmaceuticals signed an exclusive licensing agreement for marketing anti-tumor compound Zepzelca (lurbinectedin) in the US for treating relapsed small cell lung cancer. The agreement came into force in January 2020 upon receiving authorization by the US anti-trust authorities under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

The commitments assumed by the Group as a result of the agreement include the following:

• R&D activities: The Group undertook to complete and conduct certain trials of the licensed molecule that will be required by the FDA. These trials may be carried out by a third party and, hence, are classified as a distinct service and, therefore, as a performance obligation.
• Manufacturing: The Group retains the exclusive right to manufacture the medicine, which will be supplied to Jazz Pharmaceuticals.
• Pharmacovigilance activities: The Group assumes this function on behalf of Jazz Pharmaceuticals.
• Granting of a license to the compound Zepzelca, which entails assignment of the rights to market it in the licensed territory.

When the agreement came into force in January 2020, PharmaMar collected an upfront payment of USD 200 million (€181 million). Subsequently, in June, Zepzelca (lurbinectedin) received conditional approval from the FDA for commercialization in the US under the accelerated approval procedure. As a result, PharmaMar collected USD 100 million (€88.5 million) as a milestone payment from Jazz Pharmaceuticals. The upfront payment and the development milestone payment were recognized as revenue in profit or loss in the various years on the basis of PharmaMar's fulfillment of its commitments under the contract. As of 31 December 2022, €29,547 thousand were recognized as revenues (€38,619 thousand in 2021).

Additionally, in 2021, revenues in the amount of €22,073 thousand (USD 25 million) were recognized under this heading due to attainment in the year of one of the commercial milestones provided for in the license agreement, when our partner reached a certain volume of sales.

Additionally, in 2022, PharmaMar also received royalties from Jazz Pharmaceuticals amounting to €46,881 thousand on sales of Zepzelca in the US (€37,954 thousand in 2021).

An addendum to the lurbinectedin license agreement for the United States with Jazz Pharmaceuticals Ireland Limited was signed in October 2020 in order to grant Jazz an exclusive license to market lurbinectedin in Canada. PharmaMar collected an upfront payment of USD 1,000 thousand (€848 thousand) for signing this addendum. USD 1,000 thousand (€848 thousand) were collected under this agreement in 2021 for the approval in Canada.

Luye Pharma Group

In April 2019, the Group signed an out-licensing agreement with Luye Pharma Group for the development and marketing of Zepzelca for treating small cell lung cancer and potentially other indications in the territories of China, Hong Kong and Macao. Under the terms of the agreement, PharmaMar collected an upfront payment of USD 5,000 thousand (€4,452 thousand). €1,257 thousand were recognized as revenue in 2020 as PharmaMar had fulfilled the commitments set out in the licensing agreement. Luye undertakes to develop Zepzelca for treating small-cell lung cancer in China, while PharmaMar retains exclusive production rights.

Specialised Therapeutics Asia Pte, Ltd (STA)

In May 2017, PharmaMar signed a licensing agreement with Singapore-based Specialised Therapeutics Asia Pte, Ltd (STA) for commercialization of Zepzelca (lurbinectedin).

In connection with this licensing agreement, in that same year STA subscribed for shares of PharmaMar for a total amount of €2,211 thousand.

In 2021, Zepzelca was approved for the treatment of lung cancer in Australia and Singapore, two territories licensed to STA. Those approvals triggered regulatory milestone payments in the amount of USD 450 thousand (€380 thousand). €115 thousand were recognized as revenue in 2022 (€33 thousand in 2021).

Boryung Pharmaceutical Co.

In November 2017, a licensing agreement was signed with Boryung Pharmaceutical Co. to market Zepzelca (lurbinectedin) in South Korea. PharmaMar collected €1,000 thousand upon signature, and subsequently received regulatory milestone payments of €300 thousand in 2019 and €450 thousand in 2020.

In September 2022, Boryung Pharmaceutical Co. received conditional approval from the South Korean Ministry of Food and Drug Safety (MFDS) to market Zepzelca. As a result, PharmaMar collected a €1,000 thousand milestone payment and recognized €120 thousand in revenues as of 31 December.

Other agreements

In 2021, PharmaMar signed the following licensing agreements with respect to Zepzelca:

• Adium Pharma S.A.: for marketing in Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Curaçao, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Trinidad and Tobago, Uruguay and Venezuela.
• Lotus Pharmaceutical CO.: for marketing anti-tumor drug lurbinectedin in Taiwan.
• Eczacibasi Pharmaceuticals Marketing Co.: for marketing lurbinectedin in Turkey.
• In May 2020, PharmaMar signed a licensing agreement with Megapharm Ltd for the commercialization of Zepzelca in Israel and the Palestinian territories.

23.2 Breakdown of revenues

The net amount of the Company's revenues, in thousand euro, by geographical region, is as follows:

(thousand euro)	31/12/2022	31/12/2021
Spain	12,347	13,300
European Union	140,717	188,236
Americas	591	2,314
Japan	1,794	728
Other OECD countries	16,175	4,500
Other countries	8,110	6,328
TOTAL	179,734	215,405

Revenues in the European Union include milestone and royalty payments from Jazz Pharmaceuticals that are billed through a company domiciled in Ireland.

23.3 Foreign currency transactions

The detail of foreign currency transactions is as follows:

(thousand euro)	31/12/2022	31/12/2021
Licensing revenues	89,888	105,783
Sales	1,498	15,033
Purchases and services received	8,384	5,854
TOTAL	99,770	126,670

23.4 Merchandise, raw materials and other consumables consumed

(thousand euro)	31/12/2022	31/12/2021
Purchased in Spain	3,676	3,421
Purchased in other EU countries	1,656	835
Imports	122	47
Change in inventories	(2,161)	(463)
TOTAL	3,293	3,840

23.5 Personnel expenses

(thousand euro)	31/12/2022	31/12/2021
Wages, salaries and similar	31,092	28,932
Indemnities	630	163
Employee welfare expenses
Employer social security	5,048	4,537
Other welfare expenses	1,294	1,193
TOTAL	38,064	34,826

The average number of employees by category and gender is as follows:

NUMBER IN CATEGORY (MEN)	31/12/2022	31/12/2021
Executive directors	2	2
Senior managers	5	5
Management	6	6
Middle management	19	18
Clerical and similar staff	5	4
Technical staff	95	82
Other	22	22
TOTAL	154	139

NUMBER IN CATEGORY (WOMEN)	31/12/2022	31/12/2021
Executive directors	-	-
Senior managers	3	3
Management	7	6
Middle management	19	16
Clerical and similar staff	42	40
Technical staff	142	130
Other	11	10
TOTAL	224	205
TOTAL	378	344

The breakdown of the Company's workforce by category and gender at year-end was as follows:

NUMBER IN CATEGORY (MEN)	31/12/2022	31/12/2021
Executive directors	2	2
Senior managers	5	5
Management	7	6
Middle management	18	18
Clerical and similar staff	5	4
Technical staff	102	82
Other	21	22
TOTAL	160	139

NUMBER IN CATEGORY
(WOMEN)	31/12/2022	31/12/2021
Executive directors	-	-
Senior managers	3	3
Management	8	7
Middle management	20	18
Clerical and similar staff	45	40
Technical staff	148	136
Other	12	10
TOTAL	236	214
TOTAL	396	353

There were an average of 4 employees in the year with disability of 33% or greater (2 administrative staff and 2 technicians), the same as at 2021 year-end.

23.6 Outside services

The detail of this caption as of 31 December 2022 and 2021 is as follows:

(thousand euro)	31/12/2022	31/12/2021
Research & Development expenses	31,198	25,890
Leases and fees	2,057	1,931
Repairs and upkeep	2,492	2,000
Independent professional services	11,512	10,423
Transport	1,429	1,148
Insurance premiums	1,588	1,071
Advertising and public relations	7,585	6,572
Utilities	973	834
Other services	6,355	4,584
Other taxes	569	556
Total	65,758	55,009

23.7 Impairment losses and income from disposal of assets. etc.

As indicated in Note 7.1, in 2022, based on an external appraisal, the Company reversed impairment of a plot of land in Colmenar Viejo in the amount of €60 thousand (impairment amounting to €187 thousand was recognized in 2021).

In 2021, derecognition due to impairment amounting to €26,672 thousand corresponds to the impairment provision that had been recognized in 2018 in relation to PM184, a compound under development. In 2021, after analyzing the latest results from clinical trials, the Company decided to discontinue the development of this molecule, and derecognized the previously impaired balance.

24. INCOME TAX AND TAX SITUATION

The balances with public authorities as of 31 December 2022 and 2021 are as follows:

		2022	2021
(thousand euro)	Payable	Receivable	Payable	Receivable
Income tax prepayments	22,465	-	21,979	-
Advance tax revenues under audit	558	-	559	-
Total current tax revenues	23,023	-	22,538	-
Personal income tax	-	595	-	577
Social security	-	499	-	467
VAT	4,519	-	3,396	-
Other receivables from public authorities	4,519	1,094	3,396	1,044

In 2022, the Company filed corporate income tax returns on a consolidated basis. The following companies are included in the group's consolidated tax return: Genómica, S.A.U. en liquidación, Pharma Mar, S.A. and Sylentis, S.A.U.

Because certain transactions are treated differently for corporate income tax purposes and in the preparation of these financial statements, the taxable base for the year differs from the book result. The deferred or prepaid taxes arise from the recognition of revenues and expenses in different periods under current tax regulations and for the purpose of preparing the financial statements.

The reconciliation of net revenues and expenses in 2022 and 2021 to the income tax base is as follows:

2022
(thousand euro)	Income Statements
BALANCE OF REVENUES AND EXPENSES IN THE YEAR	58,954	-
	Increase	Decrease
Corporate income tax	-	(795)
Permanent differences	8,337	(48,975)
Temporary differences:
Arising in the year	338	(328)
Arising in prior years		(2,003)
TAX BASE	-	15,528
TAXABLE INCOME	-	15,528

	2021
(thousand euro)	Income Statements
BALANCE OF REVENUES AND EXPENSES IN THE YEAR	103,363	-
	Increase	Decrease
Corporate income tax	6,020	-
Permanent differences	178	(86,973)
Temporary differences:
Arising in the year	293	(470)
Arising in prior years		(1,781)
TAX BASE	-	20,630
Tax losses carried forward	-	(3,553)
TAXABLE INCOME	-	17,077

The corporate income tax expense at year-end is as follows:

(thousand euro)	31/12/2022	31/12/2021
Current tax	(3,883)	(4,269)
Deferred taxes and capitalized tax losses	1,193	(7,088)
Other	182	666
Monetization	3,303	4,671
TOTAL TAX (REVENUE)/EXPENSE	795	(6,020)

The corporate income tax expense is the result of applying a 25% tax rate to taxable income, after deducting tax losses. The gross amount of tax payable was €3,883 thousand. That amount of tax payable was subsequently reduced by applying €637 thousand in tax withholdings and credits and tax losses from other group companies. The result was a liability to the tax authorities amounting to €273 thousand that was offset against €10,358 thousand in tax that was prepaid in 2022. This amount, together with the pre-payments made in 2021, constitute corporate income tax receivable from the tax authorities amounting to €22,465 thousand.

In 2022, the Company recognized €3,303 thousand in revenue as a result of monetizing research and development tax credits, and it took €182 thousand in tax credits for research and development.

Since 2009, the Company has availed itself of article 23 of the Corporate Income Tax Act, which provides an exemption for revenues from the assignment of rights to use or exploit patents, drawings, models, plans, or secret formulas or procedures, and rights on information relating to industrial, commercial or scientific experience.

The decrease in permanent differences in 2021 corresponds mainly to the application of Article 23 of the Consolidated Text of the Corporate Income Tax Act in connection with revenue from the transfer of certain intangible assets created by the company, amounting to €60,048 thousand and to the reversal of impairment on intangible assets that was recognized in 2018 in the amount of €26,672 thousand (Note 6.6).

The decrease in permanent differences in 2022 corresponds mainly to the application of Article 23 of the Consolidated Text of the Corporate Income Tax Act in connection with revenue from the transfer of certain intangible assets created by the company, amounting to €45,857 thousand.

The increase in permanent differences in 2022 relates mainly to the impairment of the holding in Genómica, S.A.U. en liquidación in the amount of €5,120 thousand.

In 2022, the temporary differences are due mainly to reversal of amortization taken in previous years that was not tax deductible, in the amount of €1,781 thousand.

As of 31 December 2022, the tax credits earned by the Company that are available for use in future years, after deducting the tax losses used by other group undertakings, are as follows:

	(thousand euro)
Year	Taxable income as of 31/12/21	Used in 2022	Earned in 2022	Unused as of 31/12/22
2007	9,465	-	-	9,465
2008	7,317	-	-	7,317
2010	2,245	-	-	2,245
2011	3,691	-	-	3,691
2012	24,835	-	-	24,835
2015	39,798	-	-	39,798
2016	6,275	-	-	6,275
2017	39,723	-	-	39,723
2018	112,777	-	-	112,777
2019	11,000	-	-	11,000
2020	44,452	-	-	44,452
TOTAL	301,578	-	-	301,578

As of 31 December 2022, the unused tax credits earned by the Company, mainly for R&D, were as follows:

(thousand euro)
Year earned	Amount of credit as of 31/12/21	Used in previous years	Used in 2022	Earned in 2022	Unused as of 31/12/22	Expiring in
2004	9,400	-	(182)	-	9,218	2,022
2005	10,565	-	-	-	10,565	2,023
2006	10,251	-	-	-	10,251	2,024
2007	9,477	-	-	-	9,477	2,025
2008	10,059	-	-	-	10,059	2,026
2009	8,625	-	-	-	8,625	2,027
2010	8,211	-	-	-	8,211	2,028
2011	7,980	-	-	-	7,980	2,029
2012	6,915	-	-	-	6,915	2,030
2013	9,076	-	-	-	9,076	2,031
2014	11,403	(3,866)	-	-	7,537	2,032
2015	13,827	(4,247)	-	-	9,580	2,033
2016	19,213	(6,250)	-	-	12,963	2,034
2017	16,559	(6,042)	-	-	10,517	2,035
2018	14,197	(5,839)	-	-	8,358	2,036
2019	10,800	(4,129)	-	-	6,671	2,037
2020	12,288	(4,974)	-	-	7,314	2,038
2021	12,892	-	-	-	12,892	2,039
2022	-	-	-	16,874	16,874	2,040
TOTAL	201,738	(35,347)	(182)	16,874	183,083

The Company took R&D tax credits in the amount of €182 thousand. The "Used" column relates entirely to the amounts used to secure monetization of the research and development tax credits.

The Company's balances with the other companies in the tax group in respect of corporate income tax and VAT as a result of tax consolidation are as follows:

(thousand euro)	Corporate income tax
Genómica	2,173
Sylentis	3,715
TOTAL PAYABLE	5,888
(thousand euro)	VAT
Sylentis	277
TOTAL PAYABLE	277

In 2015, PharmaMar applied to the Spanish tax authorities for inclusion in the special tax regime for Value Added Tax Groups as the leading company.

As of 31 December 2022, that VAT tax group was comprised of Pharma Mar, S.A., as leading company, together with Sylentis, S.A.U., since the Company considered that all of them, both controlling company and controlled company, met the requirements of articles 163 quinquies and 163 sexies of the Value Added Tax Act and their Boards of Directors or equivalent governing bodies had approved the proposal to create a group under the Special VAT Group regime provided by Act 38/2006, using the "simple aggregation system".

Under current law, tax returns cannot be deemed definitive until they have been inspected by the tax authorities or the statute of limitations period has elapsed. The Group has the last four years open for review for the main taxes applicable to it (five years in the case of corporate income tax).

As a result, inter alia, of possible differing interpretations of the current tax legislation, additional liabilities might arise as a result of a tax audit. However, the Company's directors consider that such liabilities, if any, would not materially affect the financial statements.

On 6 January 2015, the Spanish tax authorities notified the company of plans to commence a partial tax audit of corporate income tax for the years 2010 to 2012, which would be confined to examining revenues from certain intangible assets reported by PharmaMar. On 20 January 2015, the Company applied to the tax authorities for the partial tax audit to be converted into a general tax audit covering the taxes and periods in question.

As a result, notification of the initiation of the tax audit was received in June 2015. It refers to the following periods and Group entities.

	Corporate income tax	VAT	Personal income tax - Spanish residents	Personal income tax - Non-residents	Income from capital
Zeltia, S.A.	2010-2013	2011-2013	2Q 2011 - 4Q 2013	2Q 2011 - 4Q 2013	2Q 2011 - 4Q 2013
Genómica, S.A.U.	2010-2013	2011-2013	2Q 2011 - 4Q 2013	2Q 2011 - 4Q 2013	2Q 2011 - 4Q 2013
PharmaMar, S.A.U.	2010-2013	2011-2013	2Q 2011 - 4Q 2013	2Q 2011 - 4Q 2013	-
Zelnova Zeltia, S.A.	2010-2013	06/2011-2013	1Q 2012 - 4Q 2013	-	-
Xylazel, S.A.	2010-2013	06/2011-2013	1Q 2012 - 4Q 2013	-	-

The tax audit concluded in September 2016. The company accepted an assessment that resulted in a reduction in the tax base, and it disputed assessments for corporate income tax, personal income tax withholdings and prepayments, value added tax and non-residents' personal income tax. There is currently one appeal pending before the National Court and four appeals before the High Court.

The net amount of corporate income tax payable by the companies in the Spanish tax group in each of the years referred to in the disputed tax assessments is zero in all cases, since the companies in the Spanish tax group have tax losses and international double taxation tax credits which were applied in the tax authorities' proposal, in accordance with the regulations in force in each year. Consequently, in the worst-case scenario, in which all of the tax group's appeals were to fail, the tax payable would be zero and no late payment interest would accrue.

The amount of tax due plus late payment interest and penalties that would be payable in the event that none of the appeals succeeded would not result in a material reduction in the assets recognized by the Group.

25. FINANCIAL INCOME

The detail of financial income is as follows:

(thousand euro)	31/12/2022	31/12/2021
FINANCIAL REVENUES	1,585	777
Marketable securities and other equity instruments	1,585	777
Group and associated undertakings (Note 30.2)	706	402
Third parties (Note 15)	879	375
FINANCIAL EXPENSES	(3,629)	(2,249)
On debts to third parties	(3,629)	(2,249)
EXCHANGE DIFFERENCES	3,259	5,836
IMPAIRMENT AND INCOME FROM DISPOSAL OF FINANCIAL INSTRUMENTS	(4,940)	-
Impairment of group undertakings	(4,940)	-
FINANCIAL INCOME	(3,725)	4,364

Financial revenues from marketable securities and other equity instruments arise basically from interest received from third parties on financial assets (Note 15) and loans granted to Group undertakings.

In 2022 and 2021, most of the exchange differences were due to marking the Company's deposit in dollars to market at year-end.

Impairment of group undertakings: in 2022 this caption mainly reflects the impairment of the total investment in Genómica, S.A.U. en liquidación, after it was decided to liquidate this company. The amount of the impairment includes the capital increase carried out in June 2022 against the loan from Pharma Mar, S.A. (Note 11.3).

26. SHARE-BASED PAYMENTS

At the end of 2022, PharmaMar and the Group companies had three share ownership plans in place for Group executives and employees (excluding directors of Pharma Mar, S.A.). The plan implemented in 2020 was for executives and employees who collected variable annual remuneration for attainment of objectives in 2019, had an indefinite contract (having completed any trial period by 31 December 2019) and had exceeded 50% of the targets for that year set by their department head or hierarchical superior. The plans implemented in 2021 and 2022 were aimed at all employees and executives of Group companies (excluding directors of Pharma Mar, S.A.) who had at least six months' seniority as of 31 December 2020 and 2021, respectively, and were liable for personal income tax.

Below are details of the essential terms and conditions of those share ownership plans. At the start of each year, each Group company that has decided to apply the Share Ownership Plans provides the Board of Directors of PharmaMar with a list of plan beneficiaries (i.e. employees who meet the conditions established in the relevant decision by the Shareholders' Meeting) which details, in the case of the plans implemented in 2020, the degree of attainment by the beneficiary of the objectives set for the preceding year. Additionally, given that participation in such plans has been voluntary, the lists for the Plan implemented in 2020 include only employees and executives who decided to participate and to allocate part or all of their variable remuneration to those plans; in the case of the Plans implemented in 2021 and 2022, the list includes the employees and executives who chose to participate and allocate part of their salary to the Plan. In the Plan implemented in 2020, each beneficiary was assigned a coefficient based on the degree of attainment of their objectives the previous year (on the basis of which the amount to be granted in shares was calculated); in the Plans implemented in 2021 and 2022, each beneficiary was assigned the same percentage for calculating the number of shares to be granted. Based on that information, the Board of Directors resolved that these beneficiaries should be given, by their respective employers, shares for the amount detailed in the aforementioned lists (not exceeding €12,000 per beneficiary and year in any event).

In the Plan implemented in 2020, the number of shares to be delivered to each beneficiary is the result of dividing the amount of variable remuneration allocated to the Plan, multiplied by the corresponding coefficient plus 1, by the value attributed to the shares. In the Share Ownership Plans implemented in 2021 and 2022, the number of shares delivered is the result of dividing the amount of salary allocated to the Plan by the value attributed to the shares, and applying the percentage of 100% (i.e. delivering an amount of shares equivalent to the shares acquired by the beneficiary). In all the Plans, the value attributed to the shares was the lower of: a) the weighted average price of the PharmaMar share in the electronic market on the Plan's execution date; or b) the arithmetic mean of the weighted average price of the PharmaMar share in the electronic market in the month prior to the execution date.

Executives and employees who elected not to participate in the Plan implemented in 2020 collected their variable remuneration entirely in cash, but without a multiplier being applied.

Beneficiaries hold the voting and dividend rights to the shares delivered to them from the date of effective delivery, although those shares are subject to lock-up for three years from that date (lock-up period); nevertheless, some of the shares will be released from lock-up 18 months after delivery: specifically, the number of shares resulting from dividing the total number of shares that were delivered by the assigned coefficient plus one (in the case of the Plan implemented in 2020), or by two (in the case of the Plans implemented in 2021 and 2022). The delivery of those shares, which must remain locked up for the above-mentioned lock-up period, is subject to a condition subsequent which is understood to be met in the event of voluntary severance or fair dismissal of the beneficiary. In the event of cessation of employment due to a cause other than those two, the lock-up is lifted.

Year 2019 (Share Ownership Plan approved by the Ordinary Shareholders' Meeting on 28 June 2018) – (Note 17)

On 28 June 2018, the Shareholders' Meeting of Pharma Mar, S.A. approved a new Share Ownership Plan that was executed in June 2019. The Company allocated 500,000 own shares from treasury stock to execute this plan.

In executing this Plan, a total of 163,631 shares were allocated in 2019 to 99 beneficiaries at a value of €2.0768 per share.

A total of 43,718 shares (3,629 shares after the stock merge) were released under this Plan in 2020.

In relation to this Plan, a total of 33,503 shares (2,790 shares after the stock merge) were canceled in 2022: 3,140 shares (261 shares after the stock merge) purchased by employees and executives and 30,363 shares (2,529 shares after the stock merge) contributed by the Company.

This Plan concluded in June 2022 since the three-year lock-up period had expired, and the shares that were under lock-up were released. A total of 86,410 shares (7,190 shares after the stock merge) were released under this Plan.

Year 2020 (Share Ownership Plan approved by the Ordinary Shareholders' Meeting on 26 June 2019) – (Note 17)

On 26 June 2019, the Shareholders' Meeting of Pharma Mar, S.A. approved a new Share Ownership Plan that was executed in May 2020. The Company allocated 500,000 own shares from treasury stock to execute this plan.

In executing this Plan, a total of 128,408 shares were allocated in 2020 to 131 beneficiaries at a value of €4.6108 per share.

A total of 30,763 shares (2,527 shares after the stock merge) were released under this Plan in 2021.

In 2022, 20,573 shares (1,706 shares after the stock merge) were canceled in 2022: 3,308 shares (273 shares after the stock merge) purchased by employees and executives and 17,265 shares (1,433 shares after the stock merge) contributed by the Company.

As of 31 December 2022, 77,072 shares (6,408 shares after the stock merge) contributed by the Company had not accrued.

Year 2021 (Share Ownership Plan approved by the Ordinary Shareholders' Meeting on 18 June 2020) – (Note 17)

On 18 June 2020, the Shareholders' Meeting of Pharma Mar, S.A. approved a new Share Ownership Plan that was executed in April 2021. The Company allocated 500,000 own shares from treasury stock to execute this plan.

In executing this Plan, a total of 8,026 shares were allocated in 2021 to 183 beneficiaries at a value of €103.0164 per share.

In 2022, a total of 3,538 shares were released from lock-up under this Plan.

In relation to this Plan, a total of 1,031 shares were canceled in 2022: 475 shares purchased by employees and executives and 556 shares contributed by the Company.

As of 31 December 2022, there were 3,457 shares that had not accrued.

Year 2022 (Share Ownership Plan approved by the Ordinary Shareholders' Meeting on 15 April 2021)

On 15 April 2021, the Shareholders' Meeting of Pharma Mar, S.A. approved a new Share Ownership Plan that was executed in May 2022. The Company allocated 41,000 own shares from treasury stock to execute this plan.

In executing this plan, a total of 8,244 shares were allocated in 2022 to 167 beneficiaries at a value of €71.5923 per share.

In relation to this Plan, a total of 224 shares were canceled in 2022: 212 shares purchased by employees and executives and 212 shares contributed by the Company.

As of 31 December 2022, there were 8,020 shares that had not accrued.

Year 2023 (Share Ownership Plan approved by the Ordinary Shareholders' Meeting on 29 June 2022)

On 29 June 2022, the Shareholders' Meeting of Pharma Mar, S.A. approved a new Share Ownership Plan to encourage employees and executives of Group companies to own capital in Pharma Mar, S.A. and to remain in the Group, under the same conditions for all of them. The maximum number of shares that can be allocated for the execution of this plan was set by the Shareholders' Meeting at 41,000, which will be taken from treasury stock held by the Company at the time the plan is implemented. The Shareholders' Meeting determined that the beneficiaries of this Plan would be the Group's employees and executives (excluding directors of Pharma Mar, S.A.) who are in active service at the time the plan is implemented and have at least six months' seniority as of 31 December 2021.

The Shareholders' Meeting empowered the Board of Directors to determine the other terms and conditions of the Plan. At the date of authorizing these financial statements, the Plan was pending execution, and the Board of Directors of PharmaMar had yet to establish the conditions of same under the powers granted specifically for this purpose by the Shareholders' Meeting.

The following table shows the number of shares under each plan as of 31 December 2022, adjusted for the stock merge:

	Shares awarded under plan	Shares purchase d by employee s - canceled	Shares purchased by employees - accrued	Shares purchased by employees - not yet accrued	Shares contribute d by employer - canceled	Shares contributed by employer - accrued	Shares contribut ed by employer - not yet accrued	Total number of shares not yet accrued	Fair value per share	Accrual period
	(1)+(2)+(3)+( 4)+(5)+(6)	(1)	(2)	(3)	(4)	(5)	(6)	(3)+(6)
Plan / Grant date
Plan 17 June 2018 (Granted June 2019)	13,609	261	3,629	-	2,529	7,190	-	-	2.08	June 22
Plan 18 June 2019 (Granted May 2020)	10,641	273	2,527	-	1,433	-	6,408	6,408	4.61	May 23
Plan 19 June 2020 (Granted April 2021)	8,026	475	3,538	-	556	-	3,457	3,457	103.02	Mar. 24
Plan 20 June 2021 (Granted May 2022)	8,244	112	-	4,010	112	-	4,010	8,020	71.59	May 25
	40,520	1,121	9,694	4,010	4,630	7,190	13,875	17,885

A total of €337 thousand were recognized as reserves for the amortization of the share ownership plans in 2022 (€297

thousand in 2021). Additionally, the amount recognized in the period was €259 thousand (€335 thousand in 2021), and €4 thousand were derecognized (€7 thousand in 2021).

27. CONTINGENCIES

Under current law, tax returns cannot be deemed definitive until they have been inspected by the tax authorities or the statute of limitations period has elapsed. The Group has the last four years open for review for the main taxes applicable to it (five years in the case of corporate income tax).

A tax inspection of the Spanish Group for the years 2010, 2011, 2012 and 2013 concluded in September 2016 for the following taxes: corporate income tax, VAT, personal income tax (withholdings), non-residents' personal income tax, and withholdings from income from capital. PharmaMar's management has made its best estimates of the tax risk represented by the tax assessments that are in dispute (Note 24). This tax risk is not material in relation to the financial statements.

For the rest of the years open to inspection, the Company's directors do not anticipate that additional liabilities would arise or that the amount of recognized assets might be reduced such as to have a material effect on these consolidated financial statements.

28. COMMITMENTS

28.1 Purchase and sale commitments

The Company does not have any purchase or sale commitments.

28.2 Operating lease commitments

The minimum future payments for non-cancelable operating leases as of 31 December 2022 and 2021 are detailed in Note 9.

28.3 Share-based incentive plans

• Under the eighteenth plan (June 2019) for delivery of shares free of charge, 77,072 shares (6,408 shares after the stock merge) delivered and subject to lock-up as of 31 December 2022 will be released in May 2023.

• Under the nineteenth plan (June 2020) for delivery of shares free of charge, of the shares delivered and under lockup as of 31 December 2022, 3,457 will be released in May 2024.

• Under the twentieth plan (April 2021) for delivery of shares free of charge, of the shares delivered and under lockup as of 31 December 2022, 8,020 shares will be released in two tranches: 4,010 shares in November 2023 and 4,010 shares in May 2025.

28.4 Other commitments

The company has provided comfort letters to credit institutions. Those comfort letters were mainly for Genómica S.A.U. en liquidación for a total of €1,350 thousand.

The Company has also obtained several credit and guarantee lines from financial institutions in the amount of €1,290 thousand under which the Company is listed as a borrower alongside Genómica S.A.U. en liquidación and Pharma Mar USA. PharmaMar is jointly and severally liable for the full amounts drawn against those credit and guarantee lines, including amounts drawn by Genómica, S.A.U. en liquidación and PharmaMar USA.

29. DIRECTOR AND SENIOR MANAGEMENT REMUNERATION

29.1 Director remuneration

The following table shows the remuneration paid in 2022 and 2021 to directors of PharmaMar:

(thousand euro)	31/12/2022	31/12/2021
Fixed remuneration for executive directors	1,468	1,343
Variable remuneration for executive directors	947	1,076
Fixed remuneration for belonging to the Board of Directors	804	771
Board and Board committee meeting attendance fees	549	418
Fixed remuneration for belonging to Board committees	578	596
Remuneration for belonging to Boards of other Group undertakings	10	31
Remuneration for Lead Independent Director	19	18
Other remuneration	379	337
Total	4,754	4,590

The "Other remuneration" item in 2022 and 2021 refers to certain benefits in kind paid to the Company's Chairman and Vice-Chairman, such as casualty and health insurance under the group policy for Company employees. The Chairman also has an executive office at the Company's operational headquarters, communication equipment, means of payment, support staff, security systems and personnel, and a vehicle commensurate with his functions. Additionally, each year the Company pays €12 thousand in premiums for life and saving insurance (life insurancesavings plan) for each of the two executive directors.

With respect to the executive director's variable remuneration, €947 thousand accrued as a result of evaluation of objectives approved by the Board of Directors at its meeting on 31 January 2023, based on a proposal by the Appointments and Remuneration Committee.

29.2 Senior management remuneration and loans

Company senior management received an aggregate total remuneration of €2,567 thousand in 2022 (€2,455 thousand in 2021).

29.3 Companies related to the directors and executives and their close relatives

In 2022, a company related to one member of the Board of Directors provided services to the Company amounting to €11 thousand (€4 thousand in 2021).

29.4 Directors' duty of loyalty

Based on the disclosures presented by each of the Company's directors, they and, to the best of their knowledge and belief, their related parties did not incur in situations of conflict of interest as envisaged in article 229 of the Consolidated Text of the Capital Companies Act, except where they were authorized (see Note 29.3 Companies related to the directors and executives and their close relatives).

30. OTHER TRANSACTIONS WITH RELATED PARTIES

30.1 Balances with group companies

The detail of accounts payable to and receivable from group undertakings as of 31 December 2022 and 2021 is as follows:

(thousand euro) 2022	Non-current assets	Current assets	Current liabilities
Loans and other financial assets/liabilities	5,234	56	6,165
Genómica, S.A.U. en liquidación	-	-	2,173
Sylentis, S.A.U.	5,234	56	3,992
Trade accounts receivable/payable	-	2,489	3,256
Pharma Mar, USA	-	-	390
Pharma Mar, Srl	-	181	187
Pharma Mar, GmbH	-	575	237
Pharma Mar, Sarl	-	169	1,593

Pharma Mar, Srl (Belgium)	-	520	268
Pharma Mar, Ges.m.b.H.	-	567	471
PharmaMar, AG	-	477	110
TOTAL	5,234	2,545	9,421
(thousand euro) 2021	Non-current assets	Current assets	Current liabilities
Loans and other financial assets/liabilities	21,378	97	4,093
Genómica, S.A.U.	1,444	47	1,276
Sylentis, S.A.U.	19,934	50	2,817
Trade accounts receivable/payable	-	4,296	2,212
Pharma Mar, USA	-	-	285
Pharma Mar, Srl	-	4	342
Pharma Mar, GmbH	-	2,325	141
Pharma Mar, Sarl	-	269	1,052
Pharma Mar, Srl (Belgium)	-	1,110	186
Pharma Mar, Ges.m.b.H.	-	88	138
PharmaMar, AG	-	500	68
TOTAL	21,378	4,393	6,305

Under non-current assets, loans and other financial assets refer to loans granted by the Company to its subsidiaries, Genómica and Sylentis. In 2021, there was a loan to Genómica amounting to €1,819 thousand that has been partly impaired in the amount of €375 thousand.

Current assets consist principally of accounts receivable (€2,489 thousand as of 31 December 2022 and €4,296 thousand as of 31 December 2021), i.e. the amount yet to be received for the sale of PharmaMar products to subsidiaries operating under the distribution model.

Current liabilities with Group undertakings in 2022 are broken down in the table:

(thousand euro)
2022	Taxes	Services delivered	Total
Genómica, S.A.U. en liquidación	2,173	-	2,173
Sylentis, S.A.U.	3,992	-	3,992
Pharma Mar USA	-	390	390
PharmaMar, AG	-	110	110
Pharma Mar, Srl	-	187	187
PharmaMar, GmbH	-	237	237
Pharma Mar, Sarl	-	1,593	1,593
Pharma Mar, Srl (Belgium)	-	268	268
Pharma Mar, Ges.m.b.H.	-	471	471
TOTAL	6,165	3,256	9,421

Taxes due are debts owed by the parent company to its subsidiaries as a result of tax consolidation of both corporate income tax and value added tax. In both cases, the amounts outstanding with the tax administration are recognized at PharmaMar, the head of the group, which also recognizes the account payable to its subsidiaries. Specifically, (€5,889 thousand) relate to corporate income tax and €277 thousand to VAT pending recovery in connection with 2021.

30.2 Transactions with Group undertakings

The amounts of the Company's transactions with Group undertakings as of 31 December 2022 and 2021 are as follows:

TRANSACTIONS WITH GROUP UNDERTAKINGS
EXPENSES	2022	2021
(thousand euro)
Services received
Genómica, S.A.U. en liquidación	9	18
Pharma Mar, GmbH	399	489
Pharma Mar, USA	1,274	1,179
PharmaMar, AG	193	221
Pharma Mar, Sarl	1,744	1,269
Pharma Mar, Srl	186	342
Pharma Mar, Srl (Belgium)	268	155
Pharma Mar, Ges.m.b.H.	470	960
Total expenses	4,543	4,633

REVENUES	2022	2021
(thousand euro)
Sales
PharmaMar, AG	1,450	1,633
Pharma Mar, Srl	9,951	13,377
Pharma Mar, GmbH	11,187	13,706
Pharma Mar, Sarl	2,354	2,304
Pharma Mar, Srl (Belgium)	1,854	1,914
Services provided
Genómica, S.A.U. en liquidación	25	37
Sylentis, S.A.U.	14	15
Pharma Mar, Srl	173	71
Pharma Mar, GmbH	455	1,147
PharmaMar, AG	3	3
Pharma Mar, Srl (Belgium)	131	119
Pharma Mar, Sarl	196	133
Pharma Mar, GesmbH	129	62
Financing
Genómica, S.A.U. en liquidación	29	34
Sylentis, S.A.U.	677	368
Total revenues	28,628	34,923

The transactions with Group undertakings were conducted on an arm's-length basis.

31. SURETIES AND GUARANTEES

The sureties and guarantees provided by banks for subsidies and advances received by the Company from public authorities amounted to €3,441 thousand as of 31 December 2022 (€3,952 thousand in 2021). €465 thousand relate to guarantees that had to be presented for Yondelis distribution tenders.

32. ENVIRONMENT

There were no material investments in environmental matters in 2022 and 2021.

The most significant installations that the Company has at present include:

• Atmospheric emissions: To control and clean emissions, the Company has scrubbers for gas from fume cupboards, absolute particle filters in the production area, and particle filters in the R&D department.
• Industrial discharges: the Company has a network that separates industrial water, two tanks to homogenize discharges, and a discharge valve, pursuant to Madrid Region Law 10/93.
• Waste: the Company invested in the construction of two warehouses to store waste prior to removal and disposal.

Environmental protection and improvement expenses amounted to €106 thousand in 2022 (€70 thousand in 2021) and relate mainly to waste disposal by third parties.

The Company is not aware of any significant environmental contingencies as a result of its activities.

33. AUDITORS' FEES

The fees accrued by PricewaterhouseCoopers Auditores, S.L. and other firms in its network amounted to €438 thousand in 2022 (€412 thousand in 2021) for the statutory audit of Pharma Mar, S.A. and dependent companies. No audit services were provided in 2022 and 2021 apart from the statutory audit. Fees for other non-audit services amounted to €43 thousand in 2022 (€43 thousand in 2021).

34. SUBSEQUENT EVENTS

On 3 February 2023, the Company collected €17,243 thousand from the Spanish tax authorities under the heading of corporate income tax for monetization of certain research and development tax credits under 2021 corporate income tax.

In February 2023, it was decided to close the Phase III Neptuno study with plitidepsin for the treatment of COVID-19 in hospitalized patients. The company took this decision because the evolution of the pandemic resulted in a lack of patients available for enrolment.

In 2023, the Company tacitly rolled over a credit line amounting to €3,000 thousand in total.

Between year-end and the authorization of these financial statements, no significant events occurred that affect the content of these financial statements and there were no other events requiring disclosure.

1. COMPANY SITUATION

1.1 Organizational structure

The main activity of Pharma Mar, S.A. (the "Company" or "PharmaMar") is research, development and commercialization of bio-active principles, particularly those of marine origin, for application in human medicine, especially in the antitumor field, as well as management, support and development of its investees, mainly in the biopharmaceutical business (diagnostics and RNAi).

In 2020, PharmaMar opened a new line of business: the Virology unit, where it has researched the antiviral activity of one of the compounds in its pipeline, plitidepsin, against COVID-19. The Group considers that this line of activity is not sufficiently significant to form a new segment.

The Board of Directors of the Pharma Mar, S.A. defines the general strategy. It has the following sub-committees: Executive Committee, Audit Committee, and Appointments, Remuneration and Sustainability Committee.

1.2 Operations: Business model, strategy

PharmaMar's main business is the development and marketing of antitumor drugs of marine origin.

The oncology business model focuses on discovering new marine-based antitumor molecules and developing them in preclinical and clinical trials with a view to producing new drugs with therapeutic advantages for oncology patients. PharmaMar's strategy also includes the search for strategic alliances with partners, preferably in the same industry, that will invest and collaborate in advancing the compounds through the various research phases and in subsequent marketing.

One of the distinguishing factors of the oncology business model is the capacity to discover new molecules for the pipeline, thereby generating opportunities to develop new drugs for the Company. The Company has several antitumor molecules in its pipeline at various stages of development, the goal being to bring new compounds to market. PharmaMar's business model includes having its own sales network covering Europe. This network not only enables the Company to sell its products directly in the EU, but also provides scope to leverage future opportunities to sell third-party products.

PharmaMar invests heavily in R&D and innovation in oncology and it is firmly committed to R&D to bring new drugs to market.

PharmaMar sees its strengths as being:

• A unique, integrated technology platform based on marine organisms which has led to approval to market three of its compounds in many markets around the world trabectedin, lurbinectedin and plitidepsin — and provides it with new candidates in earlier stages of clinical development with the objective of obtaining future approvals.
• Compounds already approved for certain antitumor indications have the potential to be approved for other indications.
• A well-established commercial structure in Europe that is focused on oncology and has the capacity to expand its portfolio with new products.
• Generation of revenues in the oncology business from direct sales of proprietary products.

• Out-licensing agreements in advantageous conditions for several of its compounds that have been signed and are in force, producing sizeable revenues.

• A library of samples of marine organisms that can be tested for therapeutic applications other than oncology, as has been shown in the case of virology.

• A robust financial position to fund its projects.
• The Company is investing in other opportunities, enabling it to diversify part of its business. As a result, it has a virology treatment for patients with COVID-19 under clinical development.
• The Company's strategy also includes the search for strategic alliances with partners, preferably in the same industry, that will invest and collaborate in advancing the compounds through the various research phases and in subsequent marketing.

The key components of PharmaMar's strategy are:

• Continue the clinical development of lurbinectedin in both small cell lung cancer and new indications to expand its application.
• Continue the clinical development of molecules currently in the pipeline to advance them along the clinical development track.
• Use its unique, marine-based technological platform to continue feeding its pipeline of compounds. A new molecule was recently added to the oncology pipeline and another is expected to enter clinical development shortly.
• In-license one or more third-party products for marketing through the PharmaMar sales network: these would be products in the commercial or regulatory phase that would contribute to increasing the Company's revenues.
• Maximize the commercial value of lurbinectedin in markets outside the US and Europe through partnerships with third parties.
• Advance with clinical and pre-clinical development in the Virology unit.

2. BUSINESS PERFORMANCE AND RESULTS

2.1. Total revenues

Net sales amounted to €88,738 thousand, consisting almost entirely of sales of Yondelis (€51,814 thousand) and in 2022 also included sales of the active ingredients of Yondelis, Aplidin and Zepzelca to our partners in the amount of €21,423 thousand, as well as sales of Zepzelca in certain European countries, mainly under the Compassionate Use program (AAC) in France, for a total amount of €15,155 thousand. Net sales amounted to €108,992 thousand in 2021.

Royalties relate mainly to sales of Zepzelca by our partner Jazz Pharmaceuticals in the United States. These royalties amounted to €46,881 thousand in 2022 (€37,954 thousand). PharmaMar also collected royalties amounting to €3,373 thousand from Janssen Products and Taiho Pharmaceutical Co for sales of Yondelis (€3,042 thousand in 2021).

Revenues from licensing and other development agreements amounted to €40,169 thousand in 2022 (€64,787 thousand in 2021). This revenue in 2022 was principally from the recognition of €29,547 thousand in revenue out of the USD 300,000 thousand collected in 2020 under the Zepzelca licensing agreement with Jazz Pharmaceuticals, which is being recognized in the income statement as a function of the fulfilment of contractual commitments. It also relates to €10,087 thousand as a result of attaining a commercial milestone contemplated in the 2001 licensing and co-development agreement with Janssen (Johnson&Johnson).

2.2. International revenues

Out of total 2022 revenues, 93%, i.e. €167,387 thousand, came from sales and transactions in other countries (94%, €202,105 million in 2021).

2.3. Gross margin

The gross margin was 69% of total revenues in 2022 (85% in 2021) (*).

(*) Calculated with respect to sales only, not including royalties or licensing revenues.

2.4. R&D expenditure

PharmaMar spent €68,099 thousand on R&D in 2022, of which €17,141 thousand were costs incurred in the development of plitidepsin (Aplidin) as an antiviral.

Expenditure directly on oncology in 2022 was related mainly to the LAGOON confirmatory Phase III trial with lurbinectedin in small cell lung cancer, clinical trials of this molecule in combination with other agents, and the preparation of clinical trials in other indications. Also noteworthy was spending on the clinical trial of ecubectedin in solid tumors, and the commencement of clinical trials in humans with PM534, a new anti-tumor compound of marine origin from the company's solid tumor research program. In addition, progress continues to be made in preparing new candidates for clinical development, as well as in researching new compounds in earlier phases and in preclinical trials to bring new molecules to the clinical pipeline.

2.5. Operating expenses

(thousand euro)	31/12/2022	31/12/2021	Change
Staff expenses	38,064	34,826	9.3%
Outside services	65,188	54,453	19.7%
Purchases	27,370	16,808	62.8%
Taxes other than income tax Depreciation and	570	556	2.5%
amortization	3,001	2,681	11.9%
Bad debts	-	-
Fixed asset impairment	(60)	(26,856)
Fixed asset derecognition	2	26,712
	134,135	109,180

The breakdown of operating expenses is shown in the next table:

Personnel expenses increased due to new staff hires as a result of the company's increased activity.

Outside services increased mainly as a result of greater activity in clinical trials.

The increase in Procurements reflects the increase in production during 2022.

In 2021, fixed asset derecognition in the amount of €26,672 thousand relates to the impairment booked in 2018 in connection with PM184, a compound under development. In 2021, after analyzing the latest results, the Company decided to discontinue the development of this molecule, and derecognized the previously impaired balance.

2.6. Profit or loss for the year

The Company reported a profit after tax of €58,954 thousand in 2022 (€103,363 thousand in 2021). This variation between years is a consequence of the decrease in revenues, mainly from licensing agreements and sales, partially offset by the increase in royalty revenues, as well as the increase in expenses, mainly in R&D.

2.7. Other events that impacted the 2022 financial statements

Lurbinectedin (Zepzelca)

A) In connection with revenues from the AAC compassionate use program in France, under which Zepzelca is marketed in that country, a new regulation came into force regulating the price of medicines under the program. This new regulation imposes significant discounts on these drugs. The impact in 2022, estimated at €15,155 thousand, has been provisioned. Nevertheless, unit sales were similar to the previous year.

Trabectedin (Yondelis)

• A) In December, PharmaMar collected USD 10 million from Janssen (J&J) as a result of attaining a commercial milestone contemplated in the 2001 licensing and codevelopment agreement.
• B) Fifteen years after Yondelis reached the market (2007), the first generics of trabectedin began to be marketed in Europe in the fourth quarter of 2022. The loss of exclusivity for Yondelis in the EMA space in September 2022 triggered a revision of official prices in several European countries.

On 27 September 2022, the Board of Directors of PharmaMar decided to discontinue the diagnostics business, conducted through its wholly-owned subsidiary Genómica, S.A.U., and to initiate the proceedings to dissolve and liquidate that company. As of the closing date of this report, Genómica continues its production activity in order to meet pre-existing commitments to customers.

2.8. Personnel

PharmaMar had 396 employees as of 31 December 2022 (353 in 2021).

Women account for 60% of the workforce (61% in 2021).

The graph below illustrates segmentation by gender and category:

2.9. Environmental issues

The Company did not need to incur material investments to protect and improve the environment during the year.

Since there were no contingencies relating to environmental protection and improvement and there are no risks that could have been transferred to other companies, it was not necessary to recognize any provisions for environmental actions in the year.

PharmaMar has an ISO 14001-certified environmental management system that is audited annually by independent firms.

PharmaMar has also signed the Pact for Biodiversity, which aims to promote economic development that is compatible with biodiversity conservation.

2.10. Average period taken to pay suppliers

Information on payments for commercial transactions performed in 2022 and pending payment at the end of the year in relation to the maximum legal payment periods envisaged in Act 18/2022 is as follows:

2022	2021
52	59
56	64
28	32
59,473	44,509
10,407	7,279
7,843	7,191
67,222	45,922
3,885	3,198
35,388	19,182
53.20%	47.46%
59.50%	43.10%

The average supplier payment lag in the year between 1 January and 31 December 2022 was 52 days (59 days in 2021).

3. LIQUIDITY AND CAPITAL

The balance of "cash + cash equivalents" amounted to €143,777 thousand as of 31 December 2022 (€103,534 thousand in 2021).

The "Current financial investments" caption, which amounts to €32,341 thousand (€88,030 thousand in 2021), mainly includes term deposits of €18,278 thousand maturing on 10 June 2023 and deposits in US dollars amounting to €14,063 thousand (€67,985 thousand in 2021) at a number of financial institutions that are indexed to Libor and mature between May and November 2023 with yields ranging from 0.89% to 4.04% depending on when the investment was made and the specific terms.

Current debt amounts to €8,788 thousand (€11,404 thousand in 2021) and non-current debt to €25,032 thousand (€27,645 thousand in 2021).

PharmaMar had a net cash balance of €191,599 thousand as of 31 December 2022.

The Company did not arrange any bank debt in 2022 and 2021.

As of 31 December 2022, the Company had €10,892 thousand available in credit lines.

Consequently, at the time of authorizing these financial statements, the directors of PharmaMar consider that PharmaMar has ample liquidity to cover its research and development projects and honor its future payment obligations.

The directors estimate that R&D expenditure in 2023 will be higher than in 2022 but that the other operating expenses will not increase significantly.

4. MAIN RISKS AND UNCERTAINTIES

4,1. Situation risks

Competition.

The biopharmaceutical market is highly competitive and involves multinationals, small and medium-sized domestic players, and generic producers.

PharmaMar's results may be affected by the launch of novel or innovative products, technical and technological progress, and the launch of generics by competitors.

Industrial property. Patents.

Industrial property is a key asset for PharmaMar. Effective protection of industrial property is vital for ensuring a reasonable return on investment in R&D. Industrial property can be protected by registering patents, trademarks, brand names, domains, etc.

Patents run for 20 years in most countries, including the USA and the European Union. The effective period of protection depends on how long drug development takes before launch. To compensate partly for such a long development period and the need to obtain authorization before marketing a drug, a number of markets (including the USA and the European Union) offer patent extensions of up to five years in certain circumstances.

Deficient protection of an invention or excessively long development times that limit the patent's useful life are risks inherent to the pharmaceutical business.

PharmaMar has a rigorous patent policy which seeks to protect inventions obtained through its R&D activities. In addition to the protection that can be obtained for newly-discovered active principles, we also actively pursue protection for new formulations, production processes, medical applications and even new methods of drug administration.

PharmaMar has a system for managing its patents' life cycle, with patent departments that regularly review the patent situation in coordination with the regulatory affairs department. The Company also exercise vigilance to detect breaches of our patents by other companies with a view to taking legal action if necessary.

Regulation

The pharmaceutical industry is highly regulated. Regulations cover such aspects as research, clinical trials, drug registration, drug production, technical validation of production standards, and even marketing. Regulatory requirements have become more stringent in recent times and this trend is expected to continue.

In most countries, pharmaceutical prices are controlled and regulated by the government, which has the power to authorize, disallow or even rule out reimbursement for the products. In recent years, prices have been reduced and reference prices have been approved, while the marketing and prescription of generics and biosimilar products have been facilitated.

To offset the risk of a constant flow of new legal and regulatory requirements, PharmaMar makes its decisions and designs its business processes on the basis of developing innovative products in therapeutic areas where treatment options are very limited. The Group also constantly obtains exhaustive analyses of these issues by our own experts and by prestigious external experts where necessary.

Capital availability

Because the markets are not always open and PharmaMar makes significant R&D investments each year, the group seeks a range of funding sources, in both the credit and capital markets, to finance its growth, implement its strategy and generate income in the future.

PharmaMar has spread out its risk considerably among various credit institutions, which provides it with greater flexibility and limits the impact in the event that any of its loans are not rolled over.

It has also issued long-term debt in order to diversify its funding sources.

Shareholders

As in the case of any listed company, there is the risk that a shareholder may consider that a decision by the Company's Board of Directors or executives is detrimental to their interests as a shareholder and file a complaint.

PharmaMar has director and executive liability insurance which covers the risk of a shareholder filing a complaint on the grounds that a decision by the Company's Board of Directors or executives is detrimental to their interests.

4.2. Operating risks

Commodity prices

Deviations from expected price levels and a strategy of buying and accumulating inventories of raw materials may expose the organization to excessive production costs and to losses on inventories.

PharmaMar conducts an in-depth analysis of prices at the beginning of the year and tries to obtain a closed price for the year from its suppliers. The products' cost prices are set on this basis. These are monitored monthly in case any modifications are necessary.

Health and safety

Failure to provide a safe workplace for its employees would expose the Company to sizable expenses, loss of reputation and other costs.

Workplace health and safety is monitored exhaustively in pursuit of continuous improvement.

Exposure of laboratory personnel to new natural or synthetic compounds whose possible adverse effects are unknown creates a theoretical health and safety risk in addition to the standard risk of handling chemicals.

The Company has implemented a workplace health and safety system which is audited regularly to ensure compliance.

The Company has also arranged casualty and third-party liability insurance.

Pharma Mar, S.A. has obtained OHSAS 18001 certification of its workplace health and safety systems. Additionally, in 2020, PharmaMar's workplace health and safety systems were certified in accordance with ISO 45001, which represents a new approach based on the organization's internal and external context.

Environmental

Environmental risks can generate potentially significant liabilities for companies. The greatest risk lies in third-party claims for harm to persons or property as a result of pollution.

PharmaMar's production processes in general have a very low risk of environmental impact (noise, smoke, discharges, etc.) and generate almost no waste.

Waste management is outsourced to recycling and waste management companies that are authorized by the pertinent environmental administration. Regular compliance checks are conducted and, where necessary, atmospheric emissions are monitored, water purification systems are installed and the Group has designated points for depositing separated waste.

PharmaMar is certified to the ISO 14001 standard, a management tool for the systematic oversight of the degree of interaction between the companies' activities and processes and the environment, the goal being to enhance environmental performance and minimize the impact. The environmental management system is audited annually by independent firms.

Product development

PharmaMar allocates a considerable volume of resources to researching and developing new pharmaceutical products. As a result of the length of this process, the technological challenges involved, the regulatory requirements and the intense competition, it is not possible to be sure that all compounds currently under development and those to be developed in the future will reach the market and attain commercial success.

To maximize the effective and efficient use of our resources, the Company has implemented a horizontal working structure across the various departments, project-specific teams and reporting systems to monitor R&D projects internally.

4.3. Information risk

Malfunction of the Company's internal information flows poses the risk of misalignment with strategy and of erroneous or mistimed decisions.

Market disclosures

The Company is also obliged to disclose certain financial information and make other regulatory disclosures that must be truthful, complete and timely. Failure to comply carries the risk of punishment and of a loss of credibility.

Breach of transparency and market integrity rules is classified as a serious or very serious violation of current law, incurring punishment under the consolidated text of the Securities Market Act, with the possibility of reputational damage to the Company and/or loss of credibility among investors.

PharmaMar's management and Board of Directors and certain of the company's executives and employees have access to privileged information about the Company's performance.

There are control systems in place in order to be aware of who is in possession of such information at any given time, mainly in order to comply with Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse and with Spain's Securities Market Act, in the area of inside information.

The Market Abuse Regulation includes a tool enabling the regulator to investigate potential market abuses relating to inside information (the "insider list"), which the Company must compile and maintain up to date, including all persons with access to inside information. The Rules of Conduct Steering Committee, made up of four members appointed by the Board of Directors, is tasked with ensuring proper application of the Internal Rules of Conduct in matters related to the securities market.

Information systems

If the company's information systems malfunctioned or were not sufficiently robust, this might adversely affect the continuity of the organization's critical processes and operations.

If the computer security and access control systems failed to work properly, this might lead to unauthorized discovery, unauthorized access to data or the untimely delivery of same, and improper use of confidential information.

PharmaMar is aware of the importance of computer systems to support the main business processes; for that reason, it continuously invests to maintain the infrastructure and information systems, and to keep its physical and legal security policies aligned with technological progress.

PharmaMar has a strategic plan for Information Systems whose main objective is to align the information technology strategies with the company's strategic objectives, guarantee compliance with the strict regulatory framework, and ensure efficacy, security and robustness of the information systems that support the company's business processes.

The strategic plan for Information Systems addresses key issues for attaining those goals, including:

• Organization, roles and responsibilities within the IT unit
• Corporate computing architecture and infrastructure.
• Catalog of corporate services provided by the Information Systems unit
• Quality assurance and compliance commitments.
• General policies and procedures of the IT unit.
• Information security policies, procedures and infrastructure.

Where third-party technology infrastructures or IT solutions are used, the Group has service level agreements to minimize the impact on its operations of any degradation in those services.

4.4. Financial risk

4.4.1. Market risk

Price risk

PharmaMar is exposed to price risk on available-for-sale equity instruments and on shares in exchange-traded funds at fair value through profit or loss.

Investments in available-for-sale equity instruments (which are securities of foreign biopharmaceutical companies) and units in exchange traded funds are not material in the context of PharmaMar's operations. PharmaMar's policy with regard to financial assets is to place cash in low-risk highly liquid financial assets in order to ensure the availability of funds. For this reason, those financial assets are mainly deposits remunerated at fixed interest rates at banks with good credit quality, government bonds and investments in corporate fixed-income securities, with the result that their value does not fluctuate significantly.

Interest rate risk on cash flows and fair values

The Group's interest rate risk arises from remunerated financial assets that can be converted into cash. The remunerated financial assets consist mainly of deposits remunerated at fixed interest rates.

Floating-rate debt securities expose the Company to interest rate risk on the cash flow. Fixedrate debt securities expose the Company to interest rate risk on the fair value.

Based on a number of scenarios, at times the Company manages the interest rate risk of its cash flow by means of floating-to-fixed interest rate swaps. The economic impact of these swaps is to convert floating-rate debt into fixed-rate debt. Under interest rate swaps, the Company undertakes to exchange, at regular intervals, the difference between the fixed and floating interest rates on the notional principals that are contracted.

Exchange rate risk

Exchange rate risks arise from future commercial transactions, recognized assets and liabilities, and net investments in foreign operations. The Company is exposed to exchange rate risk on transactions in foreign currencies, particularly the US dollar.

Management does not consider it necessary to establish any policy for hedging the foreign currency risk vs. the functional currency.

4.4.2. Credit risk

Credit risk arises from financial assets arranged with banks, mainly deposits.

The banks and financial institutions with which the Company works generally have independent ratings.

Where the Company acquires other financial assets, it must apply the following policies:

• Acquisition of fixed-income funds that invest in public- or private-sector debt (government bonds, treasury bills and commercial paper), generally secure, which pay periodic coupons.

• Acquisition of money market funds comprising short-term fixed-income securities (18 months maximum) where security is prioritized in exchange for a slightly lower yield than other investments.

4.4.3. Liquidity risk

The risk of not obtaining funds to honor debt obligations when they come due.

Prudent liquidity risk management entails having sufficient cash and marketable securities, financing via sufficient committed credit facilities, and the capacity to settle market positions. The goal of the Company's finance department is to maintain flexibility in funding by having credit lines and sufficient funds in financial assets to cover obligations.

4.5 Tax risks

Tax risks are inherent to the Company's activity and are influenced by the unique features of our tax regime, its complexity and the existence of gray areas that might lead to non-compliance or discrepancies with the tax administration in the application of the regulations. The Company must comply with a number of tax obligations, both material (i.e. payments) and formal, consisting of filing returns without having to make any payments. The Company tries to identify risks and then minimize them.

The Company does not use structures outside its own activities for the purpose of reducing its tax burden, nor does it carry out transactions with related undertakings whose sole purpose is to reduce taxable income or transfer profits to low-tax territories.

The Company does not have opaque structures for tax purposes nor does it constitute or acquire companies in countries or territories that Spanish regulations designate as tax havens or that are on the European Union's list of non-cooperative jurisdictions.

The Company has external advisors who help it to constantly analyze new legislation, case law and decisions in the tax area and quantify their impact.

In specific issues such as transfer pricing, it has an external consultant to ensure it has the proper documentation. In one specific case of transfer pricing, a formal valuation agreement was reached with the Administration beforehand.

The Group has not been found guilty of tax evasion.

The PharmaMar Group Code of Ethics and Code of Conduct expressly prohibit any practice involving the illegal evasion of taxes or other levies to the detriment of the public exchequer or that of the Social Security system or any other local or regional government body; accordingly, such practices must be avoided at all times.

The Group's Crime Prevention Organization and Management Model contains an exhaustive list of risk actions that are counter to the guidelines of conduct and a catalog of prohibited conduct, which refer to crimes against the Exchequer and Social Security and also to money laundering.

5. SUBSEQUENT EVENTS.

On 3 February 2023, the Company collected €17,243 thousand from the Spanish tax authorities under the heading of corporate income tax for monetization of certain research and development tax credits under 2021 corporate income tax.

In February 2023, it was decided to close the Phase III Neptuno trial with plitidepsin for the treatment of COVID-19 in hospitalized patients. The company took this decision because the evolution of the pandemic resulted in a lack of patients available for enrolment.

In 2023, the Company tacitly rolled over a credit line amounting to €3,000 thousand in total.

Between year-end and the authorization of these financial statements, no significant events occurred that affect the content of these financial statements and there were no other events requiring disclosure.

6. OUTLOOK FOR 2023

After a successful launch of lurbinectedin in the United States for treating small cell lung cancer in 2020, our partner, Jazz Pharmaceuticals, succeeded in making lurbinectedin the standard of care in this indication in the United States in less than a year. It has gained market share in its first years on the market and we expect the number of treated patients to continue growing in 2023.

Lurbinectedin has now achieved a market share of over 37% as second-line treatment. In addition to being a milestone for patients, who now have a new therapeutic alternative in an indication for which no new treatment had been approved in over 25 years, it also increased PharmaMar's revenues from royalties on sales and from the first commercial milestone in terms of sales volume.

Since 2020, Lurbinectedin has been approved as a second-line treatment of small-cell lung cancer in eight other countries outside Europe apart from the US. In addition, it may be approved during 2023 in countries where a registration dossier has already been submitted, and dossiers may be filed in such major countries as China.

Regarding clinical development of lurbinectedin, the LAGOON Phase III trial in small cell lung cancer commenced in 2021. The goal of this trial is not only to obtain approval for marketing lurbinectedin in Europe, but to serve as a confirmatory trial for the accelerated approval obtained in the United States. This trial is under way and enrolment is accelerating. Additionally, our partner, Jazz Pharmaceuticals, initiated a Phase III trial in 2021 to gain approval as first-line treatment in the United States. Our partner expects to complete enrolment for this trial in 2023. This trial is in combination with atezolizumab, an immunotherapy treatment from Roche, which is also participating in the trial as one of its sponsors. If the outcome is positive, this trial will be used not only for approval in the United States but also for registration in Europe. In relation to other indications, a Phase III registration trial for the treatment of mesothelioma is expected to begin in 2023 with lurbinectedin in combination with immunotherapy, where very encouraging results have already been obtained in previous phases. It is also planned to commence two Phase III trials with lurbinectedin in 2023: one for treating leiomyosarcoma and the other for treating ovarian cancer. Accordingly, we should end 2023 with three Phase III trials under way with lurbinectedin.

In 2023, we advanced in the development of other molecules such as PM14, with which we initiated a Phase II basket trial in a range of indications, and we also started clinical trials with a new molecule, PM534. We expect to advance with these trials in 2023 and bring a new molecule, PM54, into clinical development.

As a result, we plan to end 2023 with clear growth in the oncology pipeline, which we expect to generate positive results in subsequent years.

In the last quarter of 2022, 15 years after Yondelis was released on the market, generic trabectedin began to be sold in Europe. Yondelis was authorized for the treatment of soft tissue sarcoma in 2007 and maintained a share of around 30% of the second-line market until 2022. The year 2023 will be the first full year to capture the effect of generics on Yondelis sales.

In 2023 we may sign new out-licensing agreements for our molecules and work is also under way to in-license a third-party oncology product that is in the commercial or regulatory phase, which would enable us to distribute it through our commercial network in Europe, providing additional revenues.

7. R&D AND INNOVATION

R&D and innovation are a key component of PharmaMar's strategy, and it spent €68,099 thousand in this area in 2022, of which €17,141 thousand to develop Aplidin as an antiviral against COVID-19.

The main progress and results in R&D in 2022 are as follows:

Zepzelca (lurbinectedin)

Small-cell lung cancer

The LAGOON pivotal Phase III trial as second-line treatment for relapsed small cell lung cancer that had been agreed upon with the FDA continues enrolling patients as planned. This is a threearm trial comparing lurbinectedin as monotherapy or in combination with irinotecan against investigator's choice of irinotecan or topotecan.

If the outcome is positive, the trial could confirm the benefits of lurbinectedin for treating small cell lung cancer when patients have experienced progression after first-line treatment with platinum in the USA, and would serve as a registration trial for territories outside the USA.

The IMforte Phase III trial conducted by our partner Jazz Pharmaceuticals to assess Zepzelca® in combination with Tecentriq®, a PD-L1 inhibitor, for treating small cell lung cancer is also advancing satisfactorily. This trial, which is sponsored by F. Hoffman-La Roche Ltd and conducted in collaboration with our US partner, Jazz Pharmaceuticals, will measure progression-free survival and general survival with Zepzelca® in combination with atezolizumab as compared with atezolizumab alone. This collaborative research will provide information on a potentially novel first-line treatment option for small cell lung cancer. Our partner estimates that recruitment will be completed by the end of 2023.

In this indication, it is important to note that retrospective data collection in France, including patients who received lurbinectedin as part of the AAC compassionate use program to describe the clinical and demographic characteristics of these patients by assessing overall survival, realworld progression-free survival, etc. has concluded. This study is headed by Intergroupe Francophone de Cancérologie Thoracique and Groupe Français de Pneumo-Cancérologie, and the principal investigator is Professor Nicolas Girard of Institut Curie (Paris). The next stage is analysis of the data that was collected.

The following communications in connection with lurbinectedin for treating small cell lung cancer were presented at the American Society of Clinical Oncology (ASCO) annual meeting, which was held online and in person in Chicago from 3 to 7 June 2022:

• A poster entitled "Analysis of patients with relapsed small cell lung cancer (SCLC) receiving single-agent lurbinectedin in the phase III ATLANTIS trial", which showed the results of a subgroup of 50 patients with small cell lung cancer in the ATLANTIS Phase III trial who switched to single-agent lurbinectedin after ten cycles of lurbinectedin in combination with doxorubicin. Upon switching to lurbinectedin monotherapy, these patients tended to maintain or improve the superior tumor response obtained with the combination and no new signs of toxicity were identified.
• A poster entitled "A phase 1/2 trial of lurbinectedin (L) in combination with pembrolizumab (P) in relapsed small cell lung cancer (SCLC): The LUPER study", which showed a manageable safety profile and preliminary antitumor activity of the combination of lurbinectedin with pembrolizumab (immunotherapy) as second-line therapy for patients with relapsed small cell lung cancer.
• An abstract entitled "Efficacy and safety of lurbinectedin as second-line therapy in Chinese patients with small cell lung cancer. Preliminary results of a phase 1 study", which analyzed the results of the phase I trial in which lurbinectedin as monotherapy showed promising efficacy as a second-line treatment in Chinese patients with small-cell lung cancer, with acceptable tolerability and a manageable safety profile.

Combination trial with Zepzelca™ (lurbinectedin)

Recruitment continued on schedule in 2022 for the Phase I trials with lurbinectedin in combination with irinotecan, pembrolizumab and atezolizumab.

Specifically, the combination trial with irinotecan continued in the expansion phase in small cell lung cancer, synovial sarcoma and neuroendocrine tumors, as planned.

Phase I trial in China

The clinical trial being conducted by our partner in China, Luye Pharma, and designed to ascertain the dose of Zepzelca in Chinese patients has ended patient enrolment and is currently in the monitoring phase.

Ecubectedin (PM14)

The first Phase I/II trial with ecubectedin attained the optimal dose in patients with advanced solid tumors. An expansion Phase II basket trial with a number of tumor types is currently enrolling patients.

Combination trials

Recruitment for the Phase I/II trial with this compound in combination with irinotecan is progressing satisfactorily. The Phase Ib trial in combination with atezolizumab is also recruiting satisfactorily.

PM534

PM534 is a new marine-derived antitumor compound obtained in the company's research program for the treatment of solid tumors. A new Phase I trial has been initiated with this compound. The objectives of this first trial are to find the recommended dose and assess the safety and efficacy profile. The trial will be conducted in patients with advanced solid tumors who will be administered the drug intravenously.

PM54

This new compound has been submitted to the regulatory agencies and we estimate that it could enter the clinical phase in the first quarter of 2023.

Virology

In 2020, the Company commenced a new line of activity in the biopharmaceutical area by creating a Virology Unit to research, develop and supply medicines for viral diseases for which there no effective treatments as yet.

Aplidin (plitidepsin)

The NEPTUNO multicenter, randomized, controlled Phase III clinical trial to determine the efficacy and safety of two dosages of plitidepsin versus control in adult patients requiring hospitalization for the treatment of moderate COVID-19 infection continued in 2022 with patient enrolment in Spain and nine other countries, mainly in Europe and Latin America. In February 2023, it was decided to close the Phase III Neptuno study with plitidepsin for the treatment of COVID-19 in hospitalized patients. The company took this decision because the evolution of the pandemic resulted in a lack of patients available for enrolment. Although the patient sample is insufficient, a preliminary analysis suggests a positive trend demonstrating the drug's potency. PharmaMar will continue to analyze the trial data for subsequent publication.

The definitive results of the APLICOV-PC Phase I-II trial with plitidepsin against COVID-19 were published in Life Science Alliance. They showed that plitidepsin is safe to administer to COVID-19 patients and suggest a positive therapeutic impact on the course of the disease. The trial achieved its primary endpoint, safety, and evidenced clinical effectiveness. The NEPTUNO Phase III trial was designed on the basis of those results.

8. ACQUISITION AND DISPOSAL OF OWN SHARES

As of 31 December 2022, the Company's capital amounted to €11,013 thousand and was represented by 18,354,907 bearer shares with a par value of €0.60 per share. All the shares were fully subscribed and paid and have the same political and economic rights.

As of 31 December 2022, the Company held 247,288 own shares (344,366 in 2021) representing 1.35% of capital stock (1.88% in 2021).

In 2022, the Company acquired own shares worth €47,708 thousand and sold own shares worth €56,950 thousand. The result of those sales was a loss of €2,458 thousand, recognized under reserves. The company has a liquidity contract in place with an external firm that provides independent management of the purchase and sale of own shares.

In the scope of the employee share ownership plan, a total of 8,244 shares were allocated in 2022 to 167 beneficiaries at a value of €71.5923 per share. Additionally, a total of 224 shares were canceled under this Plan in 2022.

The breakdown of, and changes in, own shares in 2022 are as follows:

	No. of shares
Balance as of 31/12/21	344,366
Own shares purchased	761,615
Sales	(850,449)
Share ownership plan	(8,244)
Balance as of 31/12/22	247,288

9. SHARE INFORMATION

Share information

General situation

The year 2022 was one of uncertainty in all areas, both geopolitical and social, resulting in economic imbalances.

As the year began, the COVID-19 pandemic was continuing, although with lower incidence and less severely than in previous year because of the vaccination campaign that commenced in 2021. The first quarter brought the outbreak of the war between Russia and Ukraine. This conflict not only created geopolitical and social tensions but has also triggered an energy crisis with major economic consequences.

Gross Domestic Product (GDP) was driven strongly by inflation and the monetary policies established by central banks. The United States ended 2022 with 2.0% GDP growth (1.4% projected for 2023), while the figure in the Euro area was 3.5% (0.7% projected for 2023) and Spain achieved 5.2% growth in the year (expected to ease to 1.1% in 2023)¹ .

Soaring inflation in the main economies was one of the main factors behind the slowing growth. The increase in inflation was due to price pressure in energy, oil, gas and food, as well as other factors. This inflation is a consequence of the expansionary policy of recent years and was aggravated by the outbreak of war between Russia and Ukraine. According to the International Monetary Fund, inflation in 2022 was 8.0% in the United States (up from 4.7% in 2021), 8.3% in Europe (up from 2.6% in 2021) and 8.8% in Spain (up from 3.1% in 2021).

Responding to this inflationary situation, the central banks adopted more restrictive monetary policies by raising benchmark rates during the year. As a result, rates in the United States were between 4.5% and 5.0% at the end of the year while, in the Euro area, the European Central Bank raised rates to 2.5%. Those levels of interest rates had not been seen since the end of 2008.

Interest rate hikes coupled with high inflation put pressure on households, reducing their purchasing power. Household spending in Spain fell by 1.9% in 2022 (vs. 6.0% in 2021), while the household saving rate fell by 16.1% as households drew on savings accumulated during the pandemic.²

This macroeconomic situation was reflected in the stock market. Equities lost ground in 2022 as a result of central bank monetary policies, involving interest rate increases.

The Spanish stock market ended 2022 -5.56% down, but was one of the better performers in Europe if compared with Eurostoxx50 (-11.74%) and DAX (-12.35%). The only index in Europe that outperformed the IBEX35 was FTSE100, which ended in positive territory (+0.91%). The Spanish index was supported by bank, energy and oil stocks: Caixabank +52.11%, Banco de Sabadell +48.83% and Repsol +42.30%.

US indexes performed broadly in line with their European counterparts, with losses across the board. The Dow Jones lost -8.78% and the S&P500 lost -19.44%. The biotechnology indexes fared no better: the Nasdaq Biotech Index lost -26.70% and the S&P Biotech Index lost -11.68%.

Pharma Mar: Share information 2022
Total number of shares	18,354,907
Par value (euro)	0.60

¹ Source: International Monetary Fund (WEO January 2023)

² Source: Cuentas Trimestrales no Financieras de los Sectores Institucionales. Segundo trimestre de 2022. (INE)

Average daily trading (no. of shares)	72,365
Average daily trading (euro)	4,518,705
Trading days	258
Year trading low (6 October) (euro)	25,346
Year trading high (11 January) (euro)	547,421
Total trading in the year (million euro)	1,165
Lowest share price (24 February)	50.08
Highest share price (19 April)	77.80
Share price as of 31 December	64.28
Average share price in the year	63.07
Market capitalization as of 31 December (million euro)	1,180.22
Source: Bloomberg

PharmaMar's share performance

Despite the difficult environment for the stock markets in 2022, PharmaMar's share performance during the year was particularly positive, as it gained 12.77% to close at €64.28.

During the year, the company focused on conducting and completing the trials that commenced in previous years, and on initiating those planned. A Phase I trial with PM453, a new anti-tumor compound of marine origin, commenced at the end of the year in patients with advanced solid tumors.

Lurbinectedin continued to advance during the year. In May, "Clinical Cancer Research" published the results of the Phase II trial in Ewing sarcoma, where the primary endpoint of an overall response rate of 14.3%, with a median duration of response of 4.2 months, was achieved. A number of approvals were obtained and progress was achieved during the year: in July, Luye Pharma Group announced approval of compassionate use in the territory of Hainan (China), the UK Medicines and Healthcare products Regulatory Agency granted innovative drug status, conditional approval was obtained in South Korea, etc.

Sylentis also commenced two Phase III trials during the year. The first was a Phase III trial in the United States to evaluate the activity and safety of tivanisiran in dry eye patients, while the second Phase III trial with tivanisiran, initiated also in 2022, aimed to assess safety. A Phase II clinical trial with SYL1801 in patients with macular degeneration also commenced.

Additionally, as part of the company's strategy of focusing on its main activity of developing and marketing drugs, in September the Board of Directors decided to discontinue the diagnostics business, which is conducted through its subsidiary Genomica, S.A.U. en liquidación.

Source: Bloomberg

10. NON-FINANCIAL INFORMATION STATEMENT

Although the company is obliged to present a Non-Financial Information Statement as it had more than 250 employees at 31 December 2022, it has availed itself of the full exemption on the grounds that the company's information is contained in the Non-Financial Information Statement of the Group comprising PharmaMar and dependent companies, as it is the controlling company of that Group. The financial statements of PharmaMar and dependent companies are filed with the Madrid Mercantile Register.

The Annual Corporate Governance Report and the Annual Report on Director Remuneration are an integral part of this Directors' Report and may be consulted at www.cnmv.es

FINANCIAL STATEMENTS AND DIRECTORS' REPORT OF PHARMA MAR, S.A. FOR THE YEAR ENDED 31 December 2022

These Financial Statements and Directors' Report of PHARMA MAR, S.A. for the period from 1 January 2022 to 31 December 2022 were drafted and authorized in compliance with the provisions of articles 34 and 35 of the Commercial Code and articles 253 and 254 of the Capital Companies Act.

In accordance with the provisions of article 37 of the Commercial Code and article 253 of the Capital Companies Act, the Board of Directors signed this 93-page document on 27 February 2023.

The Board of Directors:

Mr José Mª Fernández Sousa-Faro	Mr Pedro Fernández Puentes
Chairman	Vice-Chairman
Mr Carlos Pazos Campos	Mr Eduardo Serra Rexach
Director	Director
Ms Sandra Ortega Mera	Mr Carlos Solchaga Catalán
Director	Director
Ms Rosa María Sánchez-Yebra Alonso Director Participated in the Board of Directors meeting by telematic link, and approved the content of the Financial statements and directors' report of Pharma Mar, S.A.	Ms Montserrat Andrade Detrell Director
Mr Mariano Esteban Rodríguez	Mr Emiliano Calvo Aller
Director	Director
Ms Mª Blanca Hernández Rodríguez Director Her signature is not recorded as she excused herself from attending the Board of Directors for unavoidable professional reasons, having delegated her representation.	Mr Fernando Martín-Delgado Santos Director

Certificate issued by the Secretary of the Board of Directors to the effect that the Financial Statements and Directors' Report of PHARMA MAR, S.A. for the year ended December 31, 2022, were authorized in electronic format by the Board of Directors at a meeting on February 27, 2023, in accordance with the format requirements established in Commission Delegated Regulation (EU) 2019/815, and were signed by the directors listed above, with the exception of: (i) Ms. Rosa María Sánchez-Yebra Alonso, who participated in the Board of Directors' meeting by means of distance communication and approved the contents of the Financial Statements and Directors' Report of Pharma Mar, S.A.; and (ii) Ms. Blanca Hernández Rodríguez, who did not sign because she had given notice of being unable to attend due to unavoidable professional requirements and granted proxy for the matters on the Agenda of this meeting (which include the authorization of the Separate and Consolidated Financial Statements and the Separate and Consolidated Directors' Reports for the year ended December 31, 2022) to the director Ms. Montserrat Andrade Detrell, with express instructions to vote in favor. Which I certify in Madrid on February 27, 2023.

Secretary of the Board of Directors

Juan Gómez Pulido

STATEMENT OF RESPONSIBILITY FOR ANNUAL FINANCIAL REPORT

The members of the Board of Directors state that, to the best of their knowledge, the separate financial statements for the year ended 31 December 2022 that were authorized by the Board on 27 February 2023, were drafted in line with the applicable accounting standards and provide a true and fair view of the net worth, financial situation and results of PHARMA MAR, S.A., and that the directors' report contains a faithful analysis of the business performance and results of PHARMA MAR, S.A.

Madrid, 27 February 2023

The Board of Directors:

Name	ID no.	Position	Signature
Mr José María Fernández Sousa-Faro		Chairman
Mr Pedro Francisco Fernández Puentes		Vice-Chairman
Mr Eduardo Serra Rexach		Director
Ms Sandra Ortega Mera		Director
Mr Carlos Solchaga Catalán		Director
Ms Rosa María Sánchez-Yebra Alonso		Director	Participated in the Board of Directors meeting by telematic link, and approved the content of the Financial statements and directors' report of Pharma Mar, S.A.
Ms Montserrat Andrade Detrell		Director
Mr Mariano Esteban Rodríguez		Director
Mr Emiliano Calvo Aller		Director
Ms Mª Blanca Hernández Rodríguez		Director	Her signature is not recorded as she excused herself from attending the Board of Directors for unavoidable professional reasons, having delegated her representation.
Mr Carlos Pazos Campos		Director
Mr Fernando Martín-Delgado Santos		Director

Certificate by the Secretary of the Board of Directors to the effect that, after authorization by the Board of Directors, on February 27, 2023, of the Separate Financial Statements and Directors' Report of PHARMA MAR, S.A. for the year ended December 31, 2022, the directors listed above signed this statement of director liability, with the exception of: (i) Ms. Rosa María Sánchez-Yebra Alonso, who participated in the Board of Directors' meeting by means of distance communication and approved the contents of the Financial Statements and Directors' Report of Pharma Mar, S.A.; and (ii) Ms. Blanca Hernández Rodríguez, who did not sign because she had given notice of being unable to attend due to unavoidable professional requirements and granted proxy for the matters on the Agenda of this meeting (which include the authorization of the Separate and Consolidated Financial Statements and the Separate and Consolidated Directors' Reports for the year ended December 31, 2022) to the director Ms. Montserrat Andrade Detrell, with express instructions to vote in favor. Which I certify in Madrid on February 27, 2023.

Secretary of the Board of Directors

Juan Gómez Pulido