Annual Report • Apr 12, 2023
Annual Report
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| Other Commercial Franchise |
2022 FY |
2021 FY |
|---|---|---|
| North America Europe revenues |
221,8 | 225,8 |
| North America revenues Europe - Hexvix |
150,8 | 125,2 |
| Other sales revenues | 1,9 | 3,1 |
| Total sales revenues | 374,5 | 354,1 |
| Signing fee and milestones | 18,7 | 6,4 |
| Total revenues | 393,1 | 360,5 |
| Gross profit | 370,4 | 336,5 |
| Operating expenses | -395,1 | -318,2 |
| EBITDA | -24,6 | 18,3 |
| Depreciation & Amortization | -24,4 | -24,1 |
| EBIT | -49,0 | -5,8 |
| Net financial items | -22,1 | -25,8 |
| Profit/loss(-) before tax | -71,1 | -31,7 |
| Tax expenses | -0,7 | 0,8 |
| Net profit/loss(-) | -71,9 | -30,9 |
| Cash balance | 268,1 | 322,9 |
| Total assets | 719,0 | 789,6 |
| Total equity | 462,7 | 502,6 |
| Equity ratio | 64 % | 64 % |
(NOK million)
(NOK million)
(NOK million)
59 New Blue Light Cystoscopes installed in the U.S. during 2022 Expanding geographic footprint with Hexvix® partnerships signed for Australia/New Zealand and Israel
Patients enrolled in U.S. "Blue Light Cystoscopy with Cysview®" Registry at year-end 2022 2 700
Total company revenue increased 9% to NOK 393.1 million
Regaining Rights to Cysview® in Canada consolidating its North America Bladder Cancer Franchise
China: ongoing Asieris Phase III trials for Hexvix and Cevira
Hexvix®/Cysview® revenue grew 6% to NOK 373.0 million
Launch of Karl Storz's new Blue Light system in the U.S. and Europe
Blue Light Cystoscopy procedures were 63 000
conducted in 2022
In 2022, demand for BLC capital equipment remained strong, and the Company increased the installed base of BLC towers in the U.S. by 19%, with the majority of those tower installations taking place late in the fourth quarter of 2022. Total revenue for the Company increased 9% to NOK 393.1 million in 2021, and Hexvix®/Cysview® revenue grew 6% to NOK 373.0 million. Global unit sales in 2022 increased 1% compared to 2021.
Operating loss before restructuring in 2022 was NOK 49.0 million, an increase from the NOK 5.8 million loss reported in 2021. The 2022 operating result includes milestone payments received from Asieris MediTech Co., Ltd. (Asieris) for the Phase III clinical trial advancement of Cevira®, in development as a non-surgical treatment of high-grade squamous intraepithelial lesions (HSIL), including all human papilloma virus (HPV) sub-types. Furthermore the 2022 operating results includes NOK 19.8 million non-recurring business development costs related to the objective to increase the Company's
product offering. Net loss for 2022 was NOK 69.7 million compared to a net loss of NOK 32.2 million in 2021.
Despite the challenges in 2022. Photocure delivered on key corporate objectives during the year; continuing to grow its business in North America; facilitating the highly successful launch of Karl Storz's Saphira™ BLC system in the U.S. market and in Europe; preparing its European operations for growth with healthcare access open for the first time since the pandemic; presenting and publishing several new data sets demonstrating the benefits of BLC with Hexvix/Cysview; and supporting the expansion of territories in which Hexvix is available through the Company's commercial partnerships. The achievement of these activities is expected to position the Company for significant and sustainable growth in 2023 and beyond.
In January 2022, Photocure announced that it had launched commercial
operations in Canada after reacquiring the rights to Cysview in the territory from the Company's former partner, BioSyent Pharma, Inc. Operations in the U.S. and Canada were combined to form Photocure's North American business segment.
In February 2022, Karl Storz's new highdefinition blue light system received market clearance from the U.S. Food and Drug Administration. Karl Storz discontinued the manufacture of its older standard definition systems prior to the market authorization, leaving a limited number of rigid BLC systems available for sale in the U.S. market until September 28th, 2022 when Karl Storz's new high definition system – Saphira™ became commercially available. Photocure reported that 57 new BLC towers were installed in the fourth quarter of 2022, the highest number of placements ever in a single quarter (31 new BLC towers installed in Q4 + 26 "OPP" upgrade replacements).. This record number of installs is further bolstered by an extremely strong pipeline for new BLC and replacement BLC demand heading into 2023.
In October 2022, Karl Storz filed a Citizen's Petition with the U.S. Food & Drug Administration (FDA) to reclassify its BLC capital equipment to Class II from Class III. If approved by the FDA, Photocure believes that several manufacturers would enter the U.S. market with BLC systems, enabling use of Cysview to expand significantly given the anticipated new resources and account
access that new capital equipment providers could facilitate.
In early November, Photocure announced that the United States Centers for Medicare & Medicaid Services (CMS) issued a final ruling to increase payment rates for Blue Light Cystoscopy (BLC) with Cysview in the hospital outpatient (HOPD) and ambulatory surgical center (ASC) settings. The resulting payment increases, effective January 1, 2023, provide an opportunity to expand the use of BLC in outpatient bladder cancer surveillance procedures.
Photocure continues to invest in its clinical and medical activities to support Hexvix/Cysview in the market. The Company attended major urology congresses during 2022 such as the American Urological Association (AUA), European Association of Urology (EAU), and the Society of Urologic Oncology (SUO) annual meetings, as well as national and regional conferences. Throughout 2022, the Company announced results from seven new data sets demonstrating the benefits of BLC with Hexvix/Cysview. These results were published in various medical journals and/or presented at medical conferences. The data sets include study results from the Company's Cysview registry in the United States evaluating over 2,700 patients across 21 sites, the Danish population study with data collected from nearly 10,000 patients, and pre-clinical study results supporting the anti-tumor effect of Hexaminolevulinate with Blue Light in a bladder cancer model.
Announcements related to the Company's partnerships and license agreements included; Photocure's entry into an exclusive agreement with Endotherapeutics to market and distribute Hexvix in Australia/New Zealand (March 2022); the signing of an exclusive agreement with IGL Medical, Ltd. for the marketing and distribution of Hexvix in Israel (June 2022), the
completion of enrollment in Asieris's Phase III clinical trial for Cevira®, in development as a non-surgical treatment of high-grade squamous intraepithelial lesions (HSIL), including all HPV subtypes (August 2022); and the first patient dosed in Asieris's Phase III clinical trial evaluating the use of BLC with Hexvix for the management of bladder cancer in China (November 2022).
Photocure ASA ("Photocure", "the Company" or "the Group"), the Bladder Cancer Company, delivers transformative solutions to improve the lives of bladder cancer patients. Photocure's unique product, sold under the brand names Cysview® (U.S. and Canada) and Hexvix® (all other markets), which make bladder cancer cells glow bright pink under blue light cystoscopy, has led to better health outcomes for patients worldwide. Photocure is headquartered in Oslo, Norway and listed on the Oslo Stock Exchange (OSE: PHO).
Strategic direction – Photocure's strategy is to maximize the efforts of its commercial infrastructure and the market opportunity for its flagship brands Hexvix/Cysview in the management of bladder cancer. In addition, the Company will continue to explore new product and business opportunities that are complementary to Photocure's commercial activities and expertise in uro-oncology.
Bladder cancer ranks as the 8th most common cancer worldwide – the 5th
most common in men – with 1,720,000 prevalent cases (5-year prevalence rate), 573,000 new cases and more than 200,000 deaths annually in 2020 (Globocan. Incidence/mortality by population: Available at: https://gco. iarc. fr/today, accessed March 2023). Bladder cancer has the highest lifetime treatment costs per patient of all cancers (Sievert KD et al. World J Urol 2009;27:295–300). Patients often must undergo multiple cystoscopies due to the high risk of recurrence. There is an urgent need to improve both the diagnosis and the management of bladder cancer for the benefit of patients and healthcare systems alike. Bladder cancer is classified into two types, non-muscle invasive bladder cancer (NMIBC) and muscle-invasive bladder cancer (MIBC), depending on the depth of carcinoma invasion in the bladder wall. NMIBC is the most common type of bladder cancer cases (75%). In MIBC, the cancer has grown into deeper layers of the bladder wall, is more likely to spread, and is harder to treat (Bladder Cancer. American Cancer Society. https://www. cancer.org/cancer/ bladder-cancer.html).
Photocure is leveraging its flagship brands Hexvix/Cysview to improve the detection of NMIBC and reduce disease recurrence and progression rates to improve cost-effective health outcomes for bladder cancer patients. Hexvix/Cysview is marketed in the U.S., Canada, and Europe by Photocure's own specialist commercial and medical teams and through partnerships in Chile, China, Australia/New Zealand, and Israel. In 2022 Photocure's revenues from Hexvix/Cysview totaled NOK 373.0 million, compared to NOK 351.4 million in 2021.
The Company continues to see significant growth opportunities in its markets and believes that it has a solid foundation for future growth of its breakthrough bladder cancer product. Furthermore, Photocure is exploring expansion of its product portfolio through
Photocure executed on its business plan throughout 2022, while residual effects from the global Covid-19 pandemic and a pause in the availability of rigid blue light cystoscopy (BLC®) capital equipment in the U.S. presented unique challenges. The Company believes that the launch of Karl Storz's new Saphira™ BLC system in the U.S. in late 2022 and the normalized access to hospitals, clinics and physician offices in 2023, address these temporary challenges and provide more favorable conditions for the coming year.
internal product development and the potential to acquire new technologies, products or businesses.
The Company has continued to invest in its North American commercial organization, in line with its commercial market opportunities and strategic objectives. The added resources have driven growth in the number of blue light cystoscopes installed at leading U.S. hospitals/urology centers, as well as growth in unit sales and revenue. The availability of Blue Light Cystoscopy (BLC®) with Cysview, for rigid and flexible cystoscopy means that Cysview can be used for both bladder cancer surgery and follow-up surveillance cystoscopy, allowing physicians to detect patients with the disease earlier and manage them more appropriately. Revenue in the Company's North America segment increased 20.0% in 2022 to NOK 150.8 million (U.S. growth of 6% in USD) while the installed base of rigid and flexible blue light cystoscopes in U.S. increased by 59 to a total of 370 at end of the year.
In addition to investments in the commercial capacity, growth has been supported by inclusion of Blue Light Cystoscopy with Cysview in prominent national guidelines for the management of bladder cancer and by improved reimbursement.
In November 2022, the United States Centers for Medicare & Medicaid Services (CMS) released final payment rates in connection with approved Medicare reimbursement changes for BLC with Cysview in the hospital outpatient (HOPD) and ambulatory surgical center (ASC) settings. The new complexity adjustments and resulting payment increases provide an opportunity to expand the use of BLC in outpatient bladder cancer surveillance procedures. The new reimbursement rates from CMS went into effect January 1, 2023.
In February 2020, Photocure announced that the United States Patent and Trademark Office (USPTO) had granted U.S. Patent No. 10,556,010 covering the
use of Blue Light Cystoscopy with Hexvix/ Cysview as neoadjuvant therapy in the treatment of bladder cancer in patients who are scheduled for a cystectomy. The '010 patent expires in December 2036.
In July 2021, the USPTO granted U.S. Patent No. 11,066,478 which covers a method to treat bladder cancer including the intravesical instillation of composition comprising Hexvix/Cysview and anti-PD-L1 and/or anti-PD-1 antibodies followed by exposure of the inside of the bladder to light. The '478 patent expires in December 2036.
In February 2022, Photocure was granted U.S. Patent No. 11,235,168 covering the use of Blue Light Cystoscopy with Hexvix/ Cysview as an adjuvant or neoadjuvant therapy for the treatment of bladder cancer. The '168 patent will expire in January 2038.
In line with Photocure's ambition to significantly penetrate the U.S. market, Cysview is on its way to becoming the standard of care for bladder cancer patients. Keys to success are in place and include:
Acceleration – Commercial investment in the U.S. to optimize the opportunity
Photocure plans to maximize the return on its commercial investment by growing its business in the largely untapped U.S. market, as well as in Europe where the Company expects to see strong returns in the form of revenue growth and improved profitability. Reacquisition of the broader European commercial rights has given Photocure global control of the Hexvix/Cysview brand, and the opportunity to generate sales in major countries in Europe where blue light cystoscopy is underpenetrated or not yet introduced.
On June 11, 2020, Photocure entered into an agreement with Ipsen Pharma SAS (Ipsen) regarding the return of Hexvix sales, marketing and distribution rights in Europe and other markets previously controlled by Ipsen to the Company. Commercial rights were transferred to Photocure on October 1, 2020. Photocure paid Ipsen EUR 15 million upon transfer on October 1, 2020, and Ipsen booked sales until this date. In addition, Ipsen is entitled to receive earn-out payments in the reacquired markets in the range of 10-15% of sales for the years 1-7 post-transfer and 7.5% of sales for the years 8-10 post-transfer.
By taking direct control of Photocure's own Hexvix/Cysview product in key regions, the Company is supporting its ambition to become a global leader in the treatment and management of bladder cancer, with a solid commercial foundation for expansion and further growth opportunities.
Full year 2022 European segment revenues decreased 2% to NOK 221.8 million from NOK 225.8 million in 2021. The decrease was mainly driven by Covid-19 surges at various times during 2022, staffing shortages and hospital budget tightening in Germany and priority growth markets such as the UK, France, and Italy, as well as negative foreign exchange during the year. Unit sales in the Company's European segment increased 1% in 2022, yearover-year.
During 2022, several scientific publications highlighted and confirmed key benefits of BLC with Hexvix/Cysview. Main publications, presentations and media coverage were:
In February 2022, an article by Laureline Lamy et al. entitled "Antitumor Effect and Induced Immune Response Following Exposure of Hexaminolevulinate (HAL) and Blue Light in an Orthotopic Model of Rat Bladder Cancer" was published in the journal, Biomedicines. The study authors concluded that "the antitumor effect is most probably pertaining to stimulation of the immune system as evident by tumor infiltration of CD3+ and CD8+ T-cells. These results support Photocure's hypothesis that the positive impact on patient outcomes observed in patients who had undergone BLC prior to cystectomy could be explained by systemic immune activation induced by HAL and blue
light. Combination of HAL and blue light with intravesical anti-PD-L1 resulted in increased anti-tumor effects. Intriguingly is the idea that local treatment with HAL and blue light can prime an immune response with potential additional effect of checkpoint inhibitors." https://www.mdpi.com/2227- 9059/10/3/548
In June 2022, results from a Danish population registry study featuring nearly 10,000 patients were presented at the Nordisk Urologisk Forening (NUF) congress in Helsinki Finland. The study abstract entitled "Use of photodynamic diagnosis (PDD) at primary TURB: Potential influence on recurrence and progression rates in NMIBC in a registry-based study using a country cohort" showed a beneficial impact on bladder cancer recurrence and progression in patients treated at clinics that have a higher level of use of BLC in primary patients. Study investigator Jørgen Bjerggaard Jensen, MD, DMSc, Professor, Consultant in Urology, Chairman of the Danish Bladder Cancer Group and the Nordic Urothelial Cancer Research Group, Department of Urology Aarhus
University Hospital stated "These real world data results show the true potential of adding better visual diagnostic methods in endoscopy compared to the old standard with conventional white light". Following the NUF Congress, the study data were published in the Scandinavian Journal of Urology. http://www.nuf2021.fi/abstracts/
In August 2022, results from a study entitled Safety of repeat blue light cystoscopy with hexaminolevulinate (HAL) in the management of bladder cancer: Results from a phase III, comparative multi-center study, was published in the journal Urologic Oncology. Authors of the study concluded that "repeat use of HAL is safe even when administered within a few weeks of receiving a dose of intravesical therapy." https://www.sciencedirect. com/science/article/abs/pii/ S1078143922001442
In September 2022, first results from the Laser III clinical study were published in the medical journal, European Urology. The study is part of a systematic program aimed at verifying the safe treatment of bladder tumors in the outpatient
setting. The results demonstrate the non-inferiority of outpatient lasermediated destruction of bladder tumors in conjunction with blue light cystoscopy (BLC®) and Hexvix® versus inpatient BLC TURBT under general anesthesia. Lead study investigator, Gregers G Hermann, M.D., Herlev/Gentofte hospital in Denmark noted that "our team found that blue light cystoscopy with Hexvix in the outpatient clinic support the identification of small bladder tumors which therefore safely can be removed with laser before they become too large for outpatient treatment." https://www.sciencedirect. com/science/article/abs/pii/ S0302283822025647
In October 2022, clinical data on BLC was presented in the Scientific Program at the International Bladder Cancer Network Meeting held September 29th-October 2nd in Barcelona, Spain. Dr. Steven Williams, of University of Texas-Medical Branch, Galveston, presented the study abstract "The Impact of Blue Light Cystoscopy Use Among Non-Muscle Invasive Bladder Cancer Patients in an Equal Access Setting: Implications on Recurrence and Time to Recurrence Stratified by Race". Dr. Williams noted that "the study found a significant decrease in the risk of recurrence following BLC utilization compared to white light cystoscopy (WLC) alone, a longer time interval to recurrence, and that equal access to health care can achieve equitable outcomes by race." https://photocure.com/news/datapresented-at-the-internationalbladder-cancer-network-ibcnmeeting-demonstrate-a-reduction-inthe-risk-of-recurrence-with-the-use-
of-blc-4365929
Photocure announced on December 5th that new evidence was presented at the 22nd Annual Society of Urologic Oncology
(SUO) Meeting demonstrating that Blue Light Cystoscopy (BLC) decreases the risk and prolongs time to recurrence based on Real World Evidence from the U.S. multiinstitutional Blue Light Cystoscopy with Cysview Registry database. https://suo-abstracts.secureplatform.com/a/gallery/rounds/15/ details/2721
On December 22, 2022, results from a study entitled "Clinical and Economic Impact of Blue Light Cystoscopy in the Management of NMIBC at U.S. Ambulatory Surgical Centers: What is the Site-of-Service Disparity?" was published on-line in the journal Urologic Oncology. The paper highlights the benefits of blue light cystoscopy when patients with bladder cancer receive this option in ASCs. The paper also reinforces the need for fair and equitable reimbursement in all sites of care, with Medicare payment rates increasing in January 2023, but favoring use of blue light in hospital outpatient departments (HOPDs) over ASCs. https://www.sciencedirect. com/science/article/abs/pii/
S1078143922004756?dgcid=author
Cevira® – in development for the non-surgical treatment of high-grade squamous intraepithelial lesions, including all HPV sub-types
Cevira is a photodynamic drug-device combination product for non-surgical treatment of high-grade cervical dysplasia.
In July 2019, the Company announced that it had entered into a License Agreement providing Asieris with a world-wide license to develop and commercialize Cevira for the treatment of HPV-induced cervical precancerous lesions.
Subsequently, Asieris launched a global clinical development program initially focused on the Chinese market, based on Photocure's Phase IIb data for patients diagnosed with high grade lesions and Phase III study design elements agreed upon with the U.S. FDA. In July 2020, Asieris announced that it had received Clinical Trial Approval (CTA) from China's National Medical Products Administration (NMPA) for the global, multi-centered Phase III clinical trial of Cevira (APL-1702). In late 2020, patient enrollment was initiated and in August 2022, Asieris announced the completion of enrollment in this trial, with a total of 402 patients enrolled. The majority of patients in the study were enrolled in China, with the remainder enrolled in Europe. Further development in Europe and a plan for the U.S. will follow if clinical results from the Chinesefocused Phase III study confirms the safety and efficacy of Cevira. Additional information about the ongoing Phase III trial for Cevira can be found by clicking the following link: https://clinicaltrials. gov/ct2/show/NCT04484415?draw=2
In October 2020, Photocure announced that the European Patent Office (EPO)
granted patent EP 2983780 covering the commercial Cevira device in Europe until 2034, adding to the patent portfolio for Cevira. In November 2020, Asieris announced initial dosing of the first patient in its Global Phase III clinical trial for Cevira, which triggered a USD 1.5 million payment to Photocure. In June 2021, Asieris announced initial dosing of the first European patient in the same trial.
Under the License Agreement with Asieris, Photocure previously received a signing fee of USD 5.0 million in 2019, two milestones totaling USD 3.0 million in 2020 and two milestones totaling USD 2.0 million in 2022. In addition, the Company may receive a total of USD 16.5 million based upon the achievement of certain clinical and regulatory milestones in China, and up to USD 36.0 million for certain clinical and regulatory milestones in the U.S. and the EU. The approval of a second indication in China, the U.S. and Europe would result in payments of up to USD 14.0 million. Sales milestones and royalties of 10% up to 20% will apply in all markets.
The Photocure annual accounts have been prepared in accordance with IFRS requirements as adopted by EU.
Total revenue was NOK 393.1 million in 2022, an increase from the NOK 360.5 million reported in 2021. Total revenue includes signing fees and milestones of NOK 18.7 million in 2022 and NOK 6.4 million in 2021.
Sales revenues reached NOK 374.5 million in 2022, an increase of 6% from NOK 354.1 million in 2021. Sales revenues comprise the Company's own sales of Hexvix in Europe and Cysview in the U.S. and from 2022 Canada and income from product sales and royalties from Photocure's license partners on sales of Hexvix/Cysview to hospitals and pharmacies in other regions. The increase in revenues was
mainly driven by added volume, price increases and impact from foreign exchange.
The Company had signing and milestone revenues in 2022 of NOK 18.7 million compared to signing revenues of NOK 6.4 million in 2021. . The 2022 revenue included milestones totaling NOK 18.5 from Asieris related to Cevira and in 2021 signing revenues of NOK 6.4 million from Asieris for the exclusive commercial rights to Hexvix in mainland China and Taiwan.
Operating expenses increased from NOK 342.3 million in 2021 to NOK 419.4 million in 2022. The main cost drivers were operating expenses associated with the build-out of the commercial infrastructure in Europe and higher sales and marketing expenses in the U.S.. Operating expenses include a total of NOK 16.7 million amortization of intangible assets related to the return on October 1, 2020, of Hexvix sales, marketing and distribution rights in Europe and other markets previously controlled by Ipsen.
Photocure's operating result was NOK -49.0 million in 2022, compared to an operating result of NOK -5.8 million in 2021. The increased loss is primarily attributable to the build-out of the commercial infrastructure in Europe, business development expenses and impact from foreign exchange. The business development expenses were driven by activities related to the objective to increase the Company's product offering.
Net financial loss totaled NOK 22.1 million in 2022, compared to net financial loss of NOK 25.8 million in 2021. The losses were driven mainly by the Ipsen earnout payment and non-cash valuation adjustments of the earnout liability due to higher expected future sales in Europe
Result before tax was a loss of NOK 71.1 million in 2022, compared to a loss of NOK 31.7 million in 2021.
Tax expense was NOK 0.7 million in 2022 and income of NOK 0.8 million in 2021. The calculation of deferred tax at year end was based on a tax rate of 22% for both 2022 and 2021.
The Group's net result after tax was NOK -71.9 million in 2022, compared to NOK -30.9 million in 2021.
Net cash flow from operating activities was NOK -2.0 million in 2022 compared to NOK 23.9 million in 2021. The negative cash flow from operating activities in 2022 was mainly driven by negative operating results. Net cash flow from investing activities was NOK -1.5 million in 2022, compared to NOK -1.9 million in 2021. Net cash
flow from financing activities was NOK -51.3 million in 2022 and included 25.0 million in term loan principal payments. This compares to net cash flow from financing activities in 2021 of NOK -34.0 million including 12.5 million in term loan principal payments.
Photocure also secured bank financing of NOK 50 million during the second quarter of 2020, and has paid down NOK 37.5 million of the principle. The remaining NOK 12.5 million will be paid down in 2023. The bank loan is secured under the State Guarantee Scheme for Loans to SME's as a buffer for Covid-19 impacts.
Photocure follows a low risk investment
strategy for its liquid funds. The return on the liquid funds depends on the rate of interest in the money markets and will therefore vary over time. Liquid funds amounted to NOK 268.1 million at December 31, 2022 and NOK 322.9 million at December 31, 2021.
Shareholder equity was NOK 462.7 million at December 31, 2022, an equity ratio of 64%. At the end of 2021, shareholder equity was NOK 502.6 million (64%).
The Board of Directors does not propose a dividend payment for 2022. Photocure is focusing its resources on building a therapeutic area-focused
commercial stage pharmaceutical company with a focus on bladder cancer. The Board of Directors will recommend payment of dividends in line with the Company's results, financial position, product and market development plans, and outlook. Photocure does not expect to pay dividends in the near future.
In 2022, Photocure ASA (Parent company) had a loss after tax of NOK 58.9 million, compared to a loss after tax of NOK 19.8 million in 2021. The equity in Photocure ASA totaled NOK 774.5 million at December 31, 2022. The equity ratio was 78%.
At December 31, 2022, 27,120,820 Photocure shares were registered. At the Ordinary General Meeting on April 28, 2022, the Board of Directors was granted authorization to purchase up to 10% of its own shares. On December 31, 2022, Photocure held 15,122 own shares.
Pursuant to § 3.3 (a) of the Norwegian Accounting Act, it is confirmed that the conditions for assuming that the Group is a going concern are present, and that the financial statements have been prepared on the basis of this assumption. No events have occurred since the end of 2022, except those which are stated in this report that are of major significance for the assessment of the Company's financial position and results.
Photocure is subject to several operational and financial risk factors and uncertainties which may affect parts or all of the activities in the Group. The Company proactively manages such risks, and management and the
Board of Directors regularly analyze operations and potential risk factors to take measures to reduce risk exposure.
Photocure develops innovative products and markets and sells these products through its own commercial teams and in partnerships with other companies. These activities entail exposure to various risks. The Board of Directors and management monitor and analyze the Company's operations and potential risk factors, and actively take risk reduction measures.
Photocure is commercializing Hexvix/ Cysview directly in the U.S., Canada and Europe, and has strategic partnerships with Genotests SpA in Chile, Asieris in China, Endotherapeutics in Australia/ New Zealand, and IGL Medical in Israel.
Any significant event that adversely affects revenues from Hexvix/Cysview could have a material and negative impact on Photocure's results and cash flows. Key commercial risks include:
Hospitals and other medical institutions may restrict access for our staff which will make the sales and support activities more challenging and therefore may have a negative impact on Photocure's results and cash flows.
Hospitals and other medical institutions may find limited availability of nursing and other staff. This may impact the demand for Photocure's products and therefore may have a negative impact on the Company's revenues, results and cash flows.
Photocure relies on third-party suppliers for manufacturing and assembly. Delays or interruptions and quality issues at the production facilities as well as improper transport, handling and delivery may impair supply of Hexvix/Cysview to the market and hence revenues, results and cash flows.
Photocure's partner Asieris will need approval from regulatory authorities to market Cevira®. Efficacy or safety issues could arise, and approval may be denied, delayed or limited.
In general, successful launches and sales for pipeline products may not be achieved inter alia due to changes in market dynamics or competition, unsuccessful marketing, and/or pricing pressure due to limitations on healthcare budgets. As with any drug intended for diagnostic or therapeutic use, adverse clinical reactions are always a possibility.
Photocure has an international business operation and is exposed to liquidity and funding risk, credit risk, currency risk and interest rate risk. At the end of 2022, the Company had no derivatives or other financial instruments to reduce the currency risk and interest rate risk. Company management is responsible for managing the financial risk. Financial risk is also monitored by the Board of Directors.
The Company monitors its cash flows from both long and short-term perspectives through planning and reporting. Photocure does not have any loan agreements that involve covenants or other restrictions. Photocure uses a multi-currency consolidated accounts system that provides flexibility in relation to drawing on multiple currencies.
The company may require new capital in the future. Adequate sources of capital funding may not be available when needed or may not be available on favorable terms.
Photocure is primarily exposed to credit risk associated with accounts receivable and other short-term receivables. Photocure's sales are mainly to hospitals and pharmaceutical wholesalers. The credit risk is limited as the counterparties are mainly large and non-affiliated companies/hospitals. Photocure's credit risk is considered moderate and the Company does not
use credit insurance.
Because the Norwegian Kroner is the Company's presentation currency, Photocure is exposed to translation risk associated with the Company's net exposure in foreign currency. Photocure's revenues and costs are accrued in different currencies and the Company is therefore exposed to exchange rate fluctuations. The Company monitors the need for hedging of large transactions on an ongoing basis. Photocure did not have outstanding hedging of future transactions on December 31, 2022 and December 31, 2021.
In the second quarter of 2020, Photocure received a loan of NOK 50 million, which is secured under the State Guarantee Scheme for Loans to SME's (Covid-19 related). The loan carries a floating interest rate, and the nominal interest rate at the end of 2022 was 4.8%. The loan is a threeyear term loan, first year interest only with quarterly repayments of NOK 6.25 million thereafter. Interest rate risk is also associated with the Company's holdings of cash and cash equivalents. The main strategy is to diversify the risk and invest in money market funds and bond funds with low risk, high liquidity and short duration. The investments are denominated in NOK.
The Group's Leadership Team at year- end consisted of Dan Schneider, President and Chief Executive Officer; Erik Dahl, Chief Financial Officer; Geoffrey Coy, Vice President and General Manager North America; Susanne Strauss, Vice President and General Manager Europe; Grete Hogstad, Vice President Global Strategic Marketing and Business Development; Patricia Kelly, Vice President Global Human Resources and Anders Neijber, M.D., Chief Medical Officer, Global Medical Affairs and Clinical Development and R&D.
The Board of Directors held 19 meetings in 2022. All members of the Board of Directors are shareholderelected. The members of the Board of Directors were at the end of 2022; Jan H. Egberts, M.D. (Chairperson), Johanna Holldack, M.D., Neal Shore, M.D., Anders Tuv, and Anne Worsøe.
Photocure ASA has offices in Oslo, Norway, in Princeton, New Jersey, U.S. and in Düsseldorf, Germany.
Photocure's mission is to deliver transformative solutions to improve the lives of bladder cancer patients. It is about patient access to healthcare and quality of life.
This mission in society encompasses all activities from developing products, gaining approval by relevant authorities, working with patient organizations and hospitals, and finally getting products to the market either through Photocure's own sales organization or by partners. The Company is also continuously supporting clinical research activities and training a growing number of physicians in using the blue light cystoscopy procedure. Photocure is also taking part in community
involvement activities and is partnering with prominent patient associations to enhance the access to care and awareness of bladder cancer in general.
Sustainability has been part of Photocure's business approach since its origin. The company believes that creating value for patients, customers and society strengthens the Company's business and provides value for shareholders. Beyond the business impact, Photocure has implemented further metrics and operating procedures linked to the UN Global Compact, the globally recognized framework for advancing sustainability in the public and private sectors, and to foster strong relationships with a variety of stakeholders through dialogue on material topics and through its commitment to corporate social responsibility.
Comprehensive ESG reporting for the Company is available at page 81 in this annual report.
The Norwegian Transparency Act has been implemented with written procedures. See further details on page 94 in the ESG section of this annual report.
Photocure's corporate social responsibility guidelines are available at www.photocure.com.
Post-period, on March 21, 2023, Photocure announced that Karl Storz due to component supply issues will discontinue the production of its current flexible BLC equipment in the U.S. Karl Storz plans to service existing customers through the remainder of the year. Karl Storz also stated that they
remain fully committed to broadening access to its high-definition blue light system SaphiraTM, allocating the appropriate commercial, regulatory and engineering resources to support this Class III device. Karl Storz will explore the development of a next generation state-of-the-art flexible blue light system pending a positive reclassification decision by the U.S. Food & Drug Administration (FDA). The impact from a lack of new flexible BLC installations in FY 2023 is estimated to be less than 2% of Photocure's total revenue.
Photocure delivers transformative solutions that improve the lives of bladder cancer patients. Based on benefits of the Company's breakthrough product for the management of bladder cancer, Hexvix/ Cysview, the Company has embarked on a stepwise approach for continued growth. Photocure sees significant long-term potential in the global bladder cancer treatment market and employs the following growth strategy:
North America and Europe are Photocure's primary markets for growth, given the Company's two direct sales forces and a majority of the market still to be penetrated by Hexvix/Cysview with BLC. Photocure regained the sales and marketing rights to Hexvix in continental Europe in the fourth quarter of 2020 and regained the rights to Cysview in Canada in January 2022. As a result, the Company remains positioned to take advantage of the growth opportunity throughout these regions.
Photocure believes that the benefits of Blue Light Cystoscopy with Hexvix/ Cysview offering superior detection and management of bladder cancer will continue to be adopted and become the standard of care. Indicators of an anticipated rebound in growth of the Company's business are: (1) The record number of BLC tower installations in Q4 2022 in North America, (2) the remaining robust pipeline of future tower placements by new account prospects, and (3) a rebound back to growth in unit sales in early 2023 in both the North American and European business segments. Photocure plans to continue supporting its commercial
efforts with additional clinical publications in scientific journals and data presentations at medical conferences to underscore the clinical benefits and cost-effectiveness of using BLC with Hexvix/Cysview.
Ongoing healthcare staffing shortages and inflationary pressures leading to hospital budget tightening, as well as the current lack of new flexible BLC tower availability present challenges in 2023 for Photocure's business. Considering these challenges, Photocure has issued the following guidance: In 2023, the Company expects new Saphira™ blue light tower installations in the range of 65 to 75, consolidated product revenue growth above 20%, and positive EBITDA (exbusiness development spending).
Jan Hendrik Egberts Chairperson
Anders Tuv Director
Johanna Holldack Director
Anne Worsøe Director
Neal Shore Director
Dan Schneider President and CEO
Oslo, 11 April 2023 Photocure ASA
We confirm that, to the best of our knowledge, that the financial statements for the period from January 1 to December 31, 2022 have been prepared in accordance with IFRS adopted by EU and gives a true and fair view of the Group and the Company's consolidated assets, liabilities, financial position and results of operations, and that the Report of the Board of Directors provides a true and fair view of the development and performance of the business and the position of the Group and the Company together with a description of the key risks and uncertainty factors that the Company is facing.
Chairperson of the Board / Member of Compensation Committee
Director / Chairperson of the Compensation Committee
Attendance: Board meetings: 19/19 Compensation Committee: 4/4
— Jan H. Egberts holds 14,500 shares and 1,312 share options in Photocure. Attendance: Board meetings: 19/19 Compensation Committee: 4/4
— Johanna Holldack holds no shares and 804 share options in Photocure.
Dr. Egberts has over 30 years of experience in the pharmaceutical and medical devices sector. Currently, Dr. Egberts serves as the Managing Partner of Veritas Investments, a private investment company focused on minority and controlling investments in healthcare companies. Dr. Egberts gained his medical degree from Erasmus University Medical School in the Netherlands and pursued the clinical part of his medical training at Harvard Medical School. Dr. Egberts also obtained an MBA from Stanford University. After Stanford, he joined McKinsey & Co. as a strategic consultant in New York. Dr. Egberts subsequently held various business development and general management positions of increasing
responsibility in the USA at Merck & Co. and Johnson & Johnson. Thereafter, he served as Senior Advisor, Healthcare Investments for 3i, the private equity firm. Dr. Egberts then became CEO of OctoPlus, a publicly traded specialty pharmaceutical company in the Netherlands. OctoPlus was subsequently acquired by Dr. Reddy Laboratories. After this, Dr. Egberts joined Agendia, a molecular diagnostics company, initially as board member and subsequently full time as interim CEO. Dr. Egberts also has held over 15 executive and non-executive supervisory board positions in the U.S. and various European countries.
Dr. Holldack has international operational experience from pharma companies, including clinical trials, drug approvals, IPOs and licensing. She has also managed several mergers and acquisitions. In addition, Dr. Holldack has venture capital experience from Swiss-based Aravis Venture where she was a partner for 5 years. Her industry career spans over 20 years, during which she held key positions in both start-up and large pharma companies. Her experience includes management and executive positions at Behringwerke, Chiron, MediGene, Borean Pharma, Telormedix and Trethera Corporation. She is chairperson of Amal Therapeutics. Dr. Holldack has a medical degree from Georg-August-University in Göttingen, Germany and is a board certified pediatrician. In addition, she has held positions as an assistant professor at the University of Essen, research fellow for the Deutsche Krebshilfe and a research associate at Harvard Medical School.
• Elected year 2017
• Elected year 2017 • Position: CEO Kupando GmbH • Education: MD • Other assignments: Advisor to Spark at Charite, Berlin
Jan Hendrik Egberts Chairperson
Anders Tuv Director
Johanna Holldack Director
Anne Worsøe Director
Neal Shore Director
Dan Schneider President and CEO
Oslo, 11 April 2023 Photocure ASA
Attendance: Board meetings: 11/11 —
Neal Shore holds no shares and 804 share options in Photocure. Attendance: Board meetings: 19/19 Audit Committee: 8/8
—
Anders Tuv holds no shares and 804 share options in Photocure. He represents Radforsk, holding 679,619 shares and no share options in Photocure.
Dr. Shore is Medical Director for the Carolina Urologic Research Center and is a Fellow of the American College of Surgeons. He has conducted more than 400 clinical trials focusing mainly on genitourinary oncology. Dr. Shore performs peer reviews for Lancet Oncology, New England Journal of Medicine, European Urology, the Journal of Urology, Urology, BJUI, PCPD, and other high-impact scientific journals. He serves on the executive boards of the Society of Urologic Oncology, the Bladder Cancer Advocacy Network (BCAN), and as the National Urology Research Director for GenesisCare. From 2016 to 2018 Dr. Shore was the President of the Large Urology Group Practice Association. In addition, he has served on numerous Committees, Editorial and Review boards, such as the AUA Research and Innovations Committees, Health and Data Committees, the SITC Task Force for Prostate Cancer and Bladder Cancer, the Editorial Boards of Review in Urology, Urology Times, Chemotherapy Advisor, OncLive, PLOS ONE, Urology Practice, and the World Journal of Urology.
Anders Tuv is Chief Investment Officer at life science investment company Radforsk with a focus on immunotherapies and precision medicines. He is an experienced investment and business development professional with broad experience from the healthcare and biotech industry covering founding and building biotech companies, strategy and business development, R&D collaborations, licensing deals, due diligences, private placements, M&As and IPOs. Anders holds a MBE degree.
Director / Member of the Audit Committee / Advisor for ESG matters
Attendance: Board meetings: 19/19 Audit Committee: 8/8 —
Anne Worsøe holds no shares and 804 share options in Photocure.
Anne Worsøe is Head of Investment Relations and Communications at Ultimovacs ASA, a clinical stage immunotherapy company listed at OSE. Anne has 20+ years of experience within strategy, business development, and communication from the investment industry, and served on the boards of several early-stage companies, venture capital funds, private and public limited companies. She is Venture Partner at Antler, a global early-stage venture capital firm and Partner and co-founder at Farmhouse Capital, an Oslo-based investment company. Previously, she was a Partner at Bakken & Bæck, a digital studio specialized in product design, development, and artificial intelligence, and the Director of Innovation Norway in San Francisco, where she initiated and co-founded Nordic Innovation House in Silicon Valley. Prior to moving abroad, she held the position as Head of New Business at Statkraft, and she was the first CEO of the Norwegian Venture Capital & Private Equity Association.
The Company's business is defined in the following manner in the Articles of Association section 3:
The board of directors of the Company has adopted several corporate governance guidelines, including rules of procedure for the board of directors, instructions for the audit committee, instructions for the compensation committee, insider manuals, manual on disclosure of information and guidelines for corporate social responsibility.
The board of directors is responsible for defining the Company's strategies, primary objectives and risk profile and to support the Company's value creation to shareholders in a sustainable way. The board of directors has taken into account financial, social and environmental factors when defining the Company's strategies, primary objectives and risk profile.
The Company's strategies, primary objectives and risk profile are evaluated by the board of directors on an annual basis and are further described in the annual report, ESG report and on the Company's website www.photocure.com.
Non-conformance with the recommendation: None
On 31 December 2022, the Company's consolidated equity was NOK 462.7
million, an equity ratio of 64%. The board of directors considers this equity level to be satisfactory. The Company had at 31 December 2022 interestbearing debt totaling NOK 174.9 million. The Company's capital structure and financial strength is continuously considered in light of its objectives, strategy and risk profile.
Photocure is focusing its resources on building a specialty pharma company and the board of directors will recommend payment of dividends in line with the Company's results, financial position and outlook. The Company has, due to its level of development, uneven revenue streams and net cash flows, and does not expect to pay recurring dividends until justified by recurring cash flows. The dividend policy is disclosed in the annual report.
The ordinary general meeting resolves the annual dividend, based on the proposal by the board of directors. The
amount proposed sets an upper limit for the general meeting's resolution.
The board of directors is authorized by the general meeting to resolve increases of the Company's share capital. The authorization is restricted to defined purposes, and does not last longer than to the Company's next annual general meeting.
The board of directors is authorized by the general meeting to purchase the Company's own shares on behalf of the Company. The authorization is restricted to defined purposes, and does not last longer than to the Company's next annual general meeting.
Non-conformance with the recommendation: None
Review of policy adopted by the Board 11 April 2023
Photocure ASA ("Photocure" or the "Company") has made a strong commitment to ensure trust in the Company and to enhance shareholder value through effective decisionmaking and improved communication between the management, the board of directors and the shareholders. The Company's framework for corporate governance is intended to decrease business risk, maximize value and utilize the Company's resources in an efficient, sustainable manner, to the benefit of shareholders, employees and society at large.
The Company will seek to comply with the Norwegian Code of Practice for Corporate Governance (the "Corporate Governance Code"), last revised on 14 October 2021 and available at the Norwegian Corporate Governance Board's web site www.nues.no, to the extent not considered unreasonable due to the Company's size and stage of development. The principal purpose of the Corporate Governance Code is (i) to ensure that listed companies implement corporate
governance that clarifies the respective roles of shareholders, the board of directors and senior management more comprehensively than what is required by legislation and (ii) to ensure effective management and control over activities with the aim of securing the greatest possible value creation over time in the best interest of companies, shareholders, employees and other parties concerned.
The Company is subject to reporting requirements for corporate governance under the Accounting Act section 3-3b as well as Oslo Børs "Continuing obligations of stock exchange listed companies" section 7. The board of directors will include a report on the Company's corporate governance in each annual report including an explanation of any deviations from the Corporate Governance Code. The corporate governance framework of the Company is subject to annual reviews and discussions by the board of directors.
The following provides a discussion of the Company's corporate governance in relation to each section of the Corporate Governance Code for the financial year 2022. Photocure's
compliance with the Corporate Governance Code is detailed in this report and section numbers refer to the Corporate Governance Code:
The Company will seek to comply with the Corporate Governance Code. The board of directors shall include a report on the Company's corporate governance in its annual report, including an explanation of any deviations from the Corporate Governance Code.
Photocure's business is clearly defined in the Company's articles of association (the "Articles of Association"). The Company's objectives, strategies and risk profiles should be evaluated at least annually to create value for shareholders. Objectives and strategies are presented in the annual report and on the Company's website www.photocure.com.
"The purpose and main business of the Company is to operate business related to medical use of photodynamic technology and other medical methods of treatment, and anything thereby connected."
According to the Norwegian Public Limited Liability Companies Act, the Company's shareholders have preemption rights in share offerings against cash contribution. Such preemption rights may however be set aside, either by the general meeting or by the board of directors if the general meeting has granted a board authorization which allows for this. Any resolution to set aside pre-emption rights will be justified by the common interests of the Company and the shareholders, and such justification will be publicly disclosed through a stock exchange notice from the Company.
Photocure owns a total of 15,122 own shares. Photocure has acquired 36,000 own shares during 2022 and sold 36,250 own shares to employees.
In the event of a future share buy-back program, the board of directors will aim to ensure that all transactions pursuant to such program will be carried out either through the trading system at Oslo Børs or at prevailing prices at Oslo Børs. In the event of such program, the board of directors will take the Company's and shareholders' interests into consideration and aim to maintain transparency and equal treatment of all shareholders. If there is limited liquidity in the Company's shares, the Company shall consider other ways to ensure equal treatment of all shareholders.
Non-conformance with the recommendation: None
The shares of the Company are freely transferable. There are no restrictions on ownership, trading and voting for shares in the Company pursuant to the Articles of Association.
The board of directors will make its best efforts with respect to the timing and facilitation of general meetings to ensure that as many shareholders as possible may exercise their rights by participating in general meetings, thereby making the general meeting an effective forum for the views of shareholders and the board of directors.
The notice for a general meeting, with reference to or attached support information on the resolutions to be considered at the general meeting, shall as a principal rule be sent to shareholders individually, or to their depository banks, no later than 21 days prior to the date of the general meeting. The notice of meeting includes information regarding shareholders' rights, guidelines for registering and voting at the meeting.
The board of directors will seek to ensure that the resolutions and supporting information distributed are sufficiently detailed and comprehensive to allow shareholders to form a view on all matters to be considered at the meeting. The notice and support information, as well as a proxy voting form, will normally be made available on the Company's website www.photocure. com no later than 21 days prior to the date of the general meeting.
Pursuant to the Articles of Association section 9 shareholders who want to participate at the general meeting shall notify the Company thereof within five days prior to the general meeting.
To the extent deemed appropriate or necessary, the board of directors will seek to arrange for the general meeting to vote separately on each candidate nominated for election to the Company's corporate bodies.
The chairperson of the board, the chief executive officer and the chief financial officer shall, as a general rule, be present at the annual general meeting. The board of directors and the chairperson of the nomination committee shall, as a general rule, be present at general meetings. The auditor should attend the ordinary general meeting and any extraordinary general meetings to the extent required by the agenda items or other relevant circumstances.
The chairperson of the board will normally be chairing the general meetings. The board of directors will seek to ensure that an independent chairperson is appointed if considered necessary based on the agenda items or other relevant circumstances.
The Company will aim to prepare and facilitate the use of proxy forms which allow separate voting instructions to be given for each item on the agenda, and nominate a person who will be available to vote on behalf of shareholders as their proxy.
Non-conformance with the recommendation: Photocure has carried out general meetings during 2022 where some of the board members have not been able to participate. The board has nevertheless been represented at all general meetings, including by the chairperson of the board of directors.
The nomination committee is governed by the Articles of Association section 7. In addition, the Company's general meeting adopts instructions for the nomination committee.
The nomination committee shall consist of two or three members who shall be shareholders or shareholder representatives. The members shall be elected by the general meeting for a term of one year. The nomination committee shall give its recommendation to the general meeting on election of and compensation to members of the board of directors and members of the nomination committee. The proposals shall be justified.
Shareholders are encouraged to submit proposals to the nomination committee for candidates for election to the board of directors. Such proposals must be in writing and justified and be submitted minimum 2 months before the general
meeting if they are to be considered by the nomination committee.
The nomination committee currently consists of the following three members: Hans Peter Bøhn (chairperson), Lars Viksmoen and Robert Blatt. The current members have been elected by the general meeting with a term until the Company's ordinary general meeting in 2023. All members are independent of the board of directors and senior management.
Non-conformance with the recommendation: None
Pursuant to the Articles of Association section 5, the Company's board of directors shall consist of three to seven members. The board of directors currently consists of the following five members: Jan H Egberts (chairperson), Johanna Holldack, Neal Shore, Anders Tuv and Anne Worsøe. The chairperson of the board has been elected by the general meeting. The term of office for members of the board of directors is one year at a time.
All members of the board are considered independent of the Company's senior management, material business contacts and the Company's main shareholders.
The Company's annual report provides information to illustrate the expertise of the members of the board of directors and their record of attendance at board meetings. Board members are encouraged to own shares in the Company.
The board of directors is responsible for the over-all management of the Company, and shall supervise the Company's day-to-day management and the Company's activities in general.
The Norwegian Public Limited Liability Companies Act regulates the duties and procedures of the board of directors. In addition, the board of directors has adopted supplementary rules of procedures, which provides further regulation on inter alia the duties of the board of directors and the chief executive officer, the division of work between the board of directors and the chief executive officer, the annual plan for the board of directors, notices of board proceedings, administrative procedures, minutes, board committees, transactions between the Company and the shareholders and confidentiality.
The board shall produce an annual plan for its work, with particular emphasis on objectives, strategy and implementation. The chief executive officer shall at least once a month, by attendance or in writing, inform the board of directors about the Company's activities, position and profit trend.
The board of directors' consideration of material matters in which the chairperson of the board is, or has been, personally involved, shall be chaired by some other member of the board.
The board of directors shall evaluate its performance and expertise annually, and make the evaluation available to the nomination committee.
The board of directors has adopted rules of procedures for the board of directors, which inter alia include guidelines for notification by members of the board of directors and senior
management if they have any material direct or indirect interest in any transaction entered into by the Company.
The rules of procedures for the board of directors also includes a statement on how the board of directors and the senior management shall handle agreements with related parties, including whether an independent valuation shall be obtained. The board of directors shall include a report on such agreements in the annual report.
The Company's audit committee is governed by the Norwegian Public Limited Liability Companies Act and a separate instruction adopted by the board of directors.
The members of the audit committee are appointed by and among the members of the board of directors. A majority of the members shall be independent of the Company's senior management, and at least one member shall have qualifications within accounting or auditing. Board members who are also members of the senior management cannot be members of the audit committee.
The audit committee currently consists of the following two members: Anders Tuv (chairperson) and Anne Worsøe.
The Company's compensation committee is governed by a separate instruction adopted by the board of directors. The members of the compensation committee are appointed by and among the members of the board of directors, and shall be independent of the Company's senior management.
The compensation committee currently consists of the following two members: Johanna Holldack (chairperson) and Jan H. Egberts.
The board of directors should on an ongoing basis assess the Company's risks. Each year, as a minimum, the board of directors has a thorough assessment of the significant parts of the Group's business and outlook, in
order to identify risks and potential risks, and remedy any incident that have occurred. The board of directors may engage external expertise if necessary. The objective is to have the best possible basis for, and control of, the Company's situation at any given time.
In addition to the annual risk assessment, the management should present quarterly financial statements that will inform the board and shareholders on current business performance, including risk. These reports should be subject to review at the board meetings.
Significant risks include strategic risks, financial risks, liquidity risks and operational risks. The Company's significant risks are assessed on an ongoing basis and at least once a year by the board.
The Company's finance function is responsible for the preparation of the financial statements and to ensure that these are prepared and reported according to applicable laws and regulations and in accordance with IFRS. The audit committee performs reviews of the quarterly and annual financial statements with special focus on transaction types which includes judgments, estimates or issues with major impact on the financial statement. In addition to the quarterly and annual reporting, the board of directors receives monthly financial updates.
Management controls are performed at a senior level in the Company.
Non-conformance with the recommendation: None
The remuneration of the board of directors shall be decided at the Company's general meeting, and should reflect the board of directors' responsibility, expertise, time commitment and the complexity of the Company's activities. The remuneration is not linked to the Company's performance.
The nomination committee shall give a recommendation as to the size of the remuneration to the board of directors. Pursuant to the instructions for the nomination committee, the recommendation should normally be published on the Company's website at least 21 days prior to the general meeting that will decide on the remuneration.
The Company has implemented a board option remuneration in accordance with the approval by the annual general meeting in 2022, under which the board members of the Company have received options to acquire shares in the Company. According to the general meeting resolution on 19 July 2022, each board member received 804 options and the chairperson received 1,312 options. Further details regarding the board option remuneration, inter alia information on pricing, vesting and exercise, can be found in the nomination committee's report and recommendations to the annual general meeting in 2022.
Any remuneration in addition to normal fees to the members of the board of directors should be specifically identified in the annual report.
Members of the board of directors and/or companies with which they are associated should not take on specific assignments for the Company in addition to their appointment as a member of the board unless approved by the board of directors. The remuneration for such additional duties should be approved by the board of directors. The Company has entered into a consultancy agreement with board member Neal D. Shore pursuant to which Mr. Shore may provide certain medical expert services to the Company. The agreement is dealt with and approved by the board. In 2022 no remuneration has been payable by the Company pursuant to the consultancy agreement with Mr. Shore.
Non-conformance with the recommendation: The Company has granted options to the members of the board of directors. The board option remuneration has been presented to and approved by the general meeting of the Company. Other than this, the Company acts in compliance with the Corporate Governance Code with regards to remuneration of the board of directors.
The Company has in accordance with the Norwegian Public Limited Liability Companies Act established guidelines for the remuneration of the senior executives in the Company. The remuneration guidelines have been approved by the general meeting. The remuneration guidelines shall be clear and understandable, and shall contribute to the Company's business strategy, long-term interests and financial sustainability. The arrangements for salary and other remuneration shall be simple and shall ensure convergence of the financial interests of the senior management and the shareholders.
The Company aims to ensure that performance-related remuneration is based on quantifiable factors which the employee in question can influence.
The remuneration guidelines are available at www.photocure.com. The compensation scheme for the Company´s senior management is based on a fixed salary, performance related bonus (capped based on fixed salary), a share incentive scheme, pension benefits and certain other benefits. Performance-related remuneration is linked to value creation for the shareholders over time, and is based on quantifiable factors which the employees in question can influence.
STATEMENT OF COMPREHENSIVE INCOME STATEMENT OF FINANCIAL POSITION as of 31 December STATEMENT OF CASH FLOWS STATEMENT OF CHANGES IN EQUITY
Non-conformance with the recommendation: The maximum pay-out under the option program is not subject to an absolute limit. Other than this, the Company acts in compliance with the Corporate Governance Code with regards to remuneration of the senior management.
The Company has targeted investor relation activities with the aim to consistently provide the market with timely and accurate information.
The Company's reporting of financial and other information is based on openness and takes into account requirements for equal treatment of all investors.
The board of directors has adopted a separate manual on disclosure of information, which sets forth the Company's disclosure obligations and procedures. The board of directors will seek to ensure that market participants receive correct, clear, relevant and upto-date information in a timely manner, taking into account the requirement for equal treatment of all participants in the securities market.
The Company will each year publish a financial calendar, providing an overview of the dates for major events such as its ordinary general meeting and publication of interim reports.
The Company shall have procedures for establishing discussions with important shareholders to enable the board of directors to develop a balanced understanding of the circumstances and focus of such shareholders. Such discussions shall be done in compliance with the provisions of
applicable laws and regulations.
All information distributed to the Company's shareholders will be published on the Company's web site at the same time as it is sent to shareholders. The chairperson of the board and the chief executive officer are authorized to speak on behalf of the Company, and delegate such authority as is appropriate in relevant cases.
In the event the Company becomes the subject of a take-over offer, the board of directors shall ensure that the Company's shareholders are treated equally and that the Company's activities are not unnecessarily interrupted. The board of directors shall also ensure that the shareholders have sufficient information and time to assess the offer.
The board of directors will not attempt to influence, hinder or complicate the submission of bids for the acquisition of the Company's operations or shares, or prevent the execution thereof. There are no defense mechanisms against take-over bids in the Articles of Association, nor have other measures been implemented to specifically hinder acquisitions of shares in the Company. The board of directors has not established written guiding principles for how it will act in the event of a take-over bid, as such situations are normally characterized by concrete and one-off situations which make a guideline challenging to prepare.
In the event a take-over was to occur, the board of directors will consider the relevant recommendations in the Corporate Governance Code and whether the concrete situation entails that the recommendations in the Corporate Governance Code can be complied with or not.
Non-conformance with the recommendation: The Company has not established separate principles for how to act in a take-over situation as described.
The Company's external auditor is KPMG AS.
On an annual basis, the board of directors reviews with the auditor the Company's internal control procedures, including identified risk areas and proposals for improvement, as well as the main features of the plan for the audit of the Company.
Furthermore, the auditor participates in meetings of the board of directors that deal with the annual accounts and, at least once a year, carries out a review of the Company's procedures for internal control in collaboration with the audit committee. At least one board meeting with the auditor shall be held each year in which no member of the senior management is present.
The board of directors has established guidelines in respect of the use of the auditor by the senior management for services other than the audit.
The remuneration to the auditor will be approved by the ordinary general meeting. The board of directors will report to the general meeting details of fees for audit work and any fees for other specific assignments.
Non-conformance with the recommendation: None
| Parent | Group | ||||
|---|---|---|---|---|---|
| 2022 2021 |
Amounts in NOK 1,000 | Notes | 2022 | 2021 | |
| ASSETS | |||||
| 129 209 | 145 881 | Customer relations | 13 | 129 209 | 145 881 |
| 144 000 | 144 000 | Goodwill | 13 | 144 000 | 144 000 |
| 14 048 | 15 575 | Property, plant, equipment and other assets | 14 | 32 479 | 33 575 |
| 315 006 | 302 131 | Loan to group company | 10,11 | - | - |
| 17 171 | 11 902 | Shares in subsidiaries | 15 | - | - |
| 55 120 | 53 003 | Deferred tax asset | 11 | 55 120 | 53 003 |
| 674 554 | 672 492 | Total non-current assets | 360 808 | 376 459 | |
| 24 412 | 26 660 | Inventories | 16 | 26 534 | 27 534 |
| 31 738 | 29 610 | Accounts receivable | 17, 19 | 47 164 | 47 980 |
| 6 517 | 5 209 | Other receivables | 17, 19 | 16 455 | 14 780 |
| 259 058 | 314 817 | Cash and short term deposits | 18, 20 | 268 073 | 322 895 |
| 321 725 376 296 Total current assets |
358 226 | 413 189 | |||
| 996 279 | 1 048 788 | Total assets | 719 034 | 789 648 | |
| Parent | Group | ||||
|---|---|---|---|---|---|
| 2022 | 2021 | Amounts in NOK 1,000 | Notes | 2022 | 2021 |
| 236 550 | 236 380 | Revenues from contract with customers | 1,2,3 | 374 474 | 354 124 |
| 18 658 | 6 416 | Signing fees and milestone revenues | 1,2,3 | 18 658 | 6 416 |
| 255 208 | 242 796 | Total revenues | 393 132 | 360 540 | |
| -23 269 | -23 012 | Cost of goods sold | 4 | -22 697 | -24 050 |
| 231 939 | 219 784 | Gross profit | 370 434 | 336 490 | |
| 899 | 999 | Other income | - | - | |
| -15 371 | -14 828 | Indirect manufacturing expenses | 5 | -15 371 | -14 828 |
| -3 342 | -4 322 | Research and development expenses | 5 | -3 342 | -4 322 |
| -192 542 | -159 113 | Marketing and sales expenses | 5 | -303 434 | -259 867 |
| -70 937 | -44 161 | Other operating expenses | 5,6,7,8 | -97 290 | -63 299 |
| -281 292 | -221 425 | Total other income and expenses recurring | -419 437 | -342 316 | |
| -49 353 | -1 641 | Operating profit/loss(-) | -49 003 | -5 826 | |
| 48 137 | 36 813 | Financial income | 9,10 | 9 218 | 26 212 |
| -30 240 | -34 643 | Financial expenses | 9,10 | -30 591 | -34 822 |
| -29 565 | -23 479 | Remeasure financial balances | 9,10 | -758 | -17 220 |
| -11 668 | -21 309 | Net financial profit/loss(-) | -22 131 | -25 830 | |
| -61 021 | -22 950 | Profit/loss(-) before tax | -71 134 | -31 656 | |
| 2 166 | 3 102 | Tax expense | 11 | -723 | 759 |
| -58 856 | -19 847 | Net profit/loss(-) | -71 857 | -30 897 | |
| Currency translation | 2 202 | -1 311 | |||
| Total other comprehensive income items | |||||
| 0 | 0 | that may be reclassified to profit & loss | 2 202 | -1 311 | |
| -58 856 | -19 847 | Comprehensive income | -69 654 | -32 208 | |
| Earnings per share (Amounts in NOK): | 12 | ||||
| Basic | -2,66 | -1,15 | |||
| Diluted | -2,66 | -1,15 | |||
| Parent | Group | ||||
|---|---|---|---|---|---|
| 2022 | 2021 | Amounts in NOK 1,000 | Notes | 2022 | 2021 |
| EQUITY AND LIABILITIES | |||||
| 13 560 | 13 487 | Share capital | 21 | 13 560 | 13 487 |
| 440 415 | 410 734 | Other paid-in capital | 440 415 | 410 734 | |
| 320 296 | 377 468 | Retained earnings | 8 758 | 78 412 | |
| 774 271 | 801 689 | Total equity | 462 733 | 502 633 | |
| 126 233 | 133 600 | Earnout liability | 22 | 126 233 | 133 600 |
| 0 | 12 500 | Long term loan financial institution | 22 | 0 | 12 500 |
| 2 523 | 2 180 | Pension liabilities | 7 | 4 755 | 3 520 |
| 9 132 10 652 Lease liabilities |
22 | 21 256 | 23 813 | ||
| 137 888 | 158 933 | Total non-current liabilities | 152 245 | 173 433 | |
| 15 867 | 17 018 | Accounts payable | 17, 23 | 21 281 | 23 648 |
| Employee withholding taxes, | |||||
| 2 344 | 1 837 | social security tax and vat | 4 587 | 3 001 | |
| 23 902 | 33 150 | Short term part non-current liabilities | 22 | 27 382 | 36 580 |
| 42 007 | 36 161 | Other current liabilities | 17, 23 | 50 807 | 50 354 |
| 84 120 | 88 166 | Total current liabilities | 104 056 | 113 583 | |
| 222 008 | 247 099 | Total liabilities | 256 301 | 287 016 | |
| 996 279 | 1 048 788 | Total equity and liabilities | 719 034 | 789 648 | |
| Oslo, 11 April 2023 | |||||
| Photocure ASA | |||||
| Parent | Group | ||||
|---|---|---|---|---|---|
| 2022 | 2021 | Amounts in NOK 1,000 | Notes | 2022 | 2021 |
| -61 021 | -22 950 | Profit/loss(-) before tax | -71 134 | -31 656 | |
| 20 051 | 20 753 | Ordinary depreciation & amortisation | 13,14 | 24 378 | 24 127 |
| 16 907 | 9 670 | Share-based payments expense | 6 | 22 176 | 12 665 |
| 343 | 295 | Pension costs | 8 | 1 235 | 921 |
| -2 147 | -1 807 | Interest income | 9 | -2 147 | -1 807 |
| 25 477 | 23 646 | Interest expenses | 9 | 25 804 | 23 826 |
| 758 | 17 220 | Remeasured earnout | 13,22 | 758 | 17 220 |
| -38 971 | -10 601 | Unrealized currency (gain)/loss loan subsidiary | 9 | - | - |
| 763 | -14 870 | Unrealized currency (gain)/loss other | 763 | -14 870 | |
| 574 | -2 528 | Other items | -893 | -2 528 | |
| Changes in | |||||
| 2 248 | 1 810 | - inventories | 1 000 | 2 144 | |
| -3 437 | -2 941 | - trade and other receivables | -859 | -15 080 | |
| 7 647 | -5 459 | - trade and other payables | -782 | -1 954 | |
| -2 443 | 6 908 | - provisons and other accruals | 460 | 11 668 | |
| 28 807 | 6 259 | Loss allowance internal loan | - | - | |
| 0 | -476 | Settlement employee benefits | 0 | -476 | |
| 49 | -21 | Tax paid | 11 | -2 777 | -314 |
| -4 395 | 24 907 | Net cash flow from operating activities | -2 018 | 23 886 | |
| 2 147 | 1 807 | Interest received | 2 147 | 1 807 | |
| -2 710 | -5 350 | Loan to subsidiary | 10 | - | - |
| 0 | -62 | New subsidiary capital | - | - | |
| -1 278 | -2 194 | Investments in machinery and equipment | 14 | -3 609 | -3 703 |
| -1 841 | -5 799 | Net cash flow from investing activities | -1 462 | -1 896 | |
| -1 619 | -1 970 | Lease offices and company cars | 14, 22 | -3 164 | -5 306 |
| -25 000 | -12 500 | Loan financial institution | 22 | -25 000 | -12 500 |
| -1 095 | -1 222 | Interest paid financial loans | -1 368 | -1 401 | |
| -29 390 | -28 818 | Earnout liability | 22 | -29 390 | -28 818 |
| 7 580 | 14 042 | Employee options exercised | 7 580 | 14 042 | |
| -49 524 | -30 468 | Net cash flow from financing activities | -51 342 | -33 983 | |
| -55 760 | -11 360 | Net change in cash during the year | -54 822 | -11 993 | |
| 314 817 | 326 176 | Cash and cash equivalents as of 01 January | 322 895 | 334 887 | |
| 259 058 | 314 817 | Cash and cash equivalents as of 31 December | 268 073 | 322 895 | |
| Jan Hendrik Egberts | Johanna Holldack |
|---|---|
| Chairperson | Director |
Anders Tuv Director
Anne Worsøe
Director
Neal Shore Director
Dan Schneider President and CEO
| Other | ||||||
|---|---|---|---|---|---|---|
| Issued | Treasury | paid-in | Translation | Retained | Total | |
| (Amounts in NOK 1 000) | capital | shares | equity | reserve | earnings | equity |
| Equity as of 31 December 2019 | 13 359 | -408 | 384 413 | 0 | 398 996 | 796 360 |
| Comprehensive income: | ||||||
| Net profit for the year | -19 847 | -19 847 | ||||
| Adjustment previous year | -1 680 | -1 680 | ||||
| Other comprehensive income that may be reclassified to p&l |
- | - | - | 0 | ||
| Total comprehensive income | 0 | 0 | 0 | 0 | -21 527 | -21 527 |
| Transaction with owners: | ||||||
| Capital increase | 0 | |||||
| Sale own shares | 186 | 186 | ||||
| Buy back own shares | -89 | -89 | ||||
| Employees' options | 128 | 26 632 | 26 760 | |||
| Total transaction with owners | 128 | 97 | 26 632 | 0 | 0 | 26 857 |
| Equity as of 31 December 2021 | 13 487 | -311 | 411 045 | 0 | 377 469 | 801 690 |
| Comprehensive income: | ||||||
| Net profit for the year | -58 856 | -58 856 | ||||
| Adjustment previous year | 1 680 | 1 680 | ||||
| Other comprehensive income that may be reclassified to p&l |
- | - | - | 0 | ||
| Total comprehensive income | 0 | 0 | 0 | 0 | -57 176 | -57 176 |
| Transaction with owners: | ||||||
| Capital increase | 0 | |||||
| Sale own shares | 0 | |||||
| Buy back own shares | -3 685 | -3 685 | ||||
| Employees' options | 74 | 3 695 | 29 671 | 33 440 | ||
| Total transaction with owners | 74 | 10 | 29 671 | 0 | 0 | 29 755 |
| Equity as of 31 December 2022 | 13 560 | -301 | 440 718 | 0 | 320 293 | 774 271 |
| Group | ||||||
|---|---|---|---|---|---|---|
| Other | ||||||
| Issued | Treasury | paid-in | Translation | Retained | Total | |
| (Amounts in NOK 1 000) | capital | shares | equity | reserve | earnings | equity |
| Equity as of 31 December 2020 | 13 359 | -408 | 384 834 | -773 | 111 121 | 508 132 |
| Comprehensive income: | ||||||
| Net profit for the year | -30 897 | -30 897 | ||||
| Other comprehensive income that may be reclassified to p&l |
- | -1 311 | - | -1 311 | ||
| Total comprehensive income | 0 | 0 | 0 | -1 311 | -30 897 | -32 208 |
| Transaction with owners: | ||||||
| Capital increase | 0 | |||||
| Sale own shares | 186 | 186 | ||||
| Buy back own shares | -89 | -89 | ||||
| Employees' options | 128 | 26 211 | 271 | 26 611 | ||
| Total transaction with owners | 128 | 98 | 26 211 | 0 | 271 | 26 709 |
| Equity as of 31 December 2021 | 13 487 | -310 | 411 045 | -2 084 | 80 495 | 502 633 |
| Comprehensive income: | ||||||
| Net profit for the year | -71 857 | -71 857 | ||||
| Other comprehensive income | ||||||
| that may be reclassified to p&l | - | 2 202 | 2 202 | |||
| Total comprehensive income | 0 | 0 | 0 | 2 202 | -71 857 | -69 654 |
| Transaction with owners: | ||||||
| Capital increase | 0 | |||||
| Sale own shares | 0 | |||||
| Buy back own shares | -3 685 | -3 685 | ||||
| Employees' options | 74 | 3 695 | 29 671 | 33 440 | ||
| Total transaction with owners | 74 | 10 | 29 671 | 0 | 0 | 29 755 |
| Equity as of 31 December 2022 | 13 560 | -300 | 440 717 | 118 | 8 638 | 462 733 |
There are no significant new IFRS standards made effective in 2022 that effect the group accounts for Photocure.
There are no IFRS or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group. The new and amended standards and interpretations from IFRS that were adopted by the EU with effect from 2022 did not have any significant impact on the reporting in 2022.
In preparation of these consolidated financial statements, management has made judgments, estimates and assumptions that affect the application of the Group's accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively. Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognized, and information about assumptions and estimation uncertainties that have significant risk of resulting in a material adjustment in the financial statements as of 31 December 2022, are included in the following notes:
Note 13 and 22 Goodwill and customer relations: the assumptions in the application of IFRS 36 of the annual goodwill impairment analysis, and the remeasurement of
the fair value of the earnout liability according to IFRS 9.
Assets/liabilities are classified as current assets/current liabilities when they meet one of the following criteria:
Monetary items in foreign currencies are converted at closing rate of exchange. In the absence of any statement to the contrary, realized and unrealized exchange rate gains and losses are included in financial income or expenses. Transactions in foreign currencies are recorded at the exchange rate on the date of transaction. Assets and liabilities in foreign currencies are translated into NOK at the exchange rate applicable on the balance sheet date.
Income and expenses in foreign
subsidiaries are translated into NOK at the average exchange rate for the financial statement period. The assets and liabilities of the foreign subsidiaries are translated to NOK at exchange rates at the reporting date
Property, plant and equipment (PPE) are recognized at cost less deductions for accumulated depreciation and accumulated impairment losses. PPE are depreciated over the expected useful life of the assets taking any residual value into consideration. Costs incurred for major replacements and upgrades of PPE are added to cost if it is probable that the costs will generate future economic benefits for the Group and if the costs can be reliably measured. Ordinary maintenance is expensed as incurred.
PPE are depreciated on a straight-line basis over the estimated useful life of the asset as follows:
| Production and test | |
|---|---|
| equipment | 5 years |
| Furniture and office | |
| equipment | 3–5 years |
Intangible development expenditures are amortized on a straight-line basis in the profit and loss over the remaining patent period for the approved product and indication as follows:
| Product development | 4 - 10 years |
|---|---|
| Customer relations | 10 years |
Non-current & intangible assets that are recognized in the balance sheet, are tested for impairment if there are indications of a loss in value. If the book value of an asset is higher than the recoverable value of the asset, the loss in value is recognized in profit and loss. The recoverable value is the
The annual accounts for 2022 for Photocure Group (Photocure) comprises Photocure ASA and the four wholly owned subsidiaries; Photocure Inc. registered in U.S, Photocure GmbH registered in Germany, Photocure SAS registered in France and Photocure Canada Inc. registered in Canada. The annual accounts for Photocure were approved for publication by the Board of Directors on 11 April 2023.
Photocure ASA is a public limited company domiciled in Norway. The business of the Group is associated with research, development, production, distribution, marketing and sales of pharmaceutical products. The Company's shares are listed on the Oslo Stock Exchange. The Parent Company's registered office is Hoffsveien 4, NO-0275 Oslo, Norway.
The annual accounts for the Group and the Parent Company have been prepared on the basis of historical cost, with the exception of money market funds and earnout liability that are valued at fair value.
The Group and the Parent Company's annual accounts are prepared in accordance with International Financial Reporting Standards (IFRS) as specified by the International Accounting Standards Board as adopted by the European Union (EU) as per 31 December 2022.
Photocure ASA has NOK (Norwegian kroner) as its functional currency and presentation currency. In the absence of any statement to the contrary, all financial information is reported in whole thousands. As a result of rounding adjustments, the figures in the financial statements may not add up to the totals.
Photocure performs the sales and distribution of Hexvix in the European markets. Photocure has established wholly owned subsidiaries in Germany (Photocure GmbH) and France (Photocure SAS) that provide marketing and promotion services. These entities have Euro (EUR) as functional currency. The sales, marketing and distribution in North America is in U.S. performed through Photocure's wholly owned subsidiary Photocure Inc. and in Canada though Photocure's wholly owned subsidiary Photocure Canada Inc., in both countries under the trade name Cysview. Photocure Inc. has U.S. dollars (USD) as functional currency while Photocure Canada Inc. has Canadian dollars (CAD) as functional currency.
Raw materials are valued at the lower of cost and net sales value in accordance with the first-in, first-out principle (FIFO). Semi-finished and finished goods are valued at production cost including a mark-up for their share of the indirect production costs based on the FIFO principle.
Trade receivables are initially recognized when they are originated. All other financial assets and financial liabilities are initially recognized when the Group becomes a party to the contractual provisions of the instrument. A trade receivable without a significant financing component is initially measured at the transaction price. All other financial assets are initially measured at fair value plus, for an item not at fair value through, transaction costs that are directly attributable.
A financial asset is subsequently measured at amortized cost if it meets both of the following criteria and is not designated as at Fair Value Through Profit and Loss (FVTPL):
Trade receivables, loan to group companies, and other receivables meet both of these criteria and are measured at amortized cost using effective interest rate method.
All financial assets not classified as measured at amortized cost or FVOCI as described above are subsequently measured at FVTPL. Photocure's investments in money market funds are measured at FVTPL.
The earnout liability is measured at fair value at the date of acquisition and remeasured at fair value at each reporting date and subsequent changes in the fair value are recognized in profit or loss
Interest bearing liabilities are recognized at fair value at the time of recognition. In subsequent periods, interest-bearing liabilities are booked at amortized cost according to the effective interest rate method.
Financial income consists of interest income on bank balances and money market fund as well as exchange rate gains from currency items. Financial expense consists of interest expense on borrowing and exchange rate losses from currency items.
The Group recognizes loss allowances for expected credit losses (ECLs) on financial assets measured at amortized cost.
The Group measures loss allowances at an amount equal to lifetime ECLs, except for the following, which are measured at 12-month ECLs:
The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due. Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument. 12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).
Loss allowances for trade receivables and contract assets are always measured at an amount equal to lifetime ECLs. The Group uses an allowance matrix based on historical losses adjusted for forward-looking information. For other financial assets measured at amortized cost the ECLs are probability-weighted estimates of credit losses discounted at the effective interest rate of the financial asset.
The core principle in IFRS 15 is revenue should be recognized dependent on the transfer of promised goods or services to the customer for an amount that reflects the consideration which should be received in exchange for those goods or services. The objective is to provide a five-step approach to revenue recognition that includes identifying contracts with customers, identifying performance obligations, determining transaction prices, allocating transaction prices to performance obligations, and recognizing revenue when or as performance obligations are satisfied.
In Photocure's customer contracts which are regarded to be within the scope of IFRS 15, the up-front fees not related to a separate performance obligation will be recognized over the term of the contract upon the delivery of goods.
If the promise to grant the license is distinct from other promised goods or services in the contract, the promise to grant the license is a separate performance obligation. A license contract with a customer is a right to use Photocure's intellectual property as it exists at the point in time at which the license is granted.
The total transaction price is allocated between the performance obligations based on the relative stand-alone selling price. The transaction price allocated to the license may consist of up-front fee, different milestone payments and sales based royalty
highest of net sales value and the value in use of the asset. Assets are grouped and measured at the lowest level for determining loss in value.
Previous impairment losses are reversed to the extent that the assets carrying amount does not exceed the carrying amount that would have been determined, net of depreciation and amortization, if no impairment loss had been recognized or taken place.
Goodwill is tested annually for impairment. For impairment testing, assets are grouped that generate cash inflows from continuing use that are largely independent from the cash inflows from other assets or cash generating units (CGU). Goodwill that are arising from a business combination is allocated to CGUs or group of CGUs that are expected to benefit from the synergies of the combination. The recoverable value of the asset is the greater of value in use and its fair value less cost of disposal. Value in use is based on estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
An impairment loss is allocated first to reduce the book value of the goodwill related to the CGU and then to reduce the carrying amount of the other assets in the CGU on a pro rata basis. An impairment loss in respect of goodwill is not reversed.
Research costs are expensed as incurred. Development costs are recognized in the balance sheet as intangible assets only if there is an identifiable asset that is expected to generate future financial benefits, and when the costs of such an asset can be reliably measured.. Development costs that have been expensed in previous accounting periods cannot be recognized in the balance sheet at a later date. Cost-sharing of research and development expenses with license partners is booked as a reduction in costs.
The work of the regulatory function and services provided are related to both market expansion and product development. Photocure classifies for this reason the regulatory function into the following two categories:
Shares and investments with the aim of long-term ownership are booked in the balance sheet as long-term investments and are valued at the lower of cost and fair value. Write-downs for permanent declines in value are made on the basis of individual evaluations. Any realized and unrealized profits/ losses and any write-downs related to these investments will be booked in the income statement as financial items.
applies to losses generated in tax years beginning after December 31, 2017. NOLs generated in 2017 and earlier would retain their 20-year life and be available to offset 100 percent of taxable income, subject to certain limitations. Companies will have to track their NOLs in different buckets based on date (pre and post December 31, 2017). The Coronavirus Aid, Relief, and Economic Security ("CARES ") Act changed those rules temporarily by permitting NOLs incurred in 2018, 2019, or 2020 to be carried back for five years to the earliest year first and suspending the 80% taxable income limitation through 2020.
The book value of assets in connection with deferred tax is reviewed on every balance sheet date and is reduced to the degree that there is no longer any objective proof that there will be sufficient taxable profits to utilize all or parts of assets in connection with deferred tax. Non-recognized assets in connection with deferred tax are reviewed every balance sheet date and are included to the degree that it is probable that future taxable profits will allow the recovery of assets in connection with deferred tax. Each taxable entity in the Group are treated separately.
Earnings per share is calculated on the basis of the profits for the period after tax but before "Other comprehensive income", divided by a weighted average number of outstanding shares in the period and adjusted for the treasury shares.
The diluted earnings per share are calculated by adjusting the denominator for amounts outstanding on option programs. Anti-dilution effects are not taken into consideration.
Provisions are booked when the Group has a liability associated with an event, when it is probable that the liability will have to be settled and when the liability can be measured or estimated.
When the Group expects that all or parts of the liability can be charged on to another party, this recharge will be recorded as an account receivable if there is virtual certain that the other party will pay. The cost associated with a provision will be recorded net in the income statement after deduction for the recharge.
payments. The part of the transaction price related to variable milestone payments are estimated as the most likely amount but constrained which currently means that these revenues will be recognized if and when the relevant milestone are achieved. Sales based royalty is recognized when the subsequent sales occur.
Revenues for the sale of products are recorded on the date of delivery, when both control and risk essentially have been transferred to the buyer.
License agreements that give the right to a guaranteed minimum royalty are booked as revenue at the time the prerequisite is fulfilled. Royalty revenue is booked as Sales revenue in line with the licensee's sale of licensed products.
Government grants are booked at the same time as the income that it shall generate or the cost that it shall reduce. Grants received for product development or manufacture are first booked as reduction of costs when the conditions for the grant in question have been met and the applications are granted. Grants received for product development that are capitalized, are reported as reduction of gross expenditures and the net expenditures are regarded as the intangible assets.
The Company's payment of contributions is expensed in the period it is accrued. Any prepayments made to the contribution fund are recognized in the balance sheet.
Employees residing in the United States participate in a 401(k), a taxqualified, defined-contribution pension account defined in subsection 401(k) of the Internal Revenue Code The 401k plan is not interest-bearing, the employee chooses from an investment line up of diversified mutual funds, which can generate gains or losses.
Employees in Germany that were part of the acquisition from Ipsen have a defined benefit pension plan that has been transferred to Photocure GmbH as part of the TUPE regulations. Photocure GmbH has entered a re-assurance agreement with an assurance company that balance the pension liability. New employees in Germany are offered a defined contribution pension plan.
Salary to senior management employees in Photocure ASA above 12 x G is subject to agreements concerning operational coverage of pensions for salary above this level in the form of contribution-based pensions. The calculated contribution constitutes 16% of the employee's salary above 12 x G. Photocure Inc has established an additional unfunded pension coverage for senior managers accruing annually an amount equal to 4% of salary and earned bonus.
The calculated pension obligation pursuant to these schemes are interest-bearing.
Employees have been offered share options to the Company's shares as an element of the Group's employee incentive policy. If the Group has own shares, the Group may allot own shares instead of issuing new shares when share options are exercised. All share options are offered at strike prices that reflect the market price +10% of the shares at the time of allotment of the rights.
The fair value is expensed over the share options vesting period and the Company's equity is increased correspondingly. The fair value of share options is calculated according to the Black-Scholes model. Each program is calculated separately with the actual strike price and duration of the program. The share options cease to be valid when the employee's is leaving the Company.
Employer's social security contributions on outstanding share options are accrued as personnel costs based on the intrinsic value of the rights.
The tax expense in the income statement includes both the income tax payable for the period and changes in deferred tax. Deferred tax in Norway is calculated at rate of 22% and in the USA at a total rate of 28% on the basis of the temporary differences that exist between the tax value of the assets and liabilities, and their book value.
Liabilities for deferred tax are included for all temporary differences that increase tax, except when the asset in connection with deferred tax arises as a result of the first-time inclusion of an asset or liability in a transaction that is not in a business combination and affects neither the accounting nor the taxable profit or loss at the time of the transaction.
Assets in connection with deferred tax are included for all tax-reducing temporary differences, carry forward of tax deductions and tax losses in the extent that there is objective proof that there will be sufficient taxable profits against which to offset tax-reducing temporary differences, and carry forward of unused tax deductions and tax losses.
In the US the tax years 2017 and prior, businesses were able to offset current taxable income by claiming net operating losses (NOLs), generally eligible for a two-year carryback and 20-year carryforward. Starting in tax year 2018, NOLs cannot be carried back, but can be indefinitely carried forward. In addition, NOLs for tax years beginning in 2018 will be subject to an 80-percent limitation. The 80 percent limitation on NOL deductions
42 43
Contingent liabilities are defined as:
Contingent liabilities are not included in the annual accounts. Notes on significant contingent liabilities are provided, with the exception of contingent liabilities with little probability of occurring.
Contingent assets are not included in the annual accounts, but are reported in cases in which there is a certain likelihood of their resulting in a benefit to the Group.
The cash flow statement has been prepared in accordance with the indirect method. Cash and cash equivalents consist of cash, bank deposits and other current investments like money market funds.
The main rule is that the leased assets are recognized in the balance sheet as a fixed asset or in a disclosure note for fixed assets. Leased assets are shown separately from other fixed assets owned by the company as "Right of use assets" in the related disclosure note.
Although a lease is a right to use an asset and not a purchase of an asset, the classification in the balance sheet follows the leased asset.
The net present value of the lease liability is calculated by discounting the rental payments with the implicit interest rate of the lease, or the business's marginal borrowing rate if the implicit interest rate is unknown.
According to IFRS 16 depreciation is calculated for the right of use assets. Depreciation is presented together with other depreciation, while interest cost is included in financial expenses in the income statement.
The leased assets are depreciated over their useful lives. This is the shorter of the rental period and the assets economic life.
Segments are reported similarly as the internal reporting to the Group's Chief Operating Decision Maker (CODM) s. CODM are defined as the Group's Senior management.
A business acquisition can be regarded as a business combination using the acquisition method when the acquired set of activities and assets meets the definition of a business and control is transferred. In determining whether a particular set of activities and assets is a business, Photocure will assessed whether the set of assets and activities acquired includes, at a minimum, an input and substantive process and whether the acquired set has the ability to produce outputs.
Based on the agreement including the transfer of distribution contracts, employees and inventory, the transaction has been defined as a business combination and is thus accounted for in accordance with IFRS 3.
The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. The residual value in the acquisition constitutes goodwill and is tested annually for impairment. Any contingent consideration is measured at fair value at the date of acquisition and remeasured at fair value at each reporting date and subsequent changes in the fair value are recognized in profit or loss as financial income or cost.
Customer relationships meet the contractual legal criterion for identification as intangible assets for an entity that has a practice of establishing contracts with its customers, regardless of whether a contract exist at the date of the acquisition. A customer relationship may also arise through means other than contracts, such as through regular contact by sales or service representatives. Furthermore, IFRS 3's illustrative examples on "customerrelated intangible assets" sets forth that customer relationships meet the criteria of an intangible asset if the company has recurring customers, even if the company does not have any open purchase orders or contracts with those.
| 1 PARTNERSHIPS | OTHER ASSETS | |
|---|---|---|
| 2 OPERATING SEGMENTS | ||
| 3 REVENUES FROM CONTRACT WITH CUSTOMERS | 15 SUBSIDIARIES | |
| 4 COST OF GOODS SOLD | 16 INVENTORIES | |
| 5 INCOME STATEMENT CLASSIFIED BY NATURE | ||
| 6 PERSONNEL EXPENSES | 18 FAIR VALUE | |
| 19 RECEIVABLES | ||
| 7 REMUNERATION OF MANAGEMENT AND BOARD OF DIRECTORS |
||
| 8 PENSION COSTS | ||
| 9 FINANCIAL INCOME AND EXPENSE | ||
| 10 RELATED PARTY | ||
| 11 TAX | ||
| 12 EARNINGS PER SHARE | ||
GOODWILL AND CUSTOMER RELATIONS
PROPERTY, PLANT, EQUIPMENT AND OTHER ASSETS
Photocure entered in July 2019 into a license agreement providing Asieris MediTech Co with a world-wide license to develop and commercialize Cevira® for the treatment of HPV induced cervical precancerous lesions. Under the agreement, Photocure will receive signing fees, development- and approval milestones, in addition to sales royalties.
Photocure entered in January 2021 into a license agreement providing Asieris MediTech Co with a license to commercialize Hexvix in mainland China and Taiwan. Under this agreement, Photocure will receive signing fees and approval milestones, in addition to sales royalties.
Photocure has two segments: Commercial Franchise and Development Portfolio. Commercial Franchise includes Hexvix/Cysview by geography (North America and Europe) and other sales (partners and other products including sales revenues for Hivec). Development Portfolio includes development of pipeline products. North America 2022 results includes U.S. and Canada while 2021 and earlier results include U.S. only as sales in Canada were through a partner. Total 2021 revenue for Photocure from this partner was NOK 0.4 million. Sales revenue Europe in the Commercial segment consists of Hexvix direct sale to hospitals, wholesalers and pharmacies.
The Development segment is split by development of Cevira and other pipeline products.
Operating costs are charged directly to the respective segment involved if directly related. Indirect manufacturing costs are allocated based on sales within the commercial segment and other indirect costs are allocated based on time and resources utilized within the different subsegments.
Segment assets and liabilities are not reported to the Chief Operating Decision Makers (CODM) and therefore not allocated to reportable segments.
| 1 Jan - 31 December 2022 | Commercial Franchise | Development Portfolio | ||||||
|---|---|---|---|---|---|---|---|---|
| (Amounts in NOK 1,000) | North Am. Cysview |
Europe Hexvix |
Other Sales |
Total Sales |
Cevira | PDT & Explorativ |
Total R&D |
Grand Total |
| Revenues from contract with customers |
150 784 | 221 826 | 1 863 | 374 474 | - | - | - | 374 474 |
| Signing fees and milestone revenues |
- | - | 152 | 152 | 18 506 | - | 18 506 | 18 658 |
| Cost of goods sold | -4 835 | -16 810 -1 052 | -22 697 | - | - | - | -22 697 | |
| Gross profit | 145 950 | 205 016 | 963 | 351 929 18 506 | - | 18 506 | 370 435 | |
| Gross profit of sales % | 97 % | 92 % | 44 % | 94 % | 94 % | |||
| R&D | -322 | -1 211 | - | -1 533 | -739 | -1 070 | -1 809 | -3 342 |
| Sales & marketing | -163 706 | -118 563 -3 619 | -285 888 | -645 | - | -645 | -286 533 | |
| Other & allocations | -38 214 | -52 758 -8 177 | -99 149 | -1 933 | -4 106 | -6 038 | -105 187 | |
| Operating expenses | -202 242 | -172 532 -11 795 | -386 570 | -3 317 | -5 176 | -8 492 -395 062 | ||
| EBITDA before restructuring | -56 292 | 32 484 -10 832 | -34 641 | 15 189 | -5 176 | 10 013 | -24 627 | |
| Depreciation and Amortization | -24 231 | -147 | -24 378 | |||||
| EBIT before restructuring | -58 872 | 9 866 | -49 005 |
| 1 Jan - 31 December 2021 | Commercial Franchise | Development Portfolio | ||||||
|---|---|---|---|---|---|---|---|---|
| (Amounts in NOK 1,000) | U.S. Cysview |
Europe Hexvix |
Other Sales |
Total Sales |
Cevira | PDT & Explorativ |
Total R&D |
Grand Total |
| Revenues from contract with customers |
125 232 | 225 751 | 1 306 | 352 289 | 1 836 | - | 1 836 | 354 125 |
| Signing fees and milestone revenues |
- | - | 6 416 | 6 416 | - | - | - | 6 416 |
| Cost of goods sold | -3 901 | -18 454 | -521 | -22 876 | -1 175 | - | -1 175 | -24 051 |
| Gross profit | 121 331 | 207 297 7 201 | 335 829 | 661 | - | 661 | 336 490 | |
| Gross profit of sales % | 97 % | 92 % | 60 % | 94 % | 36 % | 36 % | 93 % | |
| R&D | -386 | -1 279 | - | -1 665 | -390 | -2 267 | -2 657 | -4 322 |
| Sales & marketing | -131 251 | -105 127 -5 976 | -242 354 | -612 | - | -612 | -242 966 | |
| Other & allocations | -24 920 | -37 083 -5 317 | -67 320 | -1 141 | -2 440 | -3 581 | -70 901 | |
| Operating expenses | -156 557 | -143 489 -11 293 | -311 339 | -2 143 | -4 707 | -6 850 | -318 189 | |
| EBITDA before restructuring | -35 226 | 63 808 -4 092 | 24 490 | -1 482 | -4 707 | -6 189 | 18 301 | |
| Depreciation and Amortization | -23 889 | -238 | -24 127 | |||||
| EBIT before restructuring | 601 | -6 427 | -5 826 |
The definition of EBITDA is "Earnings Before Interest, Tax, Depreciation and Amortization".
For the general supply of products Photocure satisfy the contractual performance obligation upon delivery of products according to the delivery terms agreed. Invoices are issued at that point in time and the payment term is usually within 30 days. No discounts were provided to the customers and no return of products were accepted within the expiry of the products.
Photocure entered a license agreement with Asieris for the development and commercialization of product Cevira in July 2019. The agreement is based on a "ready for Phase 3 study" concept and this study will be carried out by Asieris in China from 2020.
Photocure has in the agreement with Asieris agreed to transfer the rights for the development and commercialization of Cevira (license) and to deliver the active substance for the phase 3 study. Asieris will be responsible for the remaining development of Cevira and pay all the costs. The license is a right to use Photocure's intellectual property as it existed at the contract date. The active substance will not be further developed or changed by Photocure for use by Asieris. The transfer of the license and the delivery of the active substance are by Photocure regarded as two separate performance obligations.
Asieris has in 2022 paid one milestone of USD 2.0 million related to the phase 3 study and accumulated paid USD 10 million in milestones for Cevira. The agreement include additional milestones and potential sales royalty if a commercial product is approved, this will depend on the outcome of the ongoing phase 3 study. The transaction price allocated to the license consist of signing fee, different milestone payments and sales based royalty payments. The part of the transaction price related to milestone payments are estimated as the most likely amount, but constrained which currently means that these revenues will be recognized if and when the relevant milestone are achieved.
Revenue for the sale of active substance is recognized when the customer takes control of the goods, which is at the time of shipment.
Photocure has in January 2021 entered into a partnership agreement with Asieris whereby Asieris has obtained exclusive rights to register and commercialize Hexvix[®] in Mainland China and Taiwan. Based on the agreement, Photocure received an upfront payment of USD 750,000 from Asieris for the rights to Hexvix in the designated territories as a non-refundable payment. Asieris will fund all costs to secure required clinical studies and to regulatory approvals of Hexvix in Mainland China and Taiwan.
The license of the Groups intellectual property are under all current licensing agreement considered distinct from the delivery of goods and thus a separate performance obligation. Furthermore the licenses are considered to be a right to use the company's intellectual property as is, and therefore revenue allocated to the license is recognized at point in time taking into consideration the variable constraint for milestone payments that have not yet occurred and sales based royalty. Milestone payments related to future events and sales based royalties are recognized when the events and sales actually occur.
| Group revenues from contract with customers | 2022 | 2021 |
|---|---|---|
| Nordic countries | 22 647 | 31 882 |
| Germany | 148 936 | 141 920 |
| France | 27 032 | 29 021 |
| Austria | 9 500 | 8 983 |
| UK | 2 147 | 3 448 |
| BeNeLux | 4 597 | 6 927 |
| Italy | 4 368 | 1 700 |
| Other European countries | 3 905 | 2 778 |
| United States | 149 045 | 125 232 |
| Canada | 1 740 | |
| Own sales | 373 917 | 351 891 |
| Partner countries rest of world | 557 | 2 233 |
| 374 474 | 354 124 |
The geographical revenue in all countries except North America are in the parent company. The geographical revenue information is based on the location of the end customers.
The signing fees and milestone revenue are not included in the table above.
| 1 Jan - 31 December 2022 | Commercial Franchise | ||||||
|---|---|---|---|---|---|---|---|
| Hexvix/Cysview | Grand | ||||||
| (Amounts in NOK 1,000) | Own sales | Partner | Other Sales |
Total Sales |
Pipeline | Total R&D |
Total |
| Contract revenue at point in time | 430 | 128 | 558 | 0 | 0 | 558 | |
| Contract revenue over time | 0 | 0 | 0 | ||||
| Signing fees and milestone revenues at point in time |
152 | 152 | 18 506 | 18 506 | 18 658 | ||
| Sales order revenue at point in time |
372 611 | 1 306 | 373 917 | 0 | 373 917 | ||
| 372 611 | 582 | 1 434 | 374 627 | 18 506 | 18 506 | 393 132 |
| 1 Jan - 31 December 2021 | Commercial Franchise | ||||||
|---|---|---|---|---|---|---|---|
| Hexvix/Cysview | Grand | ||||||
| (Amounts in NOK 1,000) | Own sales | Partner | Other Sales |
Total Sales |
Pipeline | Total R&D |
Total |
| Contract revenue at point in time | - | 1 832 | 1 832 | 1 832 | |||
| Contract revenue over time | 397 | 397 | 0 | 397 | |||
| Signing fees and milestone revenues at point in time |
6 416 | 6 416 | 0 | 6 416 | |||
| Sales order revenue at point in time |
350 983 | 913 | 351 896 | 0 | 351 896 | ||
| 350 983 | 6 813 | 913 | 358 709 | 1 832 | 1 832 | 360 540 |
Total cost of goods sold includes direct materials, services provided by contract manufacturers and packaging suppliers, products freights and distribution costs.
| (Amounts in NOK 1,000) | Group | Parent | ||||
|---|---|---|---|---|---|---|
| Note | 2022 | 2021 | 2022 | 2021 | ||
| Revenues from contract with customers | 2 | 374 474 | 354 124 | 236 550 | 236 380 | |
| Signing fees and milestone revenues | 2 | 18 658 | 6 416 | 18 658 | 6 416 | |
| Cost of goods sold | -22 697 | -24 050 | -23 269 | -23 012 | ||
| Gross profit | 370 435 | 336 490 | 231 939 | 219 784 | ||
| Other income | 0 | 0 | 899 | 999 | ||
| Payroll expenses | 6, 7 | -244 881 | -210 552 | -102 315 | -86 906 | |
| R&D costs excluding payroll expenses/other operating expenses | -1 809 | -2 657 | -1 809 | -2 657 | ||
| Ordinary depreciation and amortisation | 13, 14 | -24 378 | -24 127 | -20 051 | -20 753 | |
| Other operating expenses | -148 370 | -104 979 | -158 016 | -112 108 | ||
| Total operating expenses | -419 438 | -342 315 | -281 292 | -221 425 | ||
| Operating profit / loss (-) | -49 003 | -5 825 | -49 353 | -1 641 |
| Specification of Other operating expenses: | 2022 | 2021 | 2022 | 2021 |
|---|---|---|---|---|
| Marketing expenses | 45 162 | 33 140 | 16 087 | 15 908 |
| Profit split coverage US | - | - | 17 888 | 7 269 |
| Sales and marketing costs Europe | - | - | 54 719 | 48 060 |
| Travel expenses | 19 108 | 10 522 | 5 308 | 1 724 |
| Patent costs, legal and other fees | 55 848 | 38 938 | 41 317 | 25 854 |
| Other expenses | 28 253 | 22 380 | 22 698 | 13 294 |
| Total other operating expenses | 148 370 | 104 979 | 158 016 | 112 108 |
| (Amounts in NOK 1,000) | Group | Parent | ||||
|---|---|---|---|---|---|---|
| Note | 2022 | 2021 | 2022 | 2021 | ||
| Salaries | 175 991 | 156 914 | 66 879 | 60 780 | ||
| Employer's social security contributions on salaries, etc. | 20 855 | 18 736 | 8 144 | 8 297 | ||
| Option costs incl employer's social security contributions | 21 674 | 13 225 | 16 406 | 10 229 | ||
| Pension costs | 8 | 13 101 | 11 372 | 5 682 | 4 902 | |
| Other benefits | 13 260 | 10 305 | 5 205 | 2 699 | ||
| Total payroll expenses | 244 881 | 210 552 | 102 315 | 86 906 | ||
| No. of full-time equivalent positions | 106 | 98 | 37 | 32 |
As part of the company's incentive policy, employees have been offered share options to the company's shares (the term 'options' is also used). Allocated share options are vested over three years, 25% after first year, 25% second year and 50% third year. The rights are no longer valid after five years or on termination of the employee.
| ntract manufacturers and packaging suppliers, products | |||
|---|---|---|---|
| -------------------------------------------------------- | -- | -- | -- |
The number of employee share options and average exercise prices for Photocure, and developments during the year:
| 2022 | 2021 | |||
|---|---|---|---|---|
| Number | Average exercise price (NOK) |
Number | Average exercise price (NOK) |
|
| Outstanding at start of year | 1 355 750 | 109.61 | 981 534 | 66.28 |
| Granted during the year | 716 028 | 114.90 | 756 000 | 142.57 |
| Become invalid during the year | 2 000 | 87.39 | 125 500 | 81.99 |
| Exercised during the year | 147 000 | 51.49 | 256 284 | 54.41 |
| Expired during the year | - | 0.00 | - | 0.00 |
| Outstanding at end of year | 1 922 778 | 116.04 | 1 355 750 | 109.61 |
| Exercisable options as per 31 December | 448 000 | 101.30 | 90 375 | 77.66 |
The average weighted life of outstanding share options was 3.7 years at 31 December 2022 and 4.0 years at 31 December 2021.
The exercise prices and the average life of outstanding share options as per 31 December 2022 were as follows:
| Exercise price | ||
|---|---|---|
| Average remaining life | No. of options | NOK |
| 1 year | 84 500 | 50.72-56.83 |
| 3 year | 424 750 | 78.65-139.41 |
| 4 year | 697 500 | 123.34-145.27 |
| 5 year | 716 028 | 114.89-115.70 |
| Total | 1 922 778 |
The market value of share options is calculated according to the Black-Scholes method. Volatility is calculated on the basis of the development in the historical share price equal to the lifetime of the options. This assumes that historical volatility indicates future volatility, which is not necessarily the case. Strike prices are set as the listed price plus 10% at the time of allocation. Risk-free interest is based on the interest for Norwegian government bonds. Each option program is calculated separately with the actual exercise price and duration of the program. The exercise date for the options is calculated on the basis of historical experience in the company and is differentiated between senior management and other employees. The interest advantage is insignificant and has not been included in the accounts. The table below shows the values that have been used in the model.
| 2022* | 2021* | |
|---|---|---|
| Dividends (NOK) | 0.00 | 0.00 |
| Expected volatility (%) | 50.98 | 57.63 |
| Historical volatility (%) | 50.98 | 57.63 |
| Risk-free interest (%) | 2.89 | 0.92 |
| Expected life of options (years) | 3.24 | 3.25 |
* Weighted average parameters at grant of instrument
| (Amounts in NOK 1,000) | Directors' fees paid |
Salaries paid |
Bonuses accrued |
Benefits in kind |
Pension cost |
Total |
|---|---|---|---|---|---|---|
| Senior management 2022 | ||||||
| President and CEO | 6 013 | 2 812 | 754 | 494 | 10 073 | |
| Chief Financial Officer | 2 629 | 595 | 18 | 343 | 3 585 | |
| VP and General Manager North America | 3 848 | 857 | 419 | 319 | 5 444 | |
| VP and General Manager Europe | 2 935 | 586 | 427 | 3 948 | ||
| VP Global Strategic Marketing & BD | 1 754 | 196 | 88 | 221 | 2 259 | |
| VP Global Medical Affairs and Clinical Development | 2 071 | 431 | 91 | 360 | 2 952 | |
| VP Global Human Resources | 2 672 | 310 | 7 | 242 | 3 232 | |
| Total senior management | 21 921 | 5 788 | 1 803 | 1 979 | 31 491 | |
| Board of Directors 2022 | ||||||
| Chairperson of the Board | 620 | 620 | ||||
| Members of the Board | 1 440 | 1 440 | ||||
| Total remuneration | 2 060 | 21 921 | 5 788 | 1 803 | 1 979 | 33 551 |
| Directors' | Salaries | Bonuses | Benefits | Pension | ||
| (Amounts in NOK 1,000) | fees paid | paid | accrued | in kind | cost | Total |
| Senior management 2021 | ||||||
| President and CEO | 4 760 | 2 571 | 177 | 382 | 7 889 | |
| Chief Financial Officer | 2 007 | 513 | 18 | 284 | 2 822 | |
| VP and General Manager US Operations | 2 989 | 877 | 287 | 258 | 4 410 | |
| VP and General Manager Europe | 2 807 | 661 | 150 | 250 | 3 868 | |
| VP Global Strategic Marketing & BD | 1 694 | 219 | 88 | 231 | 2 232 | |
| VP Technical Development and Operations to April | 916 | - | 5 | 56 | 976 | |
| VP Global Medical Affairs and Clinical Development from September |
647 | 104 | 113 | 864 | ||
| VP Global Medical to August | 1 275 | - | 14 | 151 | 1 440 | |
| VP Global Human Resources | 2 353 | 320 | 6 | 186 | 2 865 | |
| Total senior management | 19 448 | 5 265 | 743 | 1 910 | 27 365 | |
| Board of Directors 2020 | ||||||
| Chairperson of the Board | 620 | 620 | ||||
| Members of the Board | 1 440 | 1 440 | ||||
| Total remuneration | 2 060 | 19 448 | 5 265 | 743 | 1 910 | 29 425 |
Senior managers' holdings of shares in Photocure ASA are stated in the note concerning share capital. Allocation and exercise of share options and holdings of share options for senior managers are presented in the following overview:
| Share options for senior management 2022 | Share options awarded |
Expired share options |
Share options exercised |
Holding of share options at 31 December 2022 |
Average exercise price |
|---|---|---|---|---|---|
| President & CEO | 130 000 | - | 100 000 | 325 000 | 121.33 |
| Chief Financial Officer | 90 000 | - | 20 000 | 192 500 | 119.46 |
| VP and General Manager North America | 65 000 | - | - | 212 500 | 106.73 |
| VP and General Manager Europe | 65 000 | - | - | 200 000 | 113.84 |
| VP Global Strategic Marketing & Business Development | 35 000 | - | - | 112 500 | 111.12 |
| VP Global Human Resources | - | - | - | 80 000 | 113.34 |
| VP Global Medical Affairs and Clinical Development | 60 000 | - | - | 88 000 | 122.56 |
| Total | 445 000 | - | 120 000 | 1 210 500 |
| Share options for senior management 2021 | Share options awarded |
Expired share options |
Share options exercised |
Holding of share options at 31 December 2021 |
Average exercise price |
|---|---|---|---|---|---|
| President & CEO | 135 000 | - | 100 000 | 295 000 | 100.23 |
| Chief Financial Officer | 67 500 | - | 20 000 | 122 500 | 111.59 |
| VP and General Manager US Operations | 67 500 | - | 45 000 | 147 500 | 103.14 |
| VP and General Manager Europe | 67 500 | - | 22 500 | 135 000 | 113.34 |
| VP Global Strategic Marketing & Business Development | 40 000 | - | 12 500 | 77 500 | 109.42 |
| VP Global Human Resources | 40 000 | - | - | 80 000 | 113.34 |
| VP Global Medical Affairs and Clinical Development | 28 000 | - | - | 28 000 | 139.00 |
| Total | 445 500 | - | 200 000 | 885 500 |
| (Amounts in NOK 1,000) | Group and parent | ||
|---|---|---|---|
| 2022 | 2021 | ||
| Statutory auditing | 972 | 488 | |
| Other attestation services | 138 | 22 | |
| Other services excluding auditing | 42 | 0 | |
| Tax advice | 132 | 126 | |
| Total | 1 284 | 636 |
Photocure ASA has an agreement with a life assurance company concerning contribution-based pensions for Photocure's employees in Norway. The contribution plan match the revised national regulations for pension. The contributions are 6% of the employee's ordinary salary up to 7.1 times the basic amount (G) of the Norwegian National Insurance scheme, and thereafter 16% up to 12 x G. The national insurance cover pension for salaries to 7.1 G. Pension contributions are paid into the employee's contribution account with the life assurance company. As of 31 December 2022 and 31 December 2021, the company had no deposits in the premium and the contribution fund.
Photocure ASA employees in other European countries have individual defined contribution pension plans according to local regulations and their employment agreements.
Photocure Inc matches its employee's contribution to the 401(k) plan dollar for dollar up to 4% of salary for the employees that elect to join the plan. There is a salary maximum set by the IRS, which was \$305 000 in 2022.
Employees in Photocure GmbH in Germany coming from Ipsen have defined benefit pension plans through the TUPE regulations in Germany. Photocure GmbH has a re-assurance agreement with an assurance company in Germany that balance the pension liability. New employees in Photocure GmbH are offered a defined contribution plan.
Photocure has entered into pension agreements with senior management in the form of un-funded pensions for salaries exceeding coverage by insurance. This un-funded pension liability is interest-bearing.
| (Amounts in NOK 1,000) | Group | Parent | ||
|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |
| Total pension costs, contribution scheme in life assurance | 11 866 | 10 496 | 5 339 | 4 607 |
| Total pension costs, company scheme | 1 235 | 876 | 343 | 295 |
| Total | 13 101 | 11 372 | 5 682 | 4 902 |
| (Amounts in NOK 1,000) | Group | Parent | |||
|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | ||
| Interest income | 2 336 | 1 810 | 2 287 | 1 810 | |
| Foreign exchange gains | 6 882 | 23 778 | 45 850 | 34 379 | |
| Other financial gains | 0 | 624 | 0 | 624 | |
| Total financial income | 9 218 | 26 212 | 48 137 | 36 813 | |
| Interest costs long term liabilities and lease | 1 421 | 1 401 | 1 095 | 1 222 | |
| Interest costs earnout | 24 383 | 22 425 | 24 383 | 22 425 | |
| Foreign exchange losses | 4 588 | 10 472 | 4 564 | 10 472 | |
| Other financial expense | 199 | 524 | 199 | 524 | |
| Loss allowance internal loan | - | - | |||
| Total financial expense | 30 591 | 34 822 | 30 240 | 34 643 | |
| Remeasure financial balances | 758 | 17 720 | 29 565 | 23 479 |
The foreign exchange gain in the parent company 2022 include unrealised exchange gain of the long term loan to the subsidiary that is nominated in USD.
The exchange rate NOK/USD increased to 9.90 as of December 31, 2022 compared to exchange rate of 8.84 at end of previous year. This is resulting in an unrealised gain of NOK 38.9 million in 2022 compared to a gain of NOK 10.6 million in 2021.
In the consolidated accounts the unrealised gain/loss is eliminated against the change in equity as part of other comprehensive income.
Information regarding the remeasured value of the earnout liability is provided in note 22.
A loss allowance in the parent company loan to the US subsidiary has been recognized according to IFRS as a probability weighted estimate of future loan repayments as of December 31, 2022. A loss allowance increase of NOK 28.8 million has been estimated in a downside scenario as of 31, December 2022 compared the NOK 6.3 million allowance as of 31, December 2021. The total allowance on 31, December 2022 is NOK 31 million and the estimate is based on a probability weighted scenario in case the loan will not be paid back in full.
The parent company is committed to securing the operations in the U.S.
The transfer price method implemented is the profit & loss split method (PSM) for the sales in US and a residual profit model (RPM) for the sales in Germany and France.
Both the PSM and the RPM divides the combined profit or loss between the transacting related entities based on what would be anticipated if the entities had been transacting at arm's length.
A contribution analysis for sale of Cysview in US and sale of Hexvix in Germany and France compares the split of profit or loss between the subsidiaries and Photocure ASA based on the value of the functions performed by each of the related parties, taking into account the assets used and the risks assumed by both parties.
Photocure has established a wholly owned subsidiary in the US, Photocure Inc, in order to carry out the sales and the marketing-, selling- and distribution activities for the Cysview product. Photocure ASA has the ownership to the patent rights and the trade mark and is responsible in the Group for development and manufacturing of the product. Photocure Inc purchases the completed product from the parent company and distributes in the United States. Photocure Inc has established its own marketing organization that is funded by a loan from its parent company in addition to its own revenues. The transactions between Photocure ASA and Photocure Inc are on terms at arm's length, except for the loan that is interest free until further notice.
It is Photocure's judgment that the operation in the US will be profitable. This is based on a cash flow model taking into account a balanced view of the market share for Cysview in the US compared to sales of Hexvix in Europe. The US sales and marketing force has been kept during the Covid pandemic and enables Photocure Inc to access the US market again after the pandemic has ended.
Photocure has established wholly owned subsidiaries in Germany and France. Photocure ASA carries out the sales and distribution in Europe for the Hexvix product. The marketing- and promotion activities for the Hexvix product in Continental Europe are carried out by Photocure GmbH and Photocure SAS. The residual profit in Germany and France are allocated to the subsidiaries. Mark up is assumed on fully loaded local costs for the services rendered to parent company.
Photocure established from January 2022 a sales subsidiary in Canada to carry out the sales, marketing and distribution of Cysview in Canada.
| 2022 | 2021 | |
|---|---|---|
| Sales of products | 12 986 | 7 488 |
| Sales of services | 899 | 999 |
| Intercompany sales | 13 885 | 8 487 |
| Purchase of marketing and promotion services | -54 719 | -48 060 |
| 31-Dec-22 | 31-Dec-21 | |
| Accounts receivables and other storm-term receivables | 4 733 | 0 |
| Long term loan given | 350 072 | 308 390 |
| Accounts payables and other short-term liabilities | -17 436 | -7 203 |
| Total subsidiaries | 337 369 | 301 187 |
| Guarantees to bank in favor of subsidiary for requested security | 2 724 | 2 220 |
These are for licenses with the States of Maryland, Mississippi, Nevada and California to sell Cysview and for the office lease deposit
| (Amounts in NOK 1,000) | Parent & Group | |||
|---|---|---|---|---|
| 2022 | 2021 | |||
| Income tax expense | ||||
| Tax payable | 2 840 | 2 365 | ||
| Changes in deferred tax | -2 117 | -3 124 | ||
| Total income tax expense | 723 | -759 | ||
| Tax base calculation parent | ||||
| Profit(-loss) before income tax | -61 021 | -22 950 | ||
| Permanent differences *) | 49 534 | 8 346 | ||
| Change in temporary differences | -35 757 | 10 050 | ||
| (Utilized)/Increased tax loss carried forward | 47 244 | 4 554 | ||
| Tax base | -0 | 0 | ||
| Temporary differences | ||||
| Receivables | -551 | -551 | ||
| Inventories | 4 003 | 4 489 | ||
| Non current assets | 32 041 | 29 763 | ||
| Long term currency loans | 116 280 | 77 622 | ||
| Earnout liability | -17 978 | -17 220 | ||
| Provisions | -1 024 | -1 525 | ||
| Pensions | -2 523 | -2 180 | ||
| Gains and loss account | 16 109 | 20 136 | ||
| Total | 146 356 | 110 533 | ||
| Tax loss carried forward | -396 901 | -351 456 | ||
| Net temporary differences | -250 545 | -240 923 | ||
| Deferred tax liability (asset) | -55 120 | -53 003 |
| Parent & Group | |||
|---|---|---|---|
| 2022 | 2021 | ||
| Reconciliation of effective tax rate | |||
| Expected income taxes at statutory tax rate | -13 425 | -5 049 | |
| Permanent differences | 10 897 | 1 836 | |
| Change in temporary differences | -7 867 | ||
| Prior year adjustment | 111 | ||
| Income tax expense | -10 394 | -3 102 | |
| Effective tax rate in % **) | 17.0 % | 13.5 % |
Temporary differences are recognized for the Parent company only and the note disclosure for the Group is of this reason identic to the disclosure for the Parent company.
The tax payable is however due to the new subsidiaries in Europe that received a residual share of profit in Germany and France or a minimum mark up of the costs incurred.
* ) Permanent differences consist of non deductible costs, non taxable income and deduction for development cost through the SkatteFunn concept. **) Tax expense related to profit before tax.
The parent company has a taxable loss in 2022 of NOK 47.2 million compared to a loss in 2021 of NOK 4.6 million. The deferred tax asset is of this reason and movements in other temporary differences increased to NOK 55.1 million compared to NOK 53.0 million as of 31 December 2021. Photocure apply a profit/loss split method for the business in US and a share of the US related revenue and expenses are included in the parent company. For the operations in Europe Photocure apply a residual profit share for Germany and France through our subsidiaries. The basis for recognition of a tax asset in Norway are the predicted future profit according to the business plan for all major markets and that temporary differences for the coming years will be reversed. The remaining deferred tax asset is of this reason maintained as of 31 December 2022.
European business contributes to Photocure profitability in 2022 and will continue to contribute going forward. The parent company is the selling entity of the Hexvix product in all the European countries. The marketing and promotion activities in Germany and France are performed through the subsidiaries in those countries.
It is Photocure's judgment that the operation in the US will be profitable and this will contribute to the pre-tax result in the parent company through the profit/loss split method. This is based on a cash flow model taking into account a balanced view of the market share for Cysview in the US compared to sales of Hexvix in Europe. The expanded US sales and marketing force has enabled Photocure Inc to cover larger parts of the US market in order to gain further market shares. The installed base of blue light cystoscopes in US at the end of 2022 has increased 19% compared to last year end.
Photocure continues to see growth opportunities in the European countries and particulary in several large untapped markets. With Photocure's own dedicated sales force in place in Europe, we believe this will further strengthen the sales.
Several studies have been published highlighting and verifying key clinical benefits including the positive impact of Hexvix/Cysview on reduced disease progression, bladder cancer detection and the safety of repeated use of Hexvix/Cysview. The basis for the recognition of the tax asset is the assessment that there are convincing evidence that the deferred tax benefit will be utilized.
There is no expiry on losses to be carried forward in Norway while it expires after 20 years in US according to tax legislation valid to end of 2017. The new US tax legislation valid for taxable years from 2018 have no expiry of loss carried forward but a 80% limit in utilization.
Deferred tax assets have not been recognised in respect of the following items in the US subsidiary due to no history of pre-tax profit at this point in time :
| (Amounts in NOK 1,000) | 2022 | 2021 | |||
|---|---|---|---|---|---|
| Unrecognised deferred tax assets | Amount | Tax effect | Amount | Tax effect | |
| Net deductible temporary differences | -6 996 | -1 969 | -6 215 | -1 747 | |
| Tax losses | 183 930 | 51 700 | 158 734 | 44 620 | |
| Net unrecognised deferred tax asset US | 176 933 | 49 731 | 152 519 | 42 873 |
Tax losses for which no deferred tax asset was recognized, expire as follows:
| (Amounts in NOK 1,000) | 2022 | 2021 | |||
|---|---|---|---|---|---|
| Amount | Expiry date | Amount | Expiry date | ||
| Expire Federal | 23 092 | 2030 - 2037 | 20 599 | 2030 - 2037 | |
| Expire State | 15 923 | 2030 - 20412 | 13 727 | 2030 - 2041 | |
| Never expire | 10 718 | 8 547 | |||
| Total | 49 733 | 42 873 |
Earnings per share are calculated on the basis of the profit/loss for the year after tax but excluding other comprehensive items. The result is divided by a weighted average number of outstanding shares over the year, reduced by acquisition of treasury shares. The diluted earnings per share is calculated by adjusting the average number of outstanding shares by the number of employee share options that can be exercised. Antidilution effects are not taken into consideration.
| 2022 | 2021 | |
|---|---|---|
| Figures indicate the number of shares | ||
| Ordinary shares 1 January | 26 973 820 | 26 717 536 |
| Effect of treasury shares | -20 861 | -16 919 |
| Effect of share options exercised | 82 017 | 142 718 |
| Weighted average number of shares, 31 December | 27 034 976 | 26 843 335 |
| Effect of outstanding share options | 113 759 | 264 553 |
| Weighted average number of diluted shares, 31 December | 27 148 735 | 27 107 888 |
| Net profit/loss(-) | -71 857 | -30 897 |
| (Amounts in NOK 1 000) | ||
| Earnings per share | 2022 | 2021 |
| Earnings per share in NOK basic | -2.66 | -1.15 |
| Earnings per share in NOK diluted | -2.66 | -1.15 |
Hexvix sales, marketing and distribution rights in Europe and other markets previously controlled by Ipsen Pharma SAS (Ipsen), were acquired by Photocure 1 October 2020. The parties entered into a final agreement were Photocure paid Ipsen EUR 15 million upon transfer on 1 October 2020. Ipsen receives in addition a deferred consideration 15% of sales (years 1-7 post-transfer) and 7.5% of sales (years 8-10) in the previous Ipsen major markets.
One intangible asset has been identified, Customer relationships. The customer relationships relate to existing customers in Europe which have previously been served by Ipsen. Customer relationships has been valued using a multiperiod excess earnings method and the value at transaction date was NOK 166.7 million. Photocure has evaluated this asset to have an estimated value for 10 years from transaction date and the intangible assets is depreciated on a straight-line basis over this period. The net book value of the customer relations as of 31 December 2022 is NOK 129.2 million.
Goodwill amounts to NOK 144 million and this asset is not depreciated, but is tested against impairment as of end December 2022. The impairment analysis carried out confirms the goodwill value given the performance in 2022 and future growth opportunities that are expected to in line with forecasts prepared in connection with the transaction.
| Group and parent | ||
|---|---|---|
| (Amounts in NOK 1,000) | Customer relations | Goodwill |
| Accumulated cost at 31 December 2020 | 166 720 | 144 000 |
| Additions | 0 | 0 |
| Accumulated cost at 31 December 2021 | 166 720 | 144 000 |
| Additions | 0 | 0 |
| Accumulated cost at 31 December 2022 | 166 720 | 144 000 |
| Accumulated depreciation at 31 December 2020 | 4 168 | 0 |
| Amortization and impairment | 16 672 | 0 |
| Accumulated depreciation at 31 December 2021 | 20 840 | 0 |
| Amortization and impairment | 16 672 | 0 |
| Accumulated depreciation at 31 December 2022 | 37 512 | 0 |
| Book value at 31 December 2021 | 145 880 | 144 000 |
| Book value at 31 December 2022 | 129 209 | 144 000 |
Carrying amount of goodwill is allocated to the acquired business in Europe by NOK 144 million. The recoverable amount has been determined as value in use.
The impairment test is based on cash flow projections for the business related to the investment. The cash flow projections is based on most recent financial forecast for the business.
Main assumptions are:
• Applied tax rate is 22%.
(Amounts in NOK 1,000)
| Group | Intangible assets |
Right of-use |
Machinery and Equipment |
|||
|---|---|---|---|---|---|---|
| Product Development |
Software Systems |
Office Lease |
Medical & manu facture |
Office | Total | |
| Accumulated cost at 31 December 2020 | 51 069 | 4 406 | 10 900 | 613 | 7 006 | 73 994 |
| Additions | 527 | 31 062 | 163 | 2 342 | 34 095 | |
| Disposals and lease expiry | -51 069 | -10 900 | -61 969 | |||
| Accumulated cost at 31 December 2021 | 0 | 4 933 | 31 062 | 776 | 9 348 | 46 120 |
| Additions | 1 133 | 3 498 | 78 | 3 532 | 8 240 | |
| Disposals and lease expiry | -83 | -1 797 | -1 880 | |||
| Accumulated cost at 31 December 2022 | 0 | 6 066 | 34 477 | 854 | 11 083 | 52 479 |
| Accumulated depreciation at 31 December 2020 | 51 069 | 2 831 | 7 046 | 272 | 5 407 | 66 625 |
| Amortization and depreciation | 947 | 5 392 | 170 | 946 | 7 455 | |
| Disposals and lease expiry | -51 069 | -10 067 | -399 | -61 535 | ||
| Accumulated depreciation at 31 December 2021 | 0 | 3 778 | 2 371 | 442 | 5 954 | 12 545 |
| Amortization and depreciation | 615 | 5 779 | 161 | 1 151 | 7 706 | |
| Disposals and lease expiry | 236 | -486 | -250 | |||
| Accumulated depreciation at 31 December 2022 | 0 | 4 393 | 8 386 | 603 | 6 619 | 20 001 |
| Book value at 31 December 2021 | 0 | 1 156 | 28 691 | 334 | 3 394 | 33 575 |
| Book value at 31 December 2022 | 0 | 1 673 | 26 091 | 251 | 4 464 | 32 479 |
PPE are depreciated on a straight-line basis over the estimated useful life of the asset as follows
Patent period 3 - 5 years Contract period 3 - 5 years 3 - 5 years
The note for the Parent company has immaterial differences to the Group and is not disclosed of this reason.
| Right-of-use assets (Lease) | 31-Dec-21 | 31-Dec-22 | ||||
|---|---|---|---|---|---|---|
| (Amounts in NOK 1,000) | Discount rate |
Contract value |
Expiry | New/ increase contracts |
Remeasure | Contract value |
| Right-of-use office contract Norway | 3,15 % | 13 008 | - | 574 | 13 582 | |
| Right-of-use office contract US | 3,70 % | 10 269 | - | 920 | 11 189 | |
| Right-of-use office contract Germany | 1,40 % | 6 624 | - | 298 | 387 | 7 309 |
| Right-of-use office company car fleet Germany |
1,40 % | 1 162 | (83) | 1 120 | 198 | 2 397 |
| Total lease assets | 31 063 | 34 477 |
The Right-of-use assets comprise the office lease contracts covered by IFRS 16. In addition. In addition are the lease contracts for the company car fleet in the Germany included.
The calculation of the lease asset is excluding utility services shared by the tenants.
The Parent company has a 6-year rental agreement for office premises at Hoffsveien 4 in Oslo starting 1 September 2021 and ending 31 August 2027. The agreement give Photocure an option to expand the rent period by 4 years. The rent amounts to NOK 2.8 million for the period 1 January 2023 through 31 December 2023. The rent for the remaining period until the expiry of the agreement amounts to NOK 10.1 million.
Photocure Inc rents office premises at Carnegie Center, Princeton, New Jersey from 1 April 2011 through 10 December 2022. On December 13, 2021, Photocure Inc. signed a lease amendment to move to a new office of 5,212 square fee in Carnegie Center and to extend the lease term by six years with an expiration date of December 31, 2028. The lease commitment is NOK 11.2 million ( USD 1.1 million ) at 3.7% discount rate. The rent commitment for the period 1 January 2023 to 31 December 2023 is NOK 1.9 million while the rent for the remaining period until the expiry of the agreement amounts to NOK 9.3 million.
Photocure GmbH rents office premises in Düsseldorf, Marc-Chagall-Straße 2 from 1 April 2021 through 31 March 2026. The rent commitment for the period 1 January 2023 to 31 December 2023 is EUR 151.1 thousand while the rent for the remaining period until the expiry of the agreement amounts to EUR 340.1 thousand.
The standard lease period for the car fleet in Germany is 36 months. As of 31.12.2022 Photocure GmbH had 6 lease agreements with an average remaining lease term of 21.5 months
| Company | Country | Ownership | Book value | ||
|---|---|---|---|---|---|
| 31-Dec-22 | 31-Dec-21 | 31-Dec-22 | 31-Dec-21 | ||
| Photocure Inc. | USA | 100 % | 100 % | 15 353 | 11 018 |
| Photocure GmbH | Germany | 100 % | 100 % | 1 532 | 748 |
| Photocure SAS | France | 100 % | 100 % | 285 | 136 |
| Photocure Canada Inc. | Canada | 100 % | 100 % | - | - |
| Total subsidiaries | 17 170 | 11 902 |
| (Amounts in NOK 1,000) | Group | Parent | |||
|---|---|---|---|---|---|
| 31-Dec-22 | 31-Dec-21 | 31-Dec-22 | 31-Dec-21 | ||
| Raw materials | 3 026 | 1 485 | 3 026 | 1 485 | |
| Resale products | 48 | 176 | 48 | 176 | |
| Semi-finished and finished goods | 23 461 | 25 874 | 21 339 | 25 000 | |
| Total inventories | 26 534 | 27 534 | 24 412 | 26 660 |
The raw materials inventory consists of active substances for the pharmaceutical products. Raw materials are valued at cost. Finished and semi-finished goods are valued at full manufacturing cost. Consumption is accounted in accordance with the FIFO principle. Obsolete goods are written down to net realisable value. Provisions and write-downs of inventories are included in cost of goods sold in the income statement.
The note describes the Company's various financial risks and the management of same. In addition, numerical presentations of risk associated with financial risks are included.
Photocure has an international business operation and is exposed to currency risk, interest rate risk, commodity price risk, liquidity risk and credit risk. Responsibility for managing financial risk is placed with the management of the company, including financing, interest rate and currency management as well as risk within the business areas and the risk associated with the company's business processes. Financial risk is also monitored by the Board of Directors.
Photocure has a centralised finance department. This department ensures the company's financial freedom to act both long and short term, and to monitor and manage financial risk in collaboration with the individual business units within the company. The finance department maintains communication with the company's bank connections, and carries out hedging transactions regarding interest and currency. Required authorisations for borrowing and entering into derivative agreements are to be granted by the Board of Directors. All transactions involving financial instruments are backed by an underlying commercial hedging requirement..
Photocure manufactures, markets and sells the company's products through own sales organization in Europe and North America and through license partners in other countries. Revenues from license partners consist of two elements: sales of products to license partners and milestone revenues. Photocure manufactures the company's products by renowned contract manufacturers in Italy, Spain, Netherland and Austria. Prices of raw materials is a risk factor. Photocure's commercial operations in the North America expose Photocure for currency risk against USD/CAD as both revenues and expenses are in USD/CAD. The same applies for commercial operations in Europe which are mostly in Euros. Currency risks are partly naturally hedged by purchasing goods and services in EUR and USD.
Photocure has an interest bearing earnout liability from 2020 with interest rate equal to the internal rate of return for the investment project. In addition Photocure has interest bearing bank loan, leasing liability and pension liability. The long-term bank loan has a floating interest and 90% of the loan has a state guarantee.
The company's risk related to interest income is mainly associated with the company's holdings of cash and cash equivalents. The main strategy is to diversify the risk and invest in money market funds and bond funds with low risk, high liquidity and short duration. More than 90% of the investments are denominated in NOK and are not hedged.
The Company monitors its cash flows from both long and short-term perspectives through planning and reporting. Photocure does not have any loan agreements that involve covenants or other restrictions. Photocure uses a multi-currency consolidated bank accounts system that provides flexibility in relation to drawing on multiple currencies. The company may require new capital in the future. Adequate sources of capital funding may not be available when needed or may not be available on favorable terms.
A main objective of Photocure's financial policy is to ensure that the company has the financial freedom to act both short and long term to achieve strategic and operational goals. Photocure's policy is to have sufficient funds to cover known capital requirements during the forthcoming 12 months in addition to a strategic reserve. Photocure follows a low risk investment strategy for its liquid funds. The return on the liquid funds depends on the rate of interest in the money markets and will therefore vary over time.
| Remaining period | ||||||
|---|---|---|---|---|---|---|
| (Amounts in NOK 1,000) | Less than 1 month | 1–3 months 3–12 months | 1–5 years | Total | ||
| 31-Dec-22 | ||||||
| Accounts payable | 18 091 | 3 190 | 21 281 | |||
| Withholding tax and social securities | 2 440 | 1 500 | 647 | 4 587 | ||
| Other current liabilities | 20 630 | 13 000 | 17 177 | 50 807 | ||
| Loan and lease liabilities | 7 250 | 18 750 | 151 370 | 177 370 | ||
| 31-Dec-21 | ||||||
| Accounts payable | 19 748 | 3 900 | 23 648 | |||
| Withholding tax and social securities | 771 | 2 230 | 3 001 | |||
| Other current liabilities | 3 500 | 28 000 | 18 854 | 50 354 | ||
| Loan and lease liabilities | 36 580 | 169 913 | 206 493 |
Management of credit risk associated with accounts receivable and other operational receivables is dealt with as a part of the commercial risk and is followed up continuously as a part of normal operations. Photocure is primarily exposed to credit risk associated with accounts receivable and other short-term receivables. Photocure's sales is a mix of sales directly to hospitals, pharmacies and wholesalers in Europe and North America. The credit risk is limited as the customers are hospitals which are either publicly owned or financed by public funds or insurance companies. The same applies for the wholesalers customers. Photocure's credit risk is considered moderate and the Company does not use credit insurance.
As NOK is the Company's presentation currency, Photocure is exposed to translation risk associated with the company's foreign net exposure. Photocure's revenues and costs are incurred in different currencies, primarily EUR, USD, GBP and SEK. Photocure is therefore exposed to exchange rate fluctuations. The company regularly monitors the need for hedging of large transactions. Bank accounts in foreign currencies are used actively to reduce exposure to all the main currencies, and currency risk is to some degree naturally hedged in EUR, USD and SEK by having both revenues and costs in the same currency. However, Photocure have in both 2022 and 2021 cash surplus in EUR and a cash deficit in USD. The Company has not entered into any currency hedging contracts during 2022.
The following table shows the Company's sensitivity for potential changes in the NOK exchange rate with all other factors constant. The calculation is based on the same change in relation to all relevant currencies. The effect in the income statement comes from changes in the value of monetary items.
| (Amounts in NOK 1,000) | Change in the NOK exchange rate | Effect on operating profit/loss |
|---|---|---|
| 2022 | + 10 % | -2 270 |
| 2022 | - 10 % | 2 270 |
| 2021 | + 10 % | -7 187 |
| 2021 | - 10 % | 7 187 |
The table below analyses financial assets recognised in the balance sheet at fair value according to the valuation method.
The different levels have been defined as follows:
Level 1: Noted prices in active markets for corresponding assets or liabilities.
Level 2: Available value measurements other than the noted prices classified as Level 1, either directly observable in the form of agreed prices or indirectly as derived from the price of equivalent.
Level 3: Value measurements of assets or liabilities that are not based on observed market values.
| Market value hierarchy | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Money market funds | 234 202 | 234 202 | ||
| Earnout liability, ref note 22 | (135 333) | (135 333) | ||
| Total | 234 202 | - | (135 333) | 98 869 |
The company's maximum credit risk associated with financial instruments corresponds to gross receivables. In a hypothetical situations, where no receivables are actually paid, this would correspond to:
| (Amounts in NOK 1,000) | Group | Parent | ||
|---|---|---|---|---|
| 31-Dec-22 | 31-Dec-21 | 31-Dec-22 | 31-Dec-21 | |
| Accounts receivable | 47 164 | 47 980 | 27 005 | 29 610 |
| Accounts receivable intercompany | - | - | 4 733 | 0 |
| Total | 47 164 | 47 980 | 31 738 | 29 610 |
| Prepaid expenses | 9 113 | 9 852 | 5 516 | 4 697 |
| Other receivables and deposits | 7 342 | 4 928 | 1 001 | 512 |
| Total other receivables | 16 455 | 14 780 | 6 517 | 5 209 |
Loan to the subsidiary is disclosed in Note 10.
| Age breakdown of group accounts receivable | Not yet due |
0–30 days |
30–60 days |
60–90 days |
Over 90 days |
Total |
|---|---|---|---|---|---|---|
| 31 December 2022 | 33 106 | 8 340 | 3 679 | 1 552 | 487 | 47 164 |
| 31 December 2021 | 37 641 | 4 661 | 4 705 | 630 | 342 | 47 980 |
Photocure's sales are mainly hospitals and pharmacies and wholesalers in Europe and North America.
Photocure has implemented the expected loss model under IFRS 9 on trade receivables. The expected loss as of December 31, 2022 amounts to NOK 1.0 million. Realised bad debt loss' in 2022 and 2021 has been immaterial. Credit risk and foreign exchange risk in regard to trade accounts receivable are dealt with in more detail in Note 17.
| nounts in NOK 1,000) | |
|---|---|
| (Amounts in NOK 1,000) | Group | Parent | ||
|---|---|---|---|---|
| 31-Dec-22 | 31-Dec-21 | 31-Dec-22 | 31-Dec-21 | |
| Cash and cash equivalents, restricted | 3 422 | 3 856 | 3 422 | 3 856 |
| Cash and cash equivalents, non-restricted | 30 449 | 58 984 | 21 434 | 50 906 |
| Money market funds, non-restricted | 234 202 | 260 055 | 234 202 | 260 055 |
| Total | 268 073 | 322 895 | 259 058 | 314 817 |
Money market funds are considered as cash equivalents because they are readily convertible to known amounts of cash and are held for the purpose of meeting short-term cash commitments. Restricted cash and cash equivalents at 31 December 2022 include security for employees' withholding tax in of NOK 1.7 million, while the remaining amount refers to deposit for rent of office.
Amounts that are distributed to or contributed by shareholders are included directly in the equity. The Group's equity is increased in direct relation to the cost of share-based remuneration for employees.
Registered share capital in Photocure ASA amounted to:
| No. of shares | Nominal value per share NOK |
Share capital in NOK |
|
|---|---|---|---|
| Share capital at 31 December 2021 | 26 973 820 | 0.50 | 13 486 910 |
| Share capital at 31 December 2022 | 27 120 820 | 0.50 | 13 560 410 |
| Treasury shares: | |||
| Holdings of treasury shares at 31 December 2020 | 15 666 | 7 833 | |
| Buy-back of restricted shares | 6 306 | 0.50 | 3 153 |
| Share options exercised from treasury shares | -7 126 | 0.50 | -3 563 |
| Holdings of treasury shares at 31 December 2021 | 14 846 | 7 423 | |
| Buy-back of restricted shares | 481 | 0.50 | 241 |
| Buy-back of treasury shares | 36 000 | 0.50 | 18 000 |
| Share options exercised from treasury shares | -36 205 | 0.50 | -18 103 |
| Holdings of treasury shares at 31 December 2022 | 15 122 | 7 561 |
Restricted shares were offered to the employees according to the Board's discretion. The participant received the shares in the Company that have been subject to a three years' lock up period
All shares have the same voting rights and otherwise the same rights in the Company. Ordinary shares are classified as equity. Expenses that are directly attributable to the issue of ordinary shares are included as a reduction of equity.
At the General Meeting 28 April 2022, the Board of Directors of Photocure ASA was granted authorisation to issue up to 6.1 million shares. Of this authorisation, (a) 5.4 million shares are linked to financing of the Company's development, while (b) 0.75 million shares are associated with the issue of shares to the Company's employees. Subscription of shares under the incentive program shall be subscribed at the market price with an addition of 10% at the time of allocation of the employee share options. At the General Meeting the Board of Directors was granted authorisation to purchase treasury shares to 2.7 million shares. The basis for this authorisation to purchase treasury shares is the desire by the Board of Directors to increase the liquidity of the Company's shares and in connection with the incentive schemes.
All authorisations are valid up until the Ordinary General Meeting in 2023. Previously issued authorisations have expired.
The table below indicates the status of authorisations at 31 December 2022:
| Purchase, treasury shares |
Ordinary share issue |
Employee share issues |
|
|---|---|---|---|
| (Figures indicate the number of shares) | |||
| Authorisation issued at the General Meeting on 28 April 2022 | 2 697 657 | 5 395 314 | 750 000 |
| Share issues after the General Meeting on 28 April 2022 | 0 | 0 | 144 250 |
| Purchase of treasury shares after the General Meeting 28 April 2022 | -36 000 | 0 | 0 |
| Remaining under authorisations at 31 December 2022 | 2 661 657 | 5 395 314 | 605 750 |
1 922 778 share options have been allocated to employees 31 December 2022 (see note 6).
Photocure initiated a buyback of up to 36,000 of its own shares at 1 June 2022. The purpose of the buyback program was to acquire shares which was used as settlement in the Company's share-based incentive scheme.
The major shareholders in Photocure as of 31 December 2022 were:
| Shares | Shareholding | |
|---|---|---|
| Morgan Stanley & Co. LLC | 4 160 945 | 15.3 % |
| Skandinaviska Enskilda Banken AB | 1 138 000 | 4.2 % |
| Skandinaviska Enskilda Banken AB | 1 117 101 | 4.1 % |
| Skandinaviska Enskilda Banken AB | 720 644 | 2.7 % |
| RADFORSK INVESTERINGSSTIFTELSE | 679 619 | 2.5 % |
| The Bank of New York Mellon SA/NV | 581 018 | 2.1 % |
| The Bank of New York Mellon SA/NV | 515 000 | 1.9 % |
| Nordnet Bank AB | 511 441 | 1.9 % |
| RBC Investor services bank S.A. | 477 179 | 1.8 % |
| The Bank of New York Mellon | 473 494 | 1.7 % |
| MP PENSJON PK | 440 178 | 1.6 % |
| The Northern Trust Comp, London Br | 439 420 | 1.6 % |
| Skandinaviska Enskilda Banken AB | 417 940 | 1.5 % |
| Skandinaviska Enskilda Banken AB | 412 990 | 1.5 % |
| The Bank of New York Mellon SA/NV | 400 000 | 1.5 % |
| JPMorgan Chase Bank, N.A., London | 390 226 | 1.4 % |
| VERDIPAPIRFONDET EQUINOR AKSJER NO | 375 872 | 1.4 % |
| VERDIPAPIRFONDET KLP AKSJENORGE | 375 630 | 1.4 % |
| Avanza Bank AB | 372 126 | 1.4 % |
| The Bank of New York Mellon | 329 888 | 1.2 % |
| Total of 20 largest shareholders | 14 328 711 | 52.8 % |
| Treasury shares | 15 122 | 0.1 % |
| Total other shareholders | 12 776 987 | 47.1 % |
| Total number of shares | 27 120 820 | 100.0 % |
Shares owned, directly or indirectly, by members of the Board of Directors, the President and CEO and senior management and their closely related associates as of 31 December 2022:
| Name | Position | No. of shares |
No. of share options** |
|---|---|---|---|
| Daniel Schneider | President & CEO | 99 689 | 325 000 |
| Erik Dahl | Chief Financial Officer | 32 750 | 192 500 |
| Geoffrey Coy | VP and General Manager North America | 15 207 | 212 500 |
| Susanne Strauss | VP and General Manager Europe | 1 392 | 200 000 |
| Grete Hogstad | VP Global Strategic Marketing & BD | 30 719 | 112 500 |
| Patricia Kelly | VP Global Human Resources | - | 80 000 |
| Anders Neijber | VP Global Medical Affairs and Clinical Development | - | 88 000 |
| Jan H. Egbert | Chairperson of the board | 14 500 | 1 312 |
| Anders Tuv * | Board member | 679 619 | 804 |
| Anne Worsøe | Board member | - | 804 |
| Johanna Holldack | Board member | - | 804 |
| Neal Shore | Board member | - | 804 |
* Anders Tuv represents RADFORSK Investeringsstiftelse.
** See note 6 for additional information about the share options.
| Nominell interest |
Year of | Loan amount |
Instal ments |
Book value | 1st year instal |
||
|---|---|---|---|---|---|---|---|
| (Amounts in NOK 1,000) | Currency | rate | maturity | 01.01 | paid | 31-Dec-22 | ments |
| Bank loan secured through governmental guarantee due to Covid-19 |
NOK | 4.80 % | 2023 | 37 500 | -25 000 | 12 500 | 12 500 |
| Deferred consideration (Earnout) | NOK/EUR | 2030 139 350 | -5 714 | 135 333 | 9 100 | ||
| Right-of-use office contract Norway | NOK | 3.15 % | 2027 | 13 052 | -2 193 | 11 434 | 2 302 |
| Right-of-use office contract US | USD | 3.70 % | 2028 | 10 269 | -1 548 | 9 591 | 1 598 |
| Right-of-use office contract Germany | EUR | 1.40 % | 2026 | 5 861 | -1 317 | 5 064 | 1 422 |
| Right-of-use office company car fleet Germany * EUR | 1.40 % | 2024 | 460 | -708 | 949 | 460 | |
| Total non-current liabilities | 174 871 | 27 382 |
* There are seperate lease agreements for each lease subject
Hexvix sales, marketing and distribution rights in Europe and other markets previously controlled by Ipsen Pharma SAS (Ipsen), were acquired by Photocure 1 October 2020. The parties entered into a final agreement were Photocure paid Ipsen EUR 15 million upon transfer on 1 October 2020. Ipsen receives in addition a deferred consideration 15% of sales (years 1-7 post-transfer) and 7.5% of sales (years 8-10) in the previous Ipsen major markets. The deferred consideration is paid as quarterly earnout payments in EURO after the close of the quarter.
The fair value of the deferred consideration is driven by future expected sales and is remeasured on a yearly basis. Photocure performed a new remeasurement as of 31 December 2022. The remeasurement resulted in a fair value of NOK 135.3 reflecting an increase of fair value of NOK 0.8 million compared to remeasurement adjustment of NOK 17.2 in 2021. The increased fair value has been recognized in profit or loss as a financial cost. To arrive at the remeasured fair value of NOK 135.3 million, Photocure has discounted the estimated earnout payments by an IRR at level with the investment project. This IRR has been deemed appropriate as a discount rate for the earnout payments since the level of the payments will be subject to the same risk factors as the cash flow prognosis for the acquisition as a whole. Future sales, given performance in 2022 and growth opportunities going forward, are expected to be in line with forecasts prepared in connection with the transaction.
Photocure has made the remeasurement of the earnout liability in NOK currency and based the forecasted cashflow on a fixed exchange rate EUR/NOK of 10.2 and this is in line with the prior year remeasurement .
The agreement with Ipsen determined a floor revenue for the earnout from 2022 to the end of the forecast period and there is no upper cap of revenue. The total undiscounted amount of the earnout may be in the interval of NOK 187 - 306 million depending on revenue and development of the currency exchange rate between EUR and NOK. According to our sensitivity analysis the corresponding net present value of the liability may decrease or increase by NOK 33 million.
Group
| Earnout | Financial | Office Lease |
Office Lease |
Office and car Lease |
||
|---|---|---|---|---|---|---|
| liability | loan bank | Oslo | Princeton | Germany | Total | |
| Accumulated 31 December 2020 | 149 941 | 50 000 | 1 970 | 1 917 | 0 | 203 828 |
| Proceeds from loans and borrowing | 0 | |||||
| Loan repayment and earnout | -3 834 | -12 500 | -16 334 | |||
| Payment of lease liabilities | -1 970 | -839 | -1 134 | -3 943 | ||
| Total changes from financing | -3 834 | -12 500 | -1 970 | -839 | -1 134 | -20 277 |
| Change in fair value currency | -15 906 | 82 | -15 824 | |||
| Remeasurerd liability | 17 220 | 17 220 | ||||
| New lease liability | 13 053 | 9 110 | 7 455 | 29 617 | ||
| Interest expense | 22 425 | 1 065 | 157 | 91 | 88 | 23 826 |
| Interest paid | -24 985 | -1 065 | -157 | -91 | -88 | -26 386 |
| Total liability related changes | -1 246 | 0 | 13 053 | 9 192 | 7 455 | 28 453 |
| 1th year instalments | -5 750 | -25 000 | -2 400 | -1 549 | -1 882 | -36 581 |
| Accumulated 31 December 2021 | 139 350 | 37 500 | 13 052 | 10 269 | 6 322 | 206 492 |
| Proceeds from loans and borrowing | 0 | |||||
| Loan repayment and earnout instalments | -5 714 | -25 000 | -30 714 | |||
| Payment of lease liabilities | -2 193 | -1 548 | -1 889 | -5 630 | ||
| Total changes from financing | -5 714 | -25 000 | -2 193 | -1 548 | -1 889 | -36 344 |
| Remeasurerd liability | 758 | 574 | 1 245 | 410 | 2 988 | |
| New lease liability | -324 | 1 170 | 846 | |||
| Interest expense | 24 383 | 846 | 249 | 248 | 79 | 25 804 |
| Interest paid | -23 444 | -846 | -249 | -298 | -79 | -24 915 |
| Total liability related changes | 1 697 | 0 | 574 | 871 | 1 580 | 4 723 |
| Accumulated 31 December 2022 | 135 333 | 12 500 | 11 433 | 9 591 | 6 014 | 174 871 |
| 1th year instalments | -9 100 | -12 500 | -2 302 | -1 598 | -1 882 | -27 382 |
| (Amounts in NOK 1,000) | Group Parent |
|||
|---|---|---|---|---|
| 31-Dec-22 | 31-Dec-21 | 31-Dec-22 | 31-Dec-21 | |
| Accounts payable | 21 281 | 23 648 | 12 479 | 15 574 |
| Accounts payable intercompany | - | - | 3 388 | 1 444 |
| Total | 21 281 | 23 648 | 15 867 | 17 018 |
| Accrued bonus, holiday pay, salaries | 30 782 | 27 426 | 12 442 | 13 625 |
| Incurred earnout liability | 7 376 | 7 463 | 7 376 | 7 463 |
| Short-term payable, intercompany | - | - | 14 048 | 5 758 |
| Miscellaneous other accrued costs | 12 649 | 15 465 | 8 142 | 9 315 |
| Total other current liabilities | 50 807 | 50 354 | 42 008 | 36 161 |
The incured earnout liability is for net sales in last quarter.
Accrued bonus, holiday pay, salaries include accrual for estimated annual bonus as of 31 December 2022. Final annual bonus for the Group is to be decided by the Board of Directors.
Post-period, on March 21, 2023, Photocure announced that Karl Storz due to component supply issues will discontinue the production of its current flexible BLC equipment in the U.S. Karl Storz plans to service existing customers through the remainder of the year. Karl Storz will explore the development of a next generation state-of-the-art flexible blue light system pending a positive reclassification decision by the U.S. Food & Drug Administration (FDA). The impact from a lack of new flexible BLC installations in FY 2023 is estimated to be less than 2% of Photocure's total revenue.
International Independence Standards) (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
To the best of our knowledge and belief, no prohibited non-audit services referred to in the Audit Regulation (537/2014) Article 5.1 have been provided.
We have been the auditor of the Company for 14 years from the election by the general meeting of the shareholders on 29 April 2009 for the accounting year 2009.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Reference is made to Note 10 Tax in the financial statements
| The Group has recognized a deferred tax asset of NOK 55.1 million in the Company and Group's financial statements as of 31 December 2022. |
|
|---|---|
| The recognized deferred tax asset relates to deductible temporary differences and unused tax losses in the Company in Norway. Management has assessed that there is convincing evidence that it is probable that taxable profits from the product ®/Cysview ®, will be available in the Hexvix future, against which unused tax losses in Norway can be utilized. |
|
Due to the application of the profit/loss split method for the business in the US, future taxable profits in Norway are not only dependent on the development for Hexvix ® in Europe, but also the market development for Cysview ® in the US.
We have determined this to be a key audit matter, due to the inherent uncertainty in forecasting the amount of future taxable profits.
KPMG AS Sørkedalsveien 6 P.O. Box 7000 Majorstuen N-0306 Oslo
Telephone +47 45 40 40 63 Internet www.kpmg.no Enterprise 935 174 627 MVA
To the General Meeting of Photocure ASA
We have audited the financial statements of Photocure ASA, which comprise:
Our opinion is consistent with our additional report to the Audit Committee.
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company and the Group as required by relevant laws and regulations in Norway and the International Ethics Standards Board for Accountants' International Code of Ethics for Professional Accountants (including
| Offices in: | ||||
|---|---|---|---|---|
| © KPMG AS, a Norwegian limited liability company and a member firm of the KPMG global organization of independent member | Oslo | Elverum | Mo i Rana | Tromsø |
| firms affiliated with KPMG International Limited, a private English company limited by quarantee. All rights reserved. | Alta Arendal |
Finnsnes Hamar |
Molde Sandefiord |
Trondheim Tvnset |
| Statsautoriserte revisorer - medlemmer av Den norske Revisorforening | Bergen Bodø Drammen |
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Reference is made Note 24 Related Parties – Companies in the financial statements
| The Key Audit Matter | How the matter was addressed in our audit |
|---|---|
| Photocure ASAs subsidiary, Photocure Inc, was established in order to carry out the marketing-, selling- and distribution activities for the Cysview ® product in the US. Photocure ASA has a long term loan to Photocure Inc. that is recognized at NOK 313.8 million in the Company's financial statement as of 31 December 2022. |
Our audit procedures in this area included, among others: • Challenging management and applying our own knowledge of the business and the industry to identify any indicators of impairment of the loan • Assessing the impairment documentation prepared by management |
| We have determined risk of impairment of the loan to be a key audit matter, due to the inherent risk related to future cash flow estimates and the Group's ability to successfully commercialize the individual product concerned. |
• Evaluating the appropriateness of key assumptions in the impairment documentation, including revenue and cash flow growth, the impact of the expiry of patents and agree these with the relevant key assumptions used in determining the expected credit loss • Comparing historical cash flow development in mature markets in Europe with expected future cash flows in the US market • Evaluating management's sensitivity analysis to assess the impact of reasonable changes in key assumptions like future sales in the US for Cysview ® • Evaluating the adequacy of the financial statement disclosures in the Company's financial statement |
The Board of Directors and the Managing Director (management) are responsible for the information in the Board of Directors' report and the other information accompanying the financial statements. The other information comprises information in the annual report, but does not include the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the information in the Board of Directors' report nor the other information accompanying the financial statements.
In connection with our audit of the financial statements, our responsibility is to read the Board of Directors' report and the other information accompanying the financial statements. The purpose is to consider if there is material inconsistency between the Board of Directors' report and the other information accompanying the financial statements and the financial statements or our knowledge obtained in the audit, or whether the Board of Directors' report and the other information accompanying the financial statements otherwise appear to be materially misstated. We are required to report if there is a material misstatement in the Board of Directors' report or the other information accompanying the financial statements. We have nothing to report in this regard.
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Based on our knowledge obtained in the audit, it is our opinion that the Board of Directors' report
Our opinion on the Board of Director's report applies correspondingly to the statements on Environmental, Social and Governance.
Management is responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the EU, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company's and the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
• identify and assess the risks of material misstatement of the financial statements, whether due obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
accounting and, based on the audit evidence obtained, whether a material uncertainty exists exists, we are required to draw attention in our auditor's report to the related disclosures in the conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company and the Group to cease to
the disclosures, and whether the financial statements represent the underlying transactions
• obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with the Board of Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Board of Directors, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
As part of the audit of the financial statements of Photocure ASA we have performed an assurance engagement to obtain reasonable assurance about whether the financial statements included in the annual report, with the file name 5967007LIEEXZXG8OW35-2022-12 -31 -en, have been prepared, in all material respects, in compliance with the requirements of the Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regulation) and regulation pursuant to Section 5-5 of the Norwegian Securities Trading Act, which includes requirements related to the preparation of the annual report in XHTML format, and iXBRL tagging of the consolidated financial statements.
In our opinion, the financial statements, included in the annual report, have been prepared, in all material respects, in compliance with the ESEF regulation.
Management is responsible for the preparation of the annual report in compliance with the ESEF regulation. This responsibility comprises an adequate process and such internal control as management determines is necessary.
Our responsibility, based on audit evidence obtained, is to express an opinion on whether, in all material respects, the financial statements included in the annual report have been prepared in compliance with ESEF. We conduct our work in compliance with the International Standard for Assurance Engagements (ISAE) 3000 – "Assurance engagements other than audits or reviews of historical financial information". The standard requires us to plan and perform procedures to obtain reasonable assurance about whether the financial statements included in the annual report have been prepared in compliance with the ESEF Regulation.
As part of our work, we have performed procedures to obtain an understanding of the Company's processes for preparing the financial statements in compliance with the ESEF Regulation. We examine whether the financial statements are presented in XHTML-format. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our procedures include reconciliation of the iXBRL tagged data with the audited financial statements in human-readable format. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Oslo, 11 April 2023 KPMG AS
Geir Moen State Authorised Public Accountant (This document is signed electronically)
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(Information provided based on Guidelines on Alternative Performance Measures (APMs) for listed issuers by The European Securities and Markets Authority - ESMA)
Photocure reports certain performance measures that are not defined under IFRS, but which represent additional measures used by the Board and management in assessing performance as well as for reporting both internally and to shareholders. Photocure believes that the presentation of these non-IFRS performance measures provides useful information which provides readers with a more meaningful understanding of the underlying financial and operating performance of the Company when viewed in conjunction with the IFRS financial information.
Photocure uses the following alternative performance measures:
Photocure regards EBITDA as the best approximation to pre-tax operating cash flow and reflects cash generation before working capital changes and capex. EBITDA is widely used by investors when evaluating and comparing businesses and provides an analysis of the operating results excluding depreciation and amortization. The non-cash elements depreciation and amortization may vary significantly between companies depending on the value and type of assets.
The definition of EBITDA is "Earnings Before Interest, Tax, Depreciation and Amortization."
The reconciliation to the IFRS accounts is as follows:
| All amounts in NOK 1,000 | 2022 1.1-31.12 |
2021 1.1-31.12 |
|---|---|---|
| Gross profit | 370 434 | 336 490 |
| Operating expenses excl depreciation & amortization | -395 061 | -318 188 |
| EBITDA | -24 627 | 18 302 |
| Depreciation & amortizaation | -24 376 | -24 127 |
| EBIT | -49 003 | -5 826 |
Photocure's business is conducted internationally and in respective local currency. Less than 5% of the revenue is conducted in Norwegian kroner, Photocure's functional currency. Fluctuations in foreign exchange rates may have a significant impact on reported revenue in Norwegian kroner. To eliminate the translational effect of foreign exchange and to better understand the revenue development in the various regions, Photocure provides calculated revenue growth information by region and in total for the Company.
The average exchange rates used to translate revenues as per the reporting dates
were as follows:
| 2022 1.1-31.12 |
2021 1.1-31.12 |
|
|---|---|---|
| USD (NOK per 1 USD) | 9.61 | 8.59 |
| EUR (NOK per 1 EUR) | 10.10 | 10.16 |
1st quarter 2023: May 10 2nd quarter 2023: August 9 3rd quarter 2023: November 8
Annual General Meeting: May 3, 2023
Follow us at our quarterly financial presentations and annual general meeting.
The dates are subject to change. The time and location of the presentations will be announced in due time.
HTTPS://PHOTOCURE.COM/INVESTORS-HUB/INVESTORS-EVENTS-AND-PRESENTATIONS
ESG Report
2022
| About this report | 82 |
|---|---|
| CEO letter | 84 |
| About Photocure | 86 |
| Value Chain Oversight | 87 |
| Locations | 87 |
| Corporate governance | 88 |
| Photocure's Core values | 88 |
| Stakeholder prioritization and dialogue |
|---|
| Materiality assessment |
| Materiality matrix |
| Product quality and safety |
|---|
| Human rights & Supply chain responsibility |
| Environment and climate impact |
| Working environment |
| Business ethics and transparency |
| Research Activities |
| Data protection and IT security |
| About this report | 82 |
|---|---|
| CEO letter | 84 |
| About Photocure | 86 |
| Value Chain Oversight | 87 |
| Locations | 87 |
| Corporate governance | 88 |
| Photocure's Core values | 88 |
| Photocure's approach to sustainability | 90 |
| Stakeholder prioritization and dialogue | 90 |
| Materiality assessment | 90 |
| Materiality matrix | 91 |
| Reporting on material topics | 93 |
| Product quality and safety | 93 |
| Human rights & Supply chain responsibility | 94 |
| Environment and climate impact | 96 |
| Working environment | 99 |
| Business ethics and transparency | 103 |
| Research Activities | 105 |
| Data protection and IT security | 106 |
| APPENDIX: | |
| Goals & Targets 2022 | 107 |
| Goals & Targets 2022 | 107 |
|---|---|
| Photocure's stakeholders | 108 |
| GRI Content Index | 110 |
This is Photocure's fourth sustainability report and is applicable for the period January 1st - December 31st, 2022, in line with the company's financial reporting period. The report will be conducted annually.
This report is prepared by a cross-functional team within the company and in accordance with the 2021 GRI Standards. The report complies with Euronext guidelines for ESG reporting. For GRI index, please see page 110 or the online GRI Database. Minor restatements are mentioned in the text. No significant restatements have been made from previous reporting periods.
The achievements and goals are followed up quarterly with the leadership team, tracked and documented with the oversight from the Global Head of Regulatory, Quality & Compliance Lise Borgen Carlson.
This Photocure sustainability report, including the material topics, has been reviewed and approved by the Board of Directors. Anne Worsøe, an assigned member of the Board, provided guidance to the internal ESG task force on behalf of the Board. The claims and data in this report have not been audited by a third party.
For information about this report and its content, please contact Photocure ASA and CFO Erik Dahl or Corporate Communications Director Maja Bergmann.
we will succeed. They exist under the principle that We Care about all that we do and all who we touch. Our core values – Take Ownership, Be Passionate, Be Courageous, Be Agile, Be Curious and Work Together – have been established from within our teams.
In this year's report, we follow up on the targets and progress for each material topic, as defined in last year's ESG report and we continue to set goals for how to improve our work in the future. In addition, this report includes some new features within our environmental and value chain responsibilities. Going
forward, we will work systematically on implementing sustainability targets in our purchasing and supply chain activities. We will also continue to strengthen the focus on a safe, healthy, productive and inclusive working environment and ensure the appropriate channels for reporting concerns are well known.
Photocure's mission is to deliver transformative solutions to improve the lives of bladder cancer patients. We seek to do so in a responsible way. We will continue to build a highperformance corporate culture based
on a foundation that values diversity, equality, respect and inclusion, and operates with the highest level of integrity. I hope this report will highlight our commitment to sustainability as well as provide insights about our approach to its challenges and opportunities for our business and society.
Dan Schneider
President and CEO of Photocure
"Our highly regulated business has an economic, social and environmental impact on our surroundings and stakeholders. It is our responsibility to ensure that our robust corporate governance supports ethical business operations while retaining the agility to adjust to the changing business and societal challenges of the future."
In the past three years, the company had to deal with business volatility due to the global Covid-19 pandemic. I am pleased with how we managed through these unprecedented times and proud of our employees for adapting to changing working conditions and continuing to serve our patients and customers. The pandemic has brought global attention to health and health systems worldwide. It has also affected cancer care with restrictions on hospital access and postponements of diagnostic procedures. Increasing intervals between surveillance visits have made a thorough diagnostic procedure even more crucial. At Photocure, we aim to support many more patients to benefit from the procedure.
Our highly regulated business has an economic, social and environmental impact on our surroundings and stakeholders. The most important impact is the positive contribution to the patients' lives, the economies and the societies in which we operate. However, we also need to assess and address potentially negative aspects and consequences of our operations and business relations such as hidden environmental impacts and human rights risks in our supply chain, potential quality and safety issues and the risk
of corruption. The pandemic and the changing geopolitical situations have proven to us that today's business environment is defined by unforeseen challenges and potential disruption. It is our responsibility to ensure that our robust corporate governance supports ethical business operations while retaining the agility to adjust to the changing business and societal challenges of the future.
Since 2021, Photocure has been a signatory of the United Nations Global Compact (UNGC); the world's largest corporate sustainability initiative. This commitment means we are part of a global movement, striving to become a more sustainable and responsible company. As a signatory we must adhere to the ten principles of the UNGC within human rights, labor, environment, and anti-corruption. In the past years, we have also experienced an increased attention to responsible business and high ESG (Environmental, Social and Governance) standards from our shareholders. For Photocure, sustainability is about both the quality products we make and the way we run our operations: we strive to give bladder cancer patients access to care in a sustainable way, while working to create value for our shareholders.
This year, we deliver Photocure's fourth sustainability report guided by the Euronext ESG guidelines and according to the GRI Standards. We have implemented a process based on stakeholder dialogue and materiality assessment to ensure that Photocure reviews and reports on the most material topics for our company and our industry and that our reporting is aligned with our business objectives, supports our strategy, and minimizes risks. We also reference our attention to industry standards and regulations, which helps us implement our responsibilities across our value chain in a systematic manner.
The material topics are key focus areas for our company and our industry, taking into account the interests of stakeholders and the wider society. They include the quality and safety of our products, how they are produced and sourced, standards followed by our suppliers, as well as the working environment of our employees. As for our business and risk minimization, the material topics include ethical conduct in our business relationships, in research and development and when working with personal data. As a pharmaceutical company, we believe responsibility, transparency and sustainability must be integrated in Photocure's business model and strategy, and that efficient, high-quality products manufactured, sold and used in a responsible manner is what makes us a successful company. The backbone for this success is our people and company culture.
Photocure's core values comprise important standards for the company, both internally and externally, guiding our behavior, what we believe and how
At Photocure, we focus all our efforts and resources on delivering transformative solutions to improve the lives of bladder cancer patients. Our medicinal product makes cancer cells visible for physicians so they can optimize the diagnoses, staging and treatments for cancer patients. More than 750 000 diagnostic procedures have been conducted around the world to date.
Additionally, Photocure distributes Combat BRS and Combat BRS kits for the HivecTM procedure in the Nordics, an innovative recirculation system for the delivery of hyperthermic intravesical chemotherapy in the treatment of non-muscle invasive bladder cancer (NMIBC).
Photocure has evolved into a therapeutic area-focused commercial stage pharmaceutical company with a focus on bladder cancer. The company is exploring expansion opportunities within the bladder cancer domain. In 2020, Photocure regained the commercialization rights to Hexvix in Europe and other territories around the world from Ipsen Pharmaceuticals. Photocure started commercial and medical activities in these new European territories on October 1, 2020. In 2021 Photocure continued its growth and business expansion, announcing to partner with Asieris MediTech Co. Ltd for the commercialization of Hexvix® in Mainland China and Taiwan. The company also reacquired the marketing and distribution rights to Cysview® in Canada, taking effect on January 1, 2022.
Today, the company's vision is driving change in bladder cancer and its mission is to deliver transformative solutions to improve the lives of bladder cancer patients. There have been no significant changes to the sectors in which Photocure is active, the company's value chain or other relevant business relationships compared to the previous reporting period.
Photocure is member of NHO (The Confederation of Norwegian Enterprise) and the Oslo Cancer Cluster.
Photocure is located in Oslo, Norway (Global headquarter), in Princeton, New Jersey (North America office) and in Düsseldorf, Germany (Europe office). In addition, Photocure has fully owned affiliates in France and Canada. Photocure ASA is listed on the Oslo Stock Exchange (ticker: PHO).
| Location | Total |
|---|---|
| Oslo / Global functions | 24 |
| Europe commercial | 34 |
| Princeton / Global functions |
10 |
| North America commercial | 38 |
| Total | 106 |
Photocure was founded by the Norwegian Radium Hospital to develop and commercialize a promising photodynamic non-melanoma skin cancer product with a vision to become a global leader in photodynamic technology.
Photocure has since transformed from a technology-based focus and being a global leader in photodynamic therapy to a valued player in the bladder cancer area. Based on its experience,
solid foundation and the growth of its breakthrough bladder cancer product, the company has a stepwise approach to further developing its products and services for the benefit of patients, urology care providers and the health care community.
Photocure has a strong track record of developing and commercializing pharmaceutical products based on photodynamic technology. The company has brought two first-inclass products to the market; Metvix® sold by Galderma and indicated for nonmelanoma skin cancer, and Hexvix®/ Cysview® indicated for the better detection and management of bladder cancer. Photocure has also developed Cevira® through completion of Phase II studies. Cevira is a photodynamic drug-device combination product, for non-surgical treatment of high-grade cervical dysplasia. Cevira was outlicensed to Asieris Meditech Co., Ltd in 2019.
We Care... about all that we do and all who we touch. We
Drive for results Act Professionally Make an impact
Care about the people we serve Inspire your colleagues Be enthusiastic about what we do
Be spirited in our interactions
Be Courageous Exhibit determination Have integrity in all interactions Challenge the status quo Be open in our communications
Be Curious Have a learning mindset Think innovatively Be resourceful Be inquisitive
respectful, inclusive and operate at the highest level of integrity. Our values guide the behavior of employees and form the basis for Photocure's ethical guidelines:
As a result of the work on company values, Photocure has a Care and Respect Council composed of 8 employees from different functions and regions. Membership is on a voluntary basis and for the duration of 12 months.
The Care and Respect Council's charter is to foster ideas and actions that create an inclusive work environment that values the contributions of all colleagues and supports a workforce that reflects and embraces the wide range of diversity that each of us brings to the company. The council shall act as an advisory body that provides insight and recommendations on matters regarding our Core Values, Diversity & Inclusion, and the engagement of our colleagues, which could include:
Intercultural and interpersonal communication
Awareness and appreciation of diversity and inclusion
Healthy and sustainable work life balance
Photocure has made a strong commitment to ensure trust in the company and to enhance shareholder value through effective decisionmaking and improved communication between the management, the Board of Directors and the shareholders. The company's framework for corporate governance is intended to decrease business risk, maximize value and utilize the company's resources in an efficient, sustainable manner, to the benefit of shareholders, employees and society at large. The Company will seek to comply with the Norwegian Code of Practice for Corporate Governance (the "Corporate Governance Code"), last revised on 14 October 2021 and available at the Norwegian Corporate Governance Board's website www.nues.no, to the extent not considered unreasonable due to the Company size and stage of development.
The Board of Directors is responsible for the overall management of the company and shall supervise the company's day-to-day management
and the company's activities in general.
The Annual General Meeting (AGM) is Photocure's supreme governing body at which shareholders can influence how sustainability is practiced. Photocure's Board of Directors bears the ultimate responsibility for the company's sustainability approach and the ESG report is discussed and approved by the board.
The company discloses board and governance guidelines annually in the annual report and on photocure.com (Corporate Governance Policy and Annual Review). For more information about Corporate Governance, Nomination Committee, Audit Committee and ESG Board Advisor, please see the Photocure corporate governance policy in the 2022 annual report on pages 22-28.
Board composition, including independence, gender split, professional and committee roles can be found in the Leadership section of the company website. Information regarding remuneration is published on the Photocure website in the
Management Remuneration Policy (Our Impact – ESG section). In addition, the Nomination Committee report, also available on the company website (Investors – Events & Presentations section), provides details on the Nomination Committee mandate, membership and remuneration. The board has delegated responsibility for managing sustainability impacts to the CEO and operational responsibility is delegated to Finance, Quality/ Regulatory/Compliance and Corporate Communications functions. The process and frequency to report back to the board is through the quarterly ESG goal tracking and the annual sustainability report which is approved by the board.
Photocure's core values set important standards for the company, both internally and externally. Our values guide what we believe and how we will succeed. These standards ensure that we always act in a responsible way. They exist under the principle that We Care - about all that we do and all who we touch. We value diversity and are
Health & Safety in the Workplace
Human Resources & Talent
This report covers sustainability topics that are of importance to Photocure and the company's stakeholders. The identification of priority stakeholders for the company was done by an interdisciplinary working group consisting of Photocure employees representing medical affairs, finance, operations, HR, communications, IT, compliance, and quality management.
In April 2020, the group conducted a series of semi-structured phone
/ Teams interviews with key stakeholders, including investors, employees, customers and suppliers. Due to new regulations being introduced (such as the Norwegian Transparency Act), the team did an extended supplier review and dialogue in 2021 and 2022, which resulted in an updated supply chain impact, risk, and opportunity mapping. New interviews with selected stakeholders were conducted this year, to make sure that the company is still reporting on relevant topics. Photocure is continously engaging with stakeholders regarding the material topics defined, and provides an update on the
company's progress on each of the material topics through the annual sustainability reports.
In addition to speaking with stakeholders directly, the company is also reviewing relevant documents, such as the annual employee survey, sustainability ratings and industry level ESG topics/reports.
After conducting the stakeholder interviews, the findings have been structured for discussion with Photocure's ESG working group. Taking a double-materiality approach, Photocure's working group considered the sustainability topics mentioned both on the basis of their importance for and impact on the company's business (so called 'inward' impact), and on how Photocure's business can impact a sustainability topic ('outward' impact). There have been no significant changes to the material topics compared to the previous reporting period. Some topics were given a higher focus due to changing legislation or societal attention.
Photocure's materiality assessment concluded with the following over-arching material themes, which are also presented in the materiality matrix next page:
Photocure Employees Customers/ Patients Suppliers Investors/ Shareholders Government Authorities Civil Society
Photocure's stakeholders
Stakeholder descriptions: see appendix p. 108
In this chapter, the company's management approach, activities, goals and performance for the reporting period is described for each of the material topics.
Photocure's high quality products and processes are a prerequisite for the company's contribution to value creation for both owners and society and for future growth. Photocure's product Hexvix®/Cysview® is available in over 30 countries, with its established specialist commercial and medical teams in North America and Europe.
The quality policy and the quality and compliance manual are the overarching documents describing the company's quality goals and quality system.
Photocure has a quality management system (QMS) which is compliant with Norwegian, European and North American Health Authorities' rules and regulations for drug manufacturing, drug distribution, research activities and surveillance of drug safety and drug quality. The QMS also covers Norwegian and European rules and regulations for distribution of medical devices.
The QMS is a set of written policies, standard operating procedures, work instructions and forms managed in a validated computer system.
Photocure holds a manufacturing license and a good manufacturing practice certificate issued by the Norwegian Medicine Agency which is available on the EudraGMDP public database. Photocure follows the EU regulation for medical devices with respect to distribution of medical devices.
An annual review of all aspects of the quality system, product quality and safety are conducted with the management team.
All reports of adverse events and/ or product complaints are promptly investigated and assessed. Adverse events are reported to applicable health authorities according to procedures. All complaints are investigated to identify if the root cause is linked to the manufacturing process and if there is a potential quality issue/ defect with the product.
For the commercially distributed product in year 2022 there were no quality and/or safety incidents that led to any market actions or need for reporting to health authorities e.g. product recall or healthcare information letter. In one production lot for a clinical study, a technical error was
GMP = Good Manufacturing Practice GDP = Good Distribution Practice GVP = Good Pharmacovigilance Practice GCP = Good Clinical Practice FDA = Food & Drug Agency HC = Health Canada GDPR = General Data Protection Regulations
As a business with outsourced manufacturing and logistics, Photocure relies on suppliers, individuals or organizations who provide goods and services to the company. Photocure is thereby directly and indirectly exposed to risks and opportunities in its business relations and supply chain.
Photocure has procedures in place for the interaction with suppliers, including qualification and follow up, risk assessment, auditing and procurement. As a part of the initial and ongoing evaluation of suppliers, Photocure obtains confidence that the supplier is able to deliver the materials/services as requested with the required quality, and that the supplier complies with all applicable laws relating to ethical and responsible standards of behavior in accordance with the United Nations Global Compact or similar. The company performs risk assessments (measures and analyzes potential risks) in its supply chain on a regular basis.
All new and revised supplier contracts include a claim that the supplier shall materially comply with all Applicable Laws relating to ethical and responsible standards of behavior, including, without limitation, those dealing with human rights, labor, environmental protection, sustainable development and bribery and corruption in accordance with the Ten Principles of the UN Global Compact.
Suppliers Business Conduct and responsible business practice is part of the agenda on regular business review meetings with the suppliers. All suppliers have received our Supplier and Partner Code of Conduct ("Code"). In addition, all Photocure's critical* suppliers have been assessed for presence of a Code of conduct / corporate responsibility policy. Photocure has not terminated or discontinued contracts with any suppliers due to sustainability breaches.
| Critical supplier screening; manufacturing and supply chain |
2021 | 2022 |
|---|---|---|
| Number of critical suppliers | 11 | 11 |
| Location of the critical suppliers | Europe and North-America |
Europe and North-America |
| Critical suppliers with Code of conduct / corporate responsibility policy available on website or shared with Photocure |
9 (82%) | 10 (91%) |
| Critical supplier with clear statements for adherence and respecting human rights available on website or shared with Photocure |
9 (82%) | 10 (91%) |
*Critical suppliers are defined according to internal procedure and risk matrix.
identified, not related to the product itself, however the lot was replaced with a new one. The root cause for the error was identified and actions taken to correct it.
At Photocure we aim to be accessible to any healthcare provider who needs information or wants to submit feedback regarding our product. In 2022 Photocure improved the phone service for medical information, adverse event and product complaint reporting in the U.S.
Maintain Photocure's track record of no quality and/or safety incidents leading to any market actions e.g. product recall or healthcare information letter.
As a signatory of the United Nations Global Compact, Photocure upholds the Ten Principles which are derived from: the Universal Declaration of Human Rights, the International Labor Organization's Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on Environment and Development, and the United Nations Convention Against Corruption. Committing to these principles means supporting and respecting the protection of human rights in all aspects of our business operations and making sure we encourage our suppliers and partners to do the same.
Norwegian Transparency Act
In 2022 we increased our focus on Human Rights and decent working conditions in our upstream supply chain. Written procedures are in place to ensure compliance with the Norwegian Transparency Act; which include e.g. due diligence when engaging new suppliers and yearly risk assessment for potential breaches of
human rights.
Our supply chain relies on outsourcing and a human rights-related risk assessment was conducted based on the geographic location of our contract manufactures as well as their subcontractors for raw materials. Out of 15 suppliers contributing to our product 2 were rated as "medium risk" and 13 as "low risk". The two rated as medium risk are subcontractors of one of our suppliers. Within the supply chain no new contracts were signed in the reporting period. Business partners were not included in the risk assessment as limited goods are purchased outside of the supply chain. Services purchased from business partners are mainly consultants and experts with special skills.
We also report on aspects of human rights in the "Business ethics and transparency" chapter.
Safety feature:
All Photocure products sold in Europe have a unique identifier (2D barcode) as a safety feature. In addition, all product packs have tamper evidence in the form of glued cartons.
Total number of critical suppliers in Photocure's manufacturing and supply chain
Critical suppliers with Environmental policy available on website or shared otherwise with Photocure
| 11 | 11 |
|---|---|
| 9 (82%) | 9 (82%) |
Critical suppliers located in high-water stress area 0 (0%) 0 (0%)
Suppliers screened for Environmental criteria – Source: Aqueduct Water Risk Atlas
to growing focus on occupant health during the Covid-19 pandemic, the "Fitwel Viral Response Module" was created in order to set the global standard for safeguarding occupant health and wellness—offering the premier evidence-based, thirdparty certification to mitigate viral transmission in buildings.
The office building in Düsseldorf was built in 2015 and it has a Gold Certificate from the DGNB System. Environmentally relevant upgrades in 2022 include the set-up of nesting boxes for local birds around the building and the installation of 14 charging stations for electric vehicles in the garage. More initiatives are planned for 2023.
The group will continue to broaden its focus on monitoring ESG criteria regarding its existing and future locations.
As a business with outsourced manufacturing and logistics, Photocure relies on suppliers, individuals or organizations who provide goods and services to the company (see p. 95 "Supply Chain Responsibility"). Beyond
resource consumption at its office locations, Photocure acknowledges that an impact on the environment and climate is found in the company's indirect impact through suppliers and raw materials.
Photocure aims to minimize the carbon footprint caused by transportation, by utilizing as much of the pallet and vehicle capacities as possible. In addition, when selecting primary containers and secondary packaging of our product, Photocure takes into consideration the environmental impact of the different options available.
In 2021 and 2022, all Photocure's critical suppliers within the supply chain were screened for environmental criteria, such as the existence of an Environmental Policy and the location of their operations in high water-stress areas (see below). All 11 suppliers are in either a low or low-medium water risk area. None are located in a high-water stress area.
In Photocure, we focus all our efforts and resources to improve the lives of bladder cancer patients and we recognize that we do have an economic, social, and environmental impact on our surroundings.
As a Signatory to the United Nations Global Compact and committed to the Ten Principles, Photocure supports a precautionary approach to environmental challenges; the company shall undertake initiatives to promote
greater environmental responsibility; and encourage the development and diffusion of environmentally friendly technologies. This commitment is also part of the Photocure Supplier Code of Conduct.
Photocure's business locations contribute to environmental and climate impact directly through energy use in our offices (see table under), waste generated at our offices, and employee business travel. In addition, the manufacture, transport and use of pharmaceutical products and their disposal can lead to impacts on the environment.
Scope 2: Indirect emissions from energy use (electricity & heating) from Photocure locations:
| Photocure Location | kWh electricity | kWh district heating | Total Kg C02 e |
||||
|---|---|---|---|---|---|---|---|
| 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | ||
| Headquarter (Oslo) | 75 560 | 68 818 | 32 416 | 57 284 | 1 980 kg CO2 e* |
1 410 – kg CO2 e |
|
| Europe (Düsseldorf) | 5,214** | 1 1 097*** |
NA | 26 077 | 1 630 – kg CO2 e |
13 530 – kg CO2 e |
|
| North America (Princeton)**** |
48 148 | 37 958 | - | - | 10 740 kg CO2 e |
8 460 kg CO2 |
*Oslo headquarter: the reported emissions for 2021 have been corrected from last year's report.
**Period May-Dec 2021
***Period May 2021-May 2022
****North America office: electricity & heating consumption are reported together. The reported emissions for 2021 have been restated with specific (New Jersey electricity factor) information.
Oslo headquarters: Emissions from heating in the Oslo office building increased significantly from 2021 to 2022 as offices were closed several months during 2021 due to the Covid-19 pandemic, causing lower than expected energy use for heating and electricity. Düsseldorf office: data reported from latest available 12-month period (13.05.2021 - 12.05.2022).
Greenhouse gas (GHG) emissions (in CO2 -equivalents) from Photocure locations. Calculated and validated by Variable AS (https://variable.co), in accordance with the GHG Protocol.
We strive to create a great place - for great people - to do great work. It is based on this desire that we build our working environment. The ability to attract, engage and retain a skilled workforce as well as maintaining a safe and healthy working environment are key interests of both the company and its stakeholders.
Photocure directly impacts the working environment through its strong "We Care" Culture, policies and agreements, and by keeping an active and regular dialogue with colleagues across the globe. To ensure our colleagues understand the importance of respect in the workplace, all employees were required to attend an online harassment prevention training session in 2022. Working in an office environment or remotely as part of our sales team, the company and its employees are mainly exposed to risk related to the working environment, such as the psychological well-being of employees and physical risks related to an office setting, e.g. ergonomics and sedentary work and risk associated with business travel.
Coming out of the Covid-19 pandemic, the Company continued with hybrid remote work arrangements across its locations in Norway, Germany and the U.S. for its non-customer facing employees which represents approximately 42% of its global
team. All functions were designed to accommodate remote work, primarily through the use of technology. As Covid restrictions were lifted, employees have again started to report to their offices on an average of 3 days per week and we once again held other regular in person meetings, as needed. Colleagues were genuinely happy to once again be able to be together, and in some cases, personally meet for the first time. This personal interaction has been very beneficial for the overall wellbeing and spirit of the team after the long Covid-19 period of constraints.
The Company was successful in effectively maintaining a positive work environment and engaged workforce during 2022, despite part of the year still having some Covid restrictions. The main priority of the organization is the health and welfare of all Photocure employees and stakeholders.
The working environment within the company continues to be very good. We take the "pulse" of our global colleagues on an annual basis, as well as regularly receiving feedback from colleagues through a variety of individual, small and large group sessions. As we have created a trustful organization, our employees are very open to provide their thoughts and ideas. Participation in the 2022 employee engagement survey was once again very strong with 92% of
employees providing their feedback. The overall results of the survey continued to be very high. Both our participation rate and responses to critical questions such as 'feeling proud to work for the Company' and 'recommending the Company as a great place to work', fare very well, relative to critical metrics around employee surveys. We will once again, organize focus group sessions to further understand the results and input we received in an effort to improve where we can, implement new ideas and maintain a positive work environment. The employee engagement survey will continue to be administered annually and is fully anonymous.
Photocure employees also have the chance to actively engage in shaping our company culture through the Care & Respect Council. In 2022, the Care and Respect Council took the further step of better understanding their role as advisory body by participating in the external diversity training "Unconscious Bias". This is a prelude to a future, broader effort of awareness for the whole organization. As a follow up to our mandatory, company-wide Harassment Prevention and Awareness training, the course explored the potential effects of a lack of cultural competency which includes a better understanding of one's own cultural views, creating awareness around stereotypes, microaggressions and the self-awareness around acceptance, receptiveness and respect.
Participation rate (91 people)
Do you feel proud to work for Photocure?
Would you recommend Photocure as a great place to work?
Photocure 2022 Global Employee Survey
Pharmaceuticals can be considered as a class of environmental contaminants when they are responsible for bioaccumulation and toxic effects in aquatic and terrestrial ecosystems. The active ingredient in Photocure's Hexvix/ Cysview product, Hexaminolevulinate hydrochloride (HAL), is instilled in the patient's bladder and after ca 1 hour the bladder is emptied, so that the urologist can look for bladder tumors, highlighted by the product's fluorescence. The risk for residuals in nature has been evaluated.
HAL has very limited stability in biological tissues and fluids and is readily biodegradable. The products of hydrolysis are two substances; one which is a natural compound found in all living cells and it will readily be biodegraded or metabolized in a natural environment and the second one is a fatty alcohol, which is derived from natural fats and oils, and it can be found in fruits, animal, vegetable, and marine sources.
The Hexvix/Cysview product is nonreactive under normal conditions of use, storage and transport and chemically stable under normal conditions. The product is not considered toxic or harmful to aquatic organisms nor to cause long-term adverse effects in the environment. The product contains no REACH substances as per the EU regulations*.
* REACH is a European Regulation and is an acronym for the Registration, Evaluation, Authorization and Restriction of Chemicals
| Breakdown of employees | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2020 (as per 31.12) | 2021 (as per 31.12) | 2022 (as per 31.12) | |||||||
| Organisation | Men Women | Total | Men Women | Total | Men Women | Total | |||
| Number of FTE | 46 | 41 | 87 | 50 | 47 | 97 | 59 | 46 | 105 |
| Part time employees | 0 | 2 | 2 | 0 | 1 | 1 | 0 | 1 | 0 |
| Temporarily hired | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Total of employees | 46 | 43 | 89 | 50 | 48 | 98 | 59 | 47 | 106 |
| Newly hired | |||||||||
| Total number of newly hired employees in 2020-2022 |
22 | 15 | 37 | 11 | 9 | 20 | 12 | 8 | 20 |
| Employee turnover | |||||||||
| Number of employees who have left the company |
3 | 4 | 7 | 8 | 5 | 13 | 4 | 8 | 12 |
| Parental leave | |||||||||
| Number of employees on parental leave |
0 | 1 | 1 | 0 | 0 | 0 | 1 | 2 | 3 |
Traditionally, Photocure has recruited from environments where the number of women and men is relatively equally represented. In terms of gender equality, 40% of Photocure's five board members are women, as is 43% of the 7-member Executive Leadership Team (ELT) and 50% of the 16-member Global Leadership Team (GLT) at the end of 2022. Globally, Photocure employs 54% men and 46% women. Working time arrangements at the company, independent of gender, strive to enhance the individual work-life balance.
To support growth and fulfil our ambitious strategy and targets, we need highly qualified professionals. Thus, reward and recognition are key parts of our HR strategy to attract, engage, motivate and retain great talent at Photocure.
We are proud to actively work on our compensation philosophy to offer fair, attractive, equitable pay based on experience, knowledge, and position responsibilities. We consider both internal pay guidelines and external market competitive financials when developing our remuneration package, independent of age, gender, origin, nationality, or any other. This is further communicated in our Code of Conduct.
Photocure is a small organization of 106 employee who are based in 11 countries. Due to the size, geographic diversity, and the fact that 60% of the roles in the organization are unique, we are unable to make general compensation comparisons that are meaningful. This is specifically challenging due to the uniqueness of the roles, confidentiality of the data, and overall data privacy.
Where we have larger populations of similar roles, as in our customer-facing positions, we report that we fare well in terms of our gender comparisons as it relates to salaries:
| Dec-22 | Headcount | New Hires | Terms last | Turnover % | Regret. Turnover |
|---|---|---|---|---|---|
| Dec '22 | (last 12 month) | 12 month | last 12 month | (last 12 month) | |
| TOTAL | 106 | 20 | 12 | 12.04% | 4.0% |
Photocure strives to ensure a good working environment for all employees and aims to be a workplace with equal opportunities in all areas. The company's policy is to ensure and provide equal employment rights and opportunities for all persons employed by, or seeking employment with Photocure without regard to race, age, color, religion, sexual orientation, citizenship, gender, marital status, pregnancy, national origin, disability, or other non-work-related criteria as may be protected by local or country law. This extends to the employment relationship and all other areas of personnel activity, such as recruitment, selection, job assignment, supervision, training, promotions, performance evaluations, transfers, terminations, compensation, benefits, educational opportunities, recreational activities, and work facilities.
Photocure recognizes its obligation to actively promote such opportunities for all qualified persons and will take reasonable and necessary action to ensure that these objectives are met.
The company has implemented separate processes for talent acquisition, compensation, training and development, performance management and communications. These processes ensure a nondiscriminating, secure workenvironment, follow local labor law regulations and are compliant with the Norwegian Working Environment Act, the European Directive 89/381- OSH and the U.S. employment law and standards, as well as aligning to industry best practices. The company does not have employee representatives on the Board due to the size of the company. The number of employees covered by collective bargaining agreements in 2022 was 0%. Working conditions are being determined through local industry benchmark data and employee feedback through the global annual employee survey.
At the end of 2022, the organization comprised of 106 employees of which 105 were full-time employees. In addition, Photocure continues to successfully utilize a strong network of consultants to support the operations and development as needed, and the company's practice is to outsource non-core operations and highly specialized skills and services where it makes sense. This practice allows the Company to manage its resources in an effective, efficient, and practical way.
The mid-year as well as the year-end performance appraisal for Photocure employees and management includes an assessment of the performance in relation to the company's values in addition to goal achievement. Participation and execution rate is >95%. The Company had a low incidence of accidents and absences due to illness in the Countries where this is actively tracked. There was one on-the-job accident reported globally that resulted in an absence from work. Absences due to illness in the reporting countries of Germany and Norway, was 5.8% of total hours, including two long term illnesses during the year. While in the U.S., absences due to illness are not tracked due to its paid time-off policy (PTO), there were no on-thejob accidents reported in 2022 in the U.S.. In total, three colleagues took maternity/parental leave: two women and one man. Photocure has not been in any legal proceedings regarding working environment in 2022.
Turnover at Photocure is monitored on a rolling 12-month basis. We feel that turnover in a company is very natural and that the "right" amount of change in the organization is healthy to promote a growing and developing environment. Longstanding ways and new thoughts come together in a way that keeps the organization fresh, combining consistency with new ideas. We track and report overall turnover as well as turnover deemed regrettable. We further establish goals to help to ensure that senior leaders and HR partners work together to remain highly conscious of engaging and motivating colleagues.
| Location | Total (2020) | Total (2021) | Total (2022) | Men (2022) | Women (2022) |
|---|---|---|---|---|---|
| Oslo / Global functions | 19 | 22 | 24 | 11 | 13 |
| Europe commercial | 21 | 30 | 34 | 18 | 16 |
| Princeton / Global functions | 9 | 8 | 10 | 4 | 6 |
| North America commercial | 40 | 38 | 38 | 26 | 12 |
| Total | 89 | 98 | 106 | 59 | 47 |
Regions as listed on p.100, all numbers are provided in FTE and at the end of the reporting period.
Being part of a global value chain, Photocure is directly and indirectly exposed to ethical risks through its business operations. Therefore, Photocure has high focus on conducting business in the most ethical and transparent way. This includes good corporate governance, commitment to local and industry specific business ethics norms, such as pharma industry associations ethical codes, ethical research, as well as anti-corruption and adherence to Photocure's core values and respect for human rights.
In 2021 Photocure become a signatory of the UN Global Compact which commit the company to respect the ten principles related to human rights, environment, labor, and anticorruption.
The company's CEO and management team are responsible for following up business ethics and anti-corruption work at Photocure.
Each year, the Board of Directors conducts a thorough risk assessment of the significant parts of the company's business and outlook in order to identify risks and potential risks and remedy any incident that may have occurred. This company risk assessment includes areas relating to corruption and business ethics. In May 2022, 27 suppliers were subject to a human rights review. This review included the risk of corruption.
New Board members receive a general introduction training from management and the legal counsel. The training includes an introduction to business ethics and insider rules, as well as a review of the company's corporate governance and CSR strategy. In addition, new Board Members receive an introduction to Quality and Compliance. A process to ensure conflicts of interest are prevented/
mitigated has been established. The topic is included in all board agendas: Board members need to confirm that there are no conflicts of interest related to any agenda items. Furthermore, the "Board rules of procedure" states that "Members of the Board shall notify the Board if they hold a material direct or indirect interest in any agreement or transaction entered into by the Company". Conflicts of interest are not disclosed to stakeholders.
Photocure's framework for corporate governance is intended to decrease business risk, maximize value and utilize the company's resources in an efficient, sustainable manner, to the benefit of shareholders, employees and society at large. The company seeks to comply with the Norwegian Code of Practice for corporate governance (NUES). Critical concerns are being communicated to the Board. The Leadership team has reported no critical concerns to the board in 2022. There have been no significant instances of noncompliance with laws and regulations in the reporting period, and no fines or non-monetary sanctions were incurred or paid.
Photocure has established a compliance program in line with the U.S. "OIG Compliance Program Guidance for Pharmaceutical Manufacturers". The program has the following pillars: risk assessment, policies & procedures, training, supplier management, monitoring, and reporting and investigations.
The following policies set the frame for business ethics and compliance:
The Code of Conduct, Anti-corruption policy and the Supplier & Partner Code of Conduct are available on Photocure's website and have been approved by senior leadership. All policies above are periodically reviewed, and all employees are trained. All new employees are introduced to the content of the documents as part of their onboarding.
| 2020 | 2021 | 2022 | |||||
|---|---|---|---|---|---|---|---|
| Men | Women | Men | Women | Men | Women | ||
| Organisation total | 46 | 43 | 50 | 48 | 59 | 47 | |
| Board of Directors | 3 | 2 | 3 | 2 | 3 | 2 | |
| Executive level management | 3 | 4 | 4 | 3 | 4 | 3 | |
| Non-executive level management | 7 | 10 | 10 | 11 | 10 | 13 |
of oversight and follow up on suppliers, a written procedure applicable for all supplier's engagement is in place
There have been no confirmed incidents of corruption in the reporting period, nor has any Photocure employee been dismissed or diciplined for corruption. There have been no cases of terminations or contracts not being renewed due to suspected business ethics breaches in 2022, nor has Photocure been involved in any legal proceedings regarding business ethics or corruption.
Employees can report suspected cases of business ethics breaches or corruption through an anonymous whistleblowing channel.
All employees have been introduced to the channel, both in meetings and in writing. There have been no reported incidents of corruption in the reporting period.
Maintain the compliance breaches with severity "critical" to zero. Maintain employee awareness including training on compliance and execution of the activities as outlined in the compliance program.
As part of its quality management system, Photocure has established a full set of standard operating procedures for all research and development related areas, including pre-clinical research on animals. The procedures ensure research activities are conducted in compliance with applicable laws and regulations and are subject to regular review and internal audits. Photocure is currently a sponsor of one clinical trial, registered at clinical trials.gov: NCT05600322. This study compares Hexvix Blue light cystoscopy with standard White light cystoscopy in the detection of bladder cancer in a Chinese population and is conducted as part of the upcoming marketing authorization approval in China. The study is a collaboration with Photocure's partner Asieris. An experimental bladder cancer model study in animals was initiated in 2022.
Photocure is dedicated to advancing bladder cancer care. Our commitment is to bridge the gap between randomized clinical trials (RCTs) and real-world outcomes in bladder cancer care. The company has established partnerships with different organizations to help generate the longterm real-world data (RWD) needed in bladder cancer treatment across diverse and otherwise underserved sub-groups of patients. Due to factors including a restricted patient pool defined by comprehensive eligibility criteria, controlled trial settings, as
well as set trial durations, randomized clinical trial outcomes may have gaps that need to be addressed by other means to progress therapy options. To bridge the knowledge gap that exists in bladder cancer care, Photocure has supported and worked closely with several patient registries to benefit from RWD. One non-interventional Photocure sponsored study (Blue Light Cystoscopy with Cysview® registry in the U.S.: Clinicaltrials NCT02660645) was ongoing in the reporting period.
Photocure has also provided multiple research grants, supported investigator-initiated trials and research collaborations. During 2022, several studies were published highlighting and confirming key benefits of Blue Light Cystoscopy with Hexvix/Cysview.
Main publications and presentations can be found in the Annual Report 2022 on pages 9/10.
Photocure's overarching goal is to comply with industry codes in all markets where we promote our product and interact with health care professionals and health care organizations. In Europe, the company follows the European Federation of Pharmaceutical Industries and Association's (EFPIA) code of practice, while for the U.S. market, Photocure follows the Pharma Code. Written procedures are established to ensure promotional materials are reviewed and approved and that promotional and medical activities are conducted responsibly and according to industry standards.
Therefore, Photocure publishes annual disclosure reports describing these payments and transfers on its website or applicable external websites. Photocure is equally disclosing its support for research.
Our Supplier and Partner code of conduct was introduced in 2021. As our suppliers are seen as an extension of Photocure, we require our suppliers and partners, to comply with this Code which is the same as The Ten principles of the UN Global Compact. Photocure also expects its Suppliers and Partners to require their own suppliers and subcontractors to follow these principles. In contracts with business partners and suppliers, Photocure has included statements that both parties are obliged to follow all applicable laws, rules and regulations, and this general statement also includes anticorruption laws. To strengthen the internal awareness of the importance
| Area | Goals and Target 2022 | Action and progress in 2022 |
|---|---|---|
| Product quality & safety |
Maintain Photocure's track record of no quality and/or safety incidents leading to any market actions e.g. product recall or healthcare information letter. |
No quality and/or safety incidents with any market actions reported. One technical error identified in one lot |
| Improving the phone service for medical information, adverse event reporting and product quality complaints for North America. |
Helpdesk service for US went live in July 2022 |
|
| Supply chain | Include following up on environmental, social and governance topics in regular business review meetings. |
Monthly business meetings conducted throughout the year with critical suppliers Formal business review meetings conducted with 5 suppliers in Q3, Q4 2022 and Q1 2023. |
| Assess the status of ESG topics-related policies from all critical suppliers. |
Done throughout the year as part of regular supplier re-evaluations and qualifications as well as business review meetings. |
|
| Encourage and support critical suppliers to implement policies in line with UN Global Compact |
All critical suppliers, except one have such policies formally implemented. |
|
| Environment and climate |
Include environmental topics in the monitoring of real estate providers for Photocure locations |
ESG reports from our office landlords received and reviewed. |
| impact | Continue stakeholder dialogue to assess evolving environmental and climate reporting needs |
Semi-structure interviews were conducted by a third party with stakeholders in related to material topics including environmental and climate. The outcome is included in the materiality assessment for the upcoming 2022 report. |
| Working environment |
Maintain a high employee engagement score in employee survey (>80% overall score) |
Pulse survey done in November 2022 Participation: 92% Overall satisfaction: 91% - high satisfaction 74% |
| Maintain solid succession plans for key functions and establish and implement detailed development plans f or key successors |
Succession plan presented to the Board in Q4. |
|
| Ensure all HR functions are fully backed with policies and processes to assure consistency and overall solid governance |
All processes have been calendarized and are in place |
|
| Utilise focus groups to identify improvement points for the Photocure working environment based on the Pulse Survey |
Focus groups established to discuss action from Pulse Survey. |
|
| Leverage our Care & Respect Council to support our "We Care" Culture and maximize our efforts in diversity, equality and inclusion |
Care & Respect Council has met to develop the unconscientious biases training for the entire company. Roll out planned for 2023. |
|
| Business ethics & transparency |
Maintain the compliance breaches with severity "critical" to zero. Maintain employee awareness including training on compliance and execution of the activities as outlined in the compliance program. |
No critical compliance breached reported in 2022. All new employees trained in compliance as part of their onboarding and reminder trainings held throughout the year. |
| Review the current supplier procedures to ensure correct assessment of risk for corruption, based on location, and risk for human rights breaches |
Procedure updated by year and as well as a new procedure describing the ESG work. |
|
| Strengthen the code of conduct with clearer statement for human rights. |
Revised Code of Conduct per December 2022 |
Complete Work in progress / partly achieved Not started
| Security tickets and breaches | 2020 | 2021 | 2022 |
|---|---|---|---|
| Number of moderate security tickets registered | 13 | 42 | 9 |
| Number of critical security tickets registered | 0 | 0 | 0 |
| Number of personal data breaches | 0 | 0 | 0 |
As a company in the pharmaceutical sector working with research and development and cooperating with physicians and patient advocacy groups, Photocure and/or its research partners may need to gather and store personal data as part of its research and development practices or business operations. In addition, as a listed company on the Oslo Stock Exchange, information security and data protection are also an important part of the company's obligations to its shareholders and the marketplace.
Data and information security is a priority for Photocure and described in the company's quality manual. IT activities and security are evaluated, and if necessary new risk analyses are performed. Management is informed about the result of the evaluations and approves corrective and preventive actions. The Company has received no substantiated complaints concerning breaches of customer privacy in 2022, nor has it reported any leaks, loss or theft of customer data in the reporting period.
Photocure has invested in an extensive security and information security platform based on international standards ISAE3402 and ISAE3000. Furthermore, Photocure's IT-provider Intility has a Security Operations Centre (SOC) which is responsible for managing all suspected and confirmed cyber security incidents 24/7/365. This is performed in close collaboration with other operational departments and renowned external security partners.
The procedures and processes that Photocure has established for personal data protection are based on the Norwegian Personal Data Act and the General Data Protection Regulation (GDPR), EU 2016/679. A personal data protection group has been established and a procedure is in place to describe the responsibility and process for data protection issues. Photocure has a
dedicated personal data contact person with delegated responsibility from the board and management.
Photocure's quality manual describes the overall responsibility for both data protection and IT security. To ensure appropriate management and documentation of electronic files critical for Photocure's activities in a GxP environment, Photocure has a number of standard operating procedures. For instance, Photocure has established processing of personal data, that is governed by applicable laws and regulations, and in particular the Personal Data Act and The General Data Protection Regulation (GDPR) where applicable. In addition, there are several Photocure procedures that describe the personal data process for a specific task. These procedures include work instructions for relevant roles such as employees, contractors, job candidates and board members.
The security platform is supported by an industrialized information security and compliance service that simplifies work to ensure compliance with internal and external audits.
This security and compliance service also acts as a compliance hub when leveraging public cloud services.
Photocure's security platform is audited annually according to ISEA3402 and ISAE3000 by PWC. The ISAE reports are also mapped up to the Cloud Control Matrix framework to fit industry standards defined by the Cloud Security Alliance. Photocure keeps a live dashboard on all security incidents.
Photocure's stakeholders
Photocure's employees are directly affected by the company's internal policies and activities, and directly affect the company through their performance and actions.
Photocure's customers consist of urologists, hospitals, clinics and the bladder cancer patients they treat. Customers are directly affected by the quality and safety of Photocure products. Customers directly affect the company economically and customer expectations also impact Photocure's sustainability priorities.
Photocure's suppliers are economically affected by the company and their responsibility is indirectly affected by Photocure's focus on responsible practices and the expectations placed on them
by the company. Suppliers directly affect the company through the quality and pricing of their products and services.
Photocure's investors and owners are primary stakeholders and directly affect the company's priorities and strategic direction. Photocure's economic and business performance may affect the priorities of investors and shareholders.
Government and regulatory authorities affect the company's operating conditions directly and indirectly.
Civil society affect the company's operating conditions directly and indirectly. Local communities are indirectly socially, environmentally and economically affected by Photocure's activities in terms of job creation, contribution to local value creation and environmental impact.
| Area | Goals and Target 2022 | Action and progress in 2022 |
|---|---|---|
| Data protection & IT security |
Strive to enhance IT-security in our international organization. E.g. implement multi-factor authentication to access all Intility-based IT services |
Multi-factor authentication to access all Intility based IT services implemented. A third-party did a Cyber risk assessment of Photocure; |
| Keep security tickets with severity "critical" to zero. | No critical security tickets reported in 2022 | |
| Continue to increase awareness of the security situation and reporting suspicious e-mails by annual reminders to all employees |
IT security awareness training was done February 2023 |
|
| Hold an annual GDPR refresher training to make sure every employee gets a better understanding on how to handle personal data in their daily work. |
Annual GDPR training was done February 2023 |
| Disclosure Disclosure description | Reference | Omission | |
|---|---|---|---|
| GRI 2 - GENERAL DISCLOSURES 2021 | |||
| 2-1 | Organizational details | Accounting principles 2022 (General information) + About Photocure (Locations) |
|
| 2-2 | Entities included in the organization's sustainability reporting |
Accounting principles 2022 (General information) |
|
| 2-3 | Reporting period, frequency and contact point |
About this report + Front page | |
| 2-4 | Restatements of information | About this report | |
| 2-5 | External assurance | Independent auditor's report + Corporate Governance Policy and Annual Review (Auditor) + About this report |
|
| 2. ACTIVITY AND WORKERS | |||
| 2-6 | Activities, value chain and other business relationships |
Board of Directors Report 2022 (About Photocure) + Accounting principles 2022 (General information) + Notes to the Financial Statements for 2022 (Operating segments + Partnerships) + About Photocure |
|
| 2-7 | Employees | Employees by region (table) + Breakdown of employees (table) + Policies & workplace key figures + Turnover |
|
| 2-8 | Workers who are not employees |
Information unavailable: The company did not manage to gather information about workers who are not employees for the 2022 report, but will strengthen data gathering and plans to obtain the information in 2023. |
|
| 3. GOVERNANCE | |||
| 2-9 | Governance structure and composition |
Corporate Governance Policy and Annual Review (composition and independence of the board of directors) + About Photocure (Corporate governance) |
|
| 2-10 | Nomination and selection of the highest governance body |
Corporate Governance Policy and Annual Review (Nomination committee) |
|
| 2-11 | Chair of the highest governance body |
Corporate Governance Policy and Annual Review (composition and independence of the board of directors) + Confirmation from the Board of Directors and CEO (2022) |
| Disclosure Disclosure description | Reference | Omission | |
|---|---|---|---|
| 2-12 | Role of the highest governance body in overseeing the management of impacts |
Corporate Governance Policy and Annual Review (Business + The work of the Board of Directors) + About this report + About Photocure (Corporate governance) |
Information unavailable: The company did not manage to gather all of the information for 2022, but will improve data gathering processes and plans to obtain the information in 2023. |
| 2-13 | Delegation of responsibility for managing impacts |
About Photocure (Corporate governance) |
|
| 2-14 | Role of the highest governance body in sustainability reporting |
About this report | |
| 2-15 | Conflict of interest | Business ethics and transparency | |
| 2-16 | Communication of critical concerns |
Business ethics and transparency | |
| 2-17 | Collective knowledge of the highest governance body |
Information unavailable: The company did not manage to gather this information for 2022, but will improve data gathering processes and plans to obtain the information in 2023. |
|
| 2-18 | Evaluation of the performance of the highest governance body |
Corporate Governance Policy and Annual Review (Business + The work of the Board of Directors) |
The Board conducts self assessments, but not specifically linked to their role in overseeing sustainability impacts. |
| 2-19 | Remuneration policies | Guidelines for remuneration of senior executives and Board of Directors (website) |
The disclosure is met with two minor exceptions: Our remuneration policy does not include information about clawbacks or retirement benefits. Remuneration is not linked to Board members or senior executive performance in managing sustainability impacts. |
| 2-20 | Process to determine remuneration |
Corporate Governance Policy and Annual Review (The compensation committee + remuneration of the Board of Directors + Remuneration of the senior management) + Guidelines for remuneration of senior executives and Board of Directors (website) |
The disclosure is met with one minor exception: We do not report on the views or votes of stakeholders. |
| 2-21 | Annual total compensation ratio |
Remuneration of the management and Board of Directors (table) + Compensation equity |
We do not report the median annual total compensation / percentage increase for employees. |
| 4. STRATEGY, POLICIES AND PRACTICES | |||
| 2-22 | Statement on sustainable development strategy |
CEO letter | |
| 2-23 | Policy commitments | Business ethics and transparency + Compliance Program + Human rights + Norwegian Transparency Act |
|
| 2-24 | Embedding policy commitments |
Business ethics and transparency + Compliance Program + Human rights + Norwegian Transparency Act |
Information unavailable: all of the information could not be obtained for the 2022 report. We will improve data gathering processes, and plan to obtain the information in 2023. |
Photocure has reported in accordance with the 2021 GRI Standards for the reporting period January 1st to December 31st, 2022.
| Disclosure Disclosure description | Reference | Omission | Disclosure Disclosure description | Reference | Omission | |||
|---|---|---|---|---|---|---|---|---|
| Processes to remediate | Corporate governance policy and | Information unavailable: all of the | OWN KPI | |||||
| 2-25 | negative impacts | annual review (risk management and internal control) + Business ethics and transparency (Reporting & monitoring) |
information could not be obtained for the 2022 report. We will improve data gathering processes, and plan to |
KPI | Location | Critical supplier screening; manufacturing and supply chain (table) |
||
| "Mechanisms for seeking | Business ethics and transparency | obtain the information in 2023. | KPI | Code of Conduct / CSR policy Critical supplier screening; | manufacturing and supply chain (table) | |||
| 2-26 | advice and raising concerns" |
(Reporting & monitoring) | KPI | Policy committment | Critical supplier screening; manufacturing and supply chain (table) |
|||
| 2-27 | Compliance with laws and regulations |
Business ethics and transparency (Reporting & monitoring) |
PRODUCT QUALITY AND SAFETY | |||||
| 2-28 | Membership associations | Board of Directors Report (Corporate Social Responsibility) + About Photocure |
3-3 | Management of material topics |
Product quality and safety + Stakeholder prioritization and dialogue |
|||
| 5. STAKEHOLDER ENGAGEMENT | GRI 416: CUSTOMER HEALTH AND SAFETY 2016 | |||||||
| 2-29 | Approach to stakeholder engagement |
Stakeholder prioritization and dialogue | 416-2 | Incidents of non-compliance concerning the health and safety impacts of product and services |
Product quality and safety | |||
| 2-30 | Collective bargaining agreements |
Policies and workplace key figures | ENVIRONMENT AND CLIMATE IMPACT | |||||
| MATERIAL TOPCIS | Management of material | Environment and climate impact + | ||||||
| GRI 3: MATERIAL TOPCIS 2021 | topics | Supply chain monitoring, packaging and transportation + Environmental risk related to Photocure's medicinal product + Critical supplier screening; manufacturing and supply chain |
||||||
| 3-1 | Process to determine material topcis |
Stakeholder priotitization and dialogue + Materiality assessment |
3-3 | |||||
| 3-2 | List of material topics | Stakeholder priotitization and dialogue + Materiality assessment + CEO letter |
(table) + Stakeholder prioritization and dialogue |
|||||
| HUMAN RIGHTS + SUPPLY CHAIN RESPONSIBILITY | GRI 305: EMISSIONS 2016 | |||||||
| Management of material | Human Rights + Norwegian | 305-2 | Energy indirect (scope 2) GHG emissions |
Environment and climate impact (Energy use (electricity) from Photocure locations) |
||||
| 3-3 | topics | Transparency Act + Supply chain responsibility + Stakeholder |
OWN KPI | |||||
| prioritization and dialogue GRI 412: HUMAN RIGHTS ASSESSMENT 2016 |
KPI | Environmental Policy | Critical supplier screening; manufacturing and supply chain (table) |
|||||
| Operations that have | Norwegian Transparency Act | KPI | Water-stress | Critical supplier screening; manufacturing and supply chain (table) |
||||
| 412-1 | been subject to human rights reviews or impact assessments |
WORKING ENVIRONMENT | ||||||
| 412-3 | Significant investment agreements and contracts that include human rights |
Norwegian Transparency Act | 3-3 | Management of material topics |
Working environment + Policies and workplace key figures + Stakeholder prioritization and dialogue |
|||
| clauses or that underwent human rights screening |
GRI 401: EMPLOYMENT 2016 | |||||||
| New employee hires and | Breakdown of employees (table) + |
| OWN KPI | |||||||
|---|---|---|---|---|---|---|---|
| KPI | Location | Critical supplier screening; manufacturing and supply chain (table) |
|||||
| KPI | Code of Conduct / CSR policy Critical supplier screening; | manufacturing and supply chain (table) | |||||
| KPI | Policy committment | Critical supplier screening; manufacturing and supply chain (table) |
|||||
| PRODUCT QUALITY AND SAFETY | |||||||
| 3-3 | Management of material topics |
Product quality and safety + Stakeholder prioritization and dialogue |
|||||
| GRI 416: CUSTOMER HEALTH AND SAFETY 2016 | |||||||
| 416-2 | Incidents of non-compliance concerning the health and safety impacts of product and services |
Product quality and safety | |||||
| ENVIRONMENT AND CLIMATE IMPACT | |||||||
| 3-3 | Management of material topics |
Environment and climate impact + Supply chain monitoring, packaging and transportation + Environmental risk related to Photocure's medicinal product + Critical supplier screening; manufacturing and supply chain (table) + Stakeholder prioritization and dialogue |
|||||
| GRI 305: EMISSIONS 2016 | |||||||
| 305-2 | Energy indirect (scope 2) GHG emissions |
Environment and climate impact (Energy use (electricity) from Photocure locations) |
|||||
| OWN KPI | |||||||
| KPI | Environmental Policy | Critical supplier screening; manufacturing and supply chain (table) |
|||||
| KPI | Water-stress | Critical supplier screening; manufacturing and supply chain (table) |
|||||
| WORKING ENVIRONMENT | |||||||
| 3-3 | Management of material topics |
Working environment + Policies and workplace key figures + Stakeholder prioritization and dialogue |
|||||
| GRI 401: EMPLOYMENT 2016 | |||||||
| 401-1 | New employee hires and employee turnover |
Breakdown of employees (table) + Turnover (table) |
Disclosure is met with one minor exception: The company did not manage to obtain information about age group in 2022. We will improve data gathering processes and plan to report the information in 2023. |
| Disclosure Disclosure description | Reference | Omission | |||||||
|---|---|---|---|---|---|---|---|---|---|
| GRI 405: DIVERSITY AND EQUAL OPPORTUNITY 2016 | |||||||||
| 405-1 | Diversity of governance bodies and employees |
Breakdown of employees and board members by gender (table) |
The company is not reporting age group for Board members or employees. We also do not provide a breakdown of employees per employee category. |
||||||
| OWN KPI | |||||||||
| KPI | Absence due to illness | Policies & workplace key figures | |||||||
| KPI | Parental leave | Policies & workplace key figures + Breakdown of employees (table) |
|||||||
| KPI | Employee survey | Employee engagement | |||||||
| DATA PROTECTION & IT SECURITY | |||||||||
| 3-3 | Management of material topics |
Data Protection and IT security + Stakeholder prioritization and dialogue |
|||||||
| GRI 418: CUSTOMER PRIVACY 2016 | |||||||||
| 418-1 | Substantiated complaints concerning breaches of customer privacy and losses of customer data |
Data Protection and IT security | |||||||
| OWN KPI | |||||||||
| KPI | Moderate security tickets | Security tickets and breaches | |||||||
| KPI | Critical security tickets | Security tickets and breaches | |||||||
| KPI | Personal data breaches | Security tickets and breaches | |||||||
| RESEARCH ACTIVITIES | |||||||||
| 3-3 | Management of material topics |
Research activities + Stakeholder prioritization and dialogue |
|||||||
| BUSINESS ETHICS AND TRANSPARENCY | |||||||||
| 3-3 | Management of material topics |
Business ethics and transparency + Ethical marketing and disclosure + Suppliers and partners + Stakeholder prioritization and dialogue |
|||||||
| GRI 205: ANTI-CORRUPTION 2016 | |||||||||
| 205-3 | Confirmed incidents of corruption and actions taken |
Suppliers and Partners |
WWW.PHOTOCURE.COM
PHOTOCURE ASA H o f f s v e i e n 4 0275 Oslo, Norway +47 22 06 22 10 [email protected] PHOTOCURE INC. 202 Carnegie Center, suite 101 Princeton, NJ 08540, USA +1 609 759 6500 [email protected]
PHOTOCURE GMBH Marc-Chagall-Str. 2 40477 Düsseldorf, Germany
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