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Annual Report 2022 12 APRIL 2022 WWW.PHOTOCURE.COM
VISION Leading change in bladder cancer MISSION To deliver transformative solutions to improve the lives of bladder cancer patients
Contents Vision and Mission .................................................................................................................... 2 2022 in brief .................................................................................................................... 4 Board of Directors Report 2022 .................................................................................................................... 6 Conﬁrmation from the Board of Directors and CEO .................................................................................................................... 18 The Board of Directors .................................................................................................................... 19 Corporate Governance Policy and Annual Review .................................................................................................................... 22 Financial Statements .................................................................................................................... 29 Accounting principles 2022 .................................................................................................................... 36 Notes to the Financial Statments for 2022 .................................................................................................................... 45 Auditors’ Report .................................................................................................................... 70 Alternative Performance Measures .................................................................................................................... 76 Financial Calendar .................................................................................................................... 78 ESG Report .................................................................................................................... 81 Annual Report Photocure 2022 3
4 Annual Report Photocure – Results 2022 2022 in brief Commercial Franchise 2022 FY 2021 FY Europe revenues 221,8 225,8 North America revenues 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 % 0.0 50.0 100.0 150.0 200.0 250.0 300.0 350.0 400.0 2022 2021 2020 2019 2018 Other Europe North America 0.0 50.0 100.0 150.0 200.0 250.0 300.0 350.0 400.0 450.0 Total revenue 2022 Mile- stones Other sales Europe growth US growth Total revenue 2021 25.6 360.5 -3.9 -1.3 12.2 393.1 SALES REVENUE 2018-2022 (NOK million) REVENUE 2021-2022 (NOK million) FINANCIAL HEADLINES (NOK million)
5 59 Patients enrolled in U.S. “Blue Light Cystoscopy with Cysview®” Registry at year-end 2022 Expanding geographic footprint with Hexvix ® partnerships signed for Australia/New Zealand and Israel New Blue Light Cystoscopes installed in the U.S. during 2022 Total company revenue increased 9% to NOK 393.1 million 2021 2022 +9% 2 700 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 2021 2022 +6% Launch of Karl Storz’s new Blue Light system in the U.S. and Europe Blue Light Cystoscopy procedures were conducted in 2022 63 000
6 Annual Report Photocure – Results 2022 Board of Directors Report 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 high- deﬁnition 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 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.
7 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 sub- types (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). About Photocure 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. Commercial Segment Hexvix ® /Cysview ® – the innovative product for improved detection and management of bladder cancer Bladder cancer ranks as the 8 th most common cancer worldwide – the 5 th 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
8 Annual Report Photocure – Results 2022 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: Approvals – Market authorizations for use in both trans-urethral bladder tumor resection (TURBT) procedures as well as the larger surveillance cystoscopy market Acceptance – Recommended use of Hexvix/Cysview by the AUA, EAU, SUO, and many regional and local guidelines, as well as the published Expert Consensus Guidelines for surveillance with ﬂexible blue light cystoscopes Access – Permanent codes authorized in 2020 and 2021 for the use of BLC in TURBT procedures, and improved Medicare reimbursement in surveillance settings as of January 2023. Activated Awareness – Demand via advocacy groups, clinics’ advertising and media 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,
9 France, and Italy, as well as negative foreign exchange during the year. Unit sales in the Company’s European segment increased 1% in 2022, year- over-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 anti- tumor 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
10 Annual Report Photocure – Results 2022 setting. The results demonstrate the non-inferiority of outpatient laser- mediated 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/data- presented-at-the-international- bladder-cancer-network-ibcn- meeting-demonstrate-a-reduction-in- the-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. multi- institutional Blue Light Cystoscopy with Cysview Registry database. https://suo-abstracts.secure- platform.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
11 Development Portfolio 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 Chinese- focused 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. Financial review 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.
12 Annual Report Photocure – Results 2022 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%). Dividend The Board of Directors does not propose a dividend payment for 2022. Photocure is focusing its resources on building a therapeutic area-focused
13 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. Parent company 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%. Share capital and board mandates 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. Going concern 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. Risk factors and risk management 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. Operational risk 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. Commercial risk 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: Reimbursement may be limited or unavailable in certain markets, which could make it more diﬃcult to achieve proﬁtability in these markets. Changes in reimbursement in Europe and the U.S. may have a material impact on Photocure’s results and cash ﬂows. Inﬂationary pressures in the economy and budget tightening may inhibit the hospitals’ ability to invest in equipment. This may have a negative impact on the Company’s revenues, results and cash ﬂows. 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. Use of Hexvix/Cysview requires installation of Blue Light Cystoscopes which are manufactured and sold by other companies, only one of which is approved with Cysview in the U.S. These companies’ ability and willingness to develop and promote these products may aﬀect Photocure’s results and cash ﬂows. Partners’ ability to support the brand in key markets. The expiration or loss of patent protection may adversely aﬀect Photocure’s future results and cash ﬂows. Third parties may challenge or seek to invalidate or circumvent Photocure’s patents and patent applications. The patent for Hexvix expired in the main European countries in 2019 and the patent for Cysview in the U.S. expired in the fourth quarter 2020. Competitive products or technologies may emerge at any time, and changes in the competitive landscape may have a material impact on Photocure’s results and cash ﬂows. Manufacturing risk 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.
14 Annual Report Photocure – Results 2022 Development and regulatory risk 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. Financial risk 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. Liquidity and funding risk 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. Credit risk 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. Currency risk 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. Interest rate risk 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 three- year 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. Organization 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 shareholder- elected. 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. Corporate social responsibility 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
15 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. Subsequent events 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 Saphira TM , 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.
16 Annual Report Photocure – Results 2022 Outlook 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: Acceleration – Drive the breadth and depth of Hexvix/Cysview usage in key accounts Expansion – Generate sales in new geographies and product enhancements Acquisition – Find and acquire or partner additional products used in the management of bladder cancer patients Transformation – Acquire assets to strengthen the Company’s uro- oncology product portfolio. 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 (ex- business development spending).
17 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
18 Annual Report Photocure – Results 2022 Conﬁrmation from the Board of Directors and CEO 2022 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. 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
19 Jan H. Egberts Johanna Holldack 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 • Position: Managing Partner of Veritas Investments • Education: MD and MBA • Other assignments: Chairman at Mellon Medical and Board member at LeadPharma, Cassini Medical, Pallas / NRG group and NeoVacc Ltd • Elected year 2017 • Position: CEO Kupando GmbH • Education: MD • Other assignments: Advisor to Spark at Charite, Berlin
20 Annual Report Photocure – Results 2022 Neal Shore Anders Tuv Director Director / Chairperson of the Audit Committee 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. • Elected year 2022 • Position: CMO (Urology/Surgical Oncology) GenesisCare,US; Medical Director for the Carolina Urologic Research Center, USA • Education: MD, FACS • Other assignments: Fellow of the American College of Surgeons, 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 • Elected year 2020 • Position: Chief Investment Oﬃcer at Radforsk, Norway • Education: MBE • Other assignments: Non-executive director at Nykode Therapeutics, Zelluna Immunotherapy, Nextera, ARTBIO and OnDosis AB and member of the Nomination Committee of Targovax. He also holds several advisory roles in biotech and tech companies and VC/investment funds.
21 Anne Worsøe 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. • Elected year 2020 • Position: Head of Investor Relations & Communication at Ultimovacs ASA, Norway • Education: M.Sc. • Other assignments: Chair of the Board at First Seed foundation, Board Member at SINTEF TTO AS
22 Annual Report Photocure – Results 2022 Corporate Governance Policy and Annual Review Review of policy adopted by the Board 11 April 2023 Photocure is committed to Good Corporate Governance Photocure ASA (“Photocure” or the “Company”) has made a strong commitment to ensure trust in the Company and to enhance shareholder value through eﬀective decision- making 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: 1. Implementation and reporting on Corporate Governance 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. Non-conformance with the recommendation: None 2. Business 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.
23 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 3. Equity and dividends Capital Structure 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 interest- bearing 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. Dividend Policy 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. Capital Increases and Issuance of Shares 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. Purchase of own Shares 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 “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.”
24 Annual Report Photocure – Results 2022 4. Equal treatment of shareholders Pre-Emption rights to Subscribe According to the Norwegian Public Limited Liability Companies Act, the Company’s shareholders have pre- emption rights in share oﬀerings against cash contribution. Such pre- emption 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. Trading in own shares 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 5. Shares and negotiability 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. Non-conformance with the recommendation: None 6. General meetings 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.
25 Notiﬁcation 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. Participation and Execution 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. 7. Nomination Committee 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 8. Composition and independence of the Board of Directors 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. Non-conformance with the recommendation: None
26 Annual Report Photocure – Results 2022 9. The work of the Board of Directors The Rules of Procedure for The Board of Directors 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 Audit Committee 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 principal tasks of the audit committee are to: prepare the board of directors’ supervision of the Company’s ﬁnancial reporting process; monitor the systems for internal control and risk management; have continuous contact with the Company’s auditor regarding the audit of the annual accounts; and review and monitor the independence of the Company’s auditor, including in particular the extent to which services other than auditing provided by the auditor or the audit ﬁrm represent a threat to the independence of the auditor. The audit committee currently consists of the following two members: Anders Tuv (chairperson) and Anne Worsøe. The Compensation Committee 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 principal tasks of the compensation committee are to prepare: proposals for guidelines for remuneration of senior executives and board of directors in accordance with the Norwegian Public Limited Liability Companies Act section 6-16a; report on remuneration to senior executives in accordance with the Norwegian Public Limited Liability Companies Act section 6-16b; and other matters relating to remuneration and other material employment issues in respect of the senior management. The compensation committee currently consists of the following two members: Johanna Holldack (chairperson) and Jan H. Egberts. Non-conformance with the recommendation: None 10. Risk management and internal control 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
27 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 11. Remuneration of the Board of Directors 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. 12. Remuneration of the senior management 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.
28 Annual Report Photocure – Results 2022 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. 13. Information and communications General 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 up- to-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. Information to Shareholders 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. Non-conformance with the recommendation: None 14. Take-overs 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. 15. Auditor 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
29 Financial Statements Photocure ASA STATEMENT OF COMPREHENSIVE INCOME STATEMENT OF FINANCIAL POSITION as of 31 December STATEMENT OF CASH FLOWS STATEMENT OF CHANGES IN EQUITY
30 Annual Report Photocure – Results 2022 STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE INCOME 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
31 STATEMENT OF FINANCIAL POSITION as of 31 December - ASSETS 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
32 Annual Report Photocure – Results 2022 STATEMENT OF FINANCIAL POSITION as of 31 December - EQUITY AND LIABILITIES 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 2 344 1 837 Employee withholding taxes, 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 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
33 STATEMENT OF CASH FLOWS 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
34 Annual Report Photocure – Results 2022 STATEMENT OF CHANGES IN EQUITY - Parent Company Parent company (Amounts in NOK 1 000) Issued capital Treasury shares Other paid-in equity Translation reserve Retained earnings Total 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
35 STATEMENT OF CHANGES IN EQUITY - Group Group (Amounts in NOK 1 000) Issued capital Treasury shares Other paid-in equity Translation reserve Retained earnings Total 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
36 Annual Report Photocure – Results 2022 Accounting principles 2022 I. General information 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. II. Basis for preparation of the annual accounts 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.
37 III. Changes in signiﬁcant accounting policies There are no signiﬁcant new IFRS standards made eﬀective in 2022 that eﬀect the group accounts for Photocure. IV. Disclosures regarding new standards not yet eﬀective 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. V. Use of judgements and estimates 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. Note 11 Recognition of deferred tax asset: available future taxable proﬁt against which tax losses carried forward can be used. Note 9 and 10 Long term loan subsidiary: impairment and key assumptions underlying the balance sheet value in Parent company. VI. Summary of important guidelines for accounting for the Group A. Classiﬁcation Assets/liabilities are classiﬁed as current assets/current liabilities when they meet one of the following criteria: They are expected to be realized in the Group’s ordinary operating cycle or are kept for sale or consumption; They are expected to be realized within 12 months of the balance sheet date; or They are in the form of cash or a cash equivalent. All other assets/liabilities are classiﬁed as ﬁxed assets/long-term liabilities B. Currency 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 C. Property, plant, equipment and intangible assets 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 D. Impairment 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
38 Annual Report Photocure – Results 2022 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. E. Research and development costs 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: Regulatory work and services related to new products or product development based on new clinical trials up to and including phase 3, are classiﬁed as R&D costs Regulatory work and services for new markets based on existing clinical data are classiﬁed as marketing costs F. Investment in subsidiary companies 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.
39 G. Inventories 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. H. Financial assets and liabilities Recognition and measurement 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): it is held within a business model whose objective is to hold assets to collect contractual cash ﬂows; and its contractual terms give rise on speciﬁed dates to cash ﬂows that are solely payments of principal and interest on the principal amount outstanding. 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. Impairment 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: debt securities that are determined to have low credit risk at the reporting date; and other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the ﬁnancial instrument) has not increased signiﬁcantly since initial recognition. 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. I. Revenue recognition 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
40 Annual Report Photocure – Results 2022 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. J. Government grants 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. K. Pensions 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 tax- qualiﬁed, 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. L. Share remuneration and other beneﬁts related to share based remuneration 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. M. Tax 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
41 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. N. Earnings per share 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. O. Provisions 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.
42 Annual Report Photocure – Results 2022 P. Contingent liabilities and assets Contingent liabilities are deﬁned as: Possible liabilities as a result of earlier events where their existence depends on future events; Liabilities that are not included because it is not probable that they will lead to an outﬂow of resources from the Group; Liabilities that cannot be measured with suﬃcient reliability. 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. Q. Cash ﬂow statement 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. R. Lease agreements 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.
43 S. Segment reporting 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. T. Business combinations 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 “customer- related 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.
44 Annual Report Photocure – Results 2022
45 Notes to the Financial Statements for 2022 Photocure ASA 1 PARTNERSHIPS 2 OPERATING SEGMENTS 3 REVENUES FROM CONTRACT WITH CUSTOMERS 4 COST OF GOODS SOLD 5 INCOME STATEMENT CLASSIFIED BY NATURE 6 PERSONNEL EXPENSES 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 13 GOODWILL AND CUSTOMER RELATIONS 14 PROPERTY, PLANT, EQUIPMENT AND OTHER ASSETS 15 SUBSIDIARIES 16 INVENTORIES 17 FINANCIAL RISK 18 FAIR VALUE 19 RECEIVABLES 20 CASH AND SHORT TERM DEPOSITS 21 SHARE CAPITAL 22 LOAN TERMS AND REPAYMENT 23 ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES 24 SUBSEQUENT EVENTS
46 Annual Report Photocure – Results 2022 1. PARTNERSHIPS 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. 2. OPERATING SEGMENTS 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
47 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”. 3. REVENUES FROM CONTRACT WITH CUSTOMERS Performance obligation product deliveries 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. Performance obligation license 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.
48 Annual Report Photocure – Results 2022 Geographical information (Amounts in NOK 1,000) 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. Revenue recognition by segments 1 Jan - 31 December 2022 Commercial Franchise Development Portfolio Grand Total Hexvix/Cysview (Amounts in NOK 1,000) Own sales Partner Other Sales Total Sales Pipeline Total R&D 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 Revenue recognition by segments 1 Jan - 31 December 2021 Commercial Franchise Development Portfolio Grand Total Hexvix/Cysview (Amounts in NOK 1,000) Own sales Partner Other Sales Total Sales Pipeline Total R&D 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
49 4. COST OF GOODS SOLD Total cost of goods sold includes direct materials, services provided by contract manufacturers and packaging suppliers, products freights and distribution costs. 5. INCOME STATEMENT CLASSIFIED BY NATURE (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 6. PERSONNEL EXPENSES (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 Share-based remuneration 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.
50 Annual Report Photocure – Results 2022 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: Average remaining life No. of options Exercise price 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 Calculation method for market value of employee share options: 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
51 7. REMUNERATION OF MANAGEMENT AND BOARD OF DIRECTORS (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 (Amounts in NOK 1,000) Directors’ fees paid Salaries paid Bonuses accrued Beneﬁts in kind Pension 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
52 Annual Report Photocure – Results 2022 Share options senior management 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 Auditing fees (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
53 8. PENSION COSTS 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. The pension cost for the year is calculated as follows: (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
54 Annual Report Photocure – Results 2022 9. FINANCIAL INCOME AND EXPENSE (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. Remeasure ﬁnancial balances 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.
55 10. RELATED PARTIES - COMPANIES Subsidiaries 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. Transactions and intercompany balances: 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
56 Annual Report Photocure – Results 2022 11. TAX (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.
57 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
58 Annual Report Photocure – Results 2022 12. EARNINGS PER SHARE 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
59 13. GOODWILL AND CUSTOMER RELATIONS 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: • Sales growth and related expenses is based on current penetration and future growth potential as per management assessment. When assessing future growth and related expenses management has taken into consideration experiences from high growth markets as well as more mature markets within the company portfolio. • With minor exceptions the sales are in Euro. Assumed exchange rate in the forecast projection NOK/EUR is 10.20, this is at same level as the average rate for 2022. • The impairment test is based on a 8 year cash ﬂow projection including the terminal year. 8 year is applied as this reﬂects the change in hospital practices driven by the product as well as the low churn experienced in other markets. • The applied discount rate is 18.0% post tax. An increase of discount rate with 2% or 4% will not change the conclusion of the impairment test. Terminal growth rate is in the projection estimated to zero as a conservative approach. An increase of the terminal growth rate to 4% will have a positive impact on the fair value of the investment with NOK 40 million. This percent reﬂects the expected inﬂation and the growth in the aged population that has the highest prevalence of bladder cancer • Applied tax rate is 22%.
60 Annual Report Photocure – Results 2022 14. PROPERTY, PLANT, EQUIPMENT AND LEASE ASSETS (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.
61 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 15. SUBSIDIARIES 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 16. INVENTORIES (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.
62 Annual Report Photocure – Results 2022 17. FINANCIAL RISK 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. (I) Organisation of ﬁnancial risk management 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. Centralised risk management 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.. Commercial operations – production, sales and marketing 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. (II) Classes of ﬁnancial risk Interest rate risk 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. Liquidity and funding risk 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
63 Credit risk 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. Currency risk 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
64 Annual Report Photocure – Results 2022 18. FAIR VALUE 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. (Amounts in NOK 1,000) 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 19. RECEIVABLES Maximum credit risk 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.
65 20. CASH AND SHORT TERM DEPOSITS (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. 21. SHARE CAPITAL 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. 1. The nominal value of treasury shares is presented in the balance sheet as a negative equity element. The net purchase price is entered as a reduction of other paid-in equity. Proﬁts or losses on transactions in treasury shares are not included in the income statement. 2. Transaction charges in connection with equity transactions are included directly in equity after deduction for tax. Only transaction charges that are directly attributable to the equity transaction are included directly in equity. 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.
66 Annual Report Photocure – Results 2022 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. Ownership structure 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 %
67 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. 22. LOAN TERMS AND REPAYMENT (Amounts in NOK 1,000) Currency Nominell interest rate Year of maturity Loan amount 01.01 Instal- ments paid Book value 31-Dec-22 1st year instal- 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.
68 Annual Report Photocure – Results 2022 Group Earnout liability Financial loan bank Oﬃce Lease Oslo Oﬃce Lease Princeton Oﬃce and car Lease 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
69 23. ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES (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. 24. SUBSEQUENT EVENTS 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.
70 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 Independent Auditor’s Report Report on the Audit of the Financial Statements Opinion We have audited the financial statements of Photocure ASA, which comprise: • the financial statements of the parent company Photocure ASA (the Company), which comprise the statement of financial position as at 31 December 2022, the statement of profit or loss and comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and • the consolidated financial statements of Photocure ASA and its subsidiaries (the Group), which comprise the statement of financial position as at 31 December 2022, the statement of profit or loss and comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion • the financial statements comply with applicable statutory requirements, • the financial statements give a true and fair view of the financial position of the Company as at 31 December 2022, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU, and • the consolidated financial statements give a true and fair view of the financial position of the Group as at 31 December 2022, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU. Our opinion is consistent with our additional report to the Audit Committee. Basis for Opinion 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 Penneo Dokumentnøkkel: PDT52-0A6P8-BV7YJ-XK8TA-ILIS6-PIMPK
71 71 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 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. 1. Deferred tax asset Reference is made to Note 10 Tax in the financial statements The Key Audit Matter How the matter was addressed in our audit 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 Hexvix®/Cysview ®, will be available in the 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. Our audit procedures included, among others: • Evaluating the appropriateness of key assumptions in the estimated future taxable profit analysis prepared by management, including revenue and cash flow growth, the impact of the expiry of patents and the reversal of significant temporary differences • Comparing financial performance with the original forecasts, to evaluate the reliability of management’s prognoses related to future taxable profit • Evaluating management’s sensitivity analysis to assess the impact of reasonable changes in key assumptions including future sales for Hexvix®/Cysview ® • Evaluating the adequacy of the disclosures in the financial statements. Penneo Dokumentnøkkel: PDT52-0A6P8-BV7YJ-XK8TA-ILIS6-PIMPK
72 2. Loan to subsidiary 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. 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. 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 • 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 Other Information 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 infor mation 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. Penneo Dokumentnøkkel: PDT52-0A6P8-BV7YJ-XK8TA-ILIS6-PIMPK
73 Based on our knowledge obtained in the audit, it is our opinion that the Board of Directors’ report • is consistent with the financial statements and • contains the information required by applicable statutory requirements. Our opinion on the Board of Director’s report applies correspondingly to the statements on Environmental, Social and Governance. Responsibilities of Management for the Financial Statements 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 rel ated 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. Auditor’s Responsibilities for the Audit of the Financial Statements 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 to fraud or error. We design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's and the Group's internal control. • evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's and the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company and the Group to cease to continue as a going concern. • evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves a true and fair view. • obtain sufficient appropriate audit evidence regarding the financial information of the entities or Penneo Dokumentnøkkel: PDT52-0A6P8-BV7YJ-XK8TA-ILIS6-PIMPK
74 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. Report on Other Legal and Regulatory Requirements Report on Compliance with Requirement on European Single Electronic Format (ESEF) Opinion 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’s Responsibilities 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. Auditor’s Responsibilities 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. Penneo Dokumentnøkkel: PDT52-0A6P8-BV7YJ-XK8TA-ILIS6-PIMPK
75 Oslo, 11 April 2023 KPMG AS Geir Moen State Authorised Public Accountant (This document is signed electronically) Penneo Dokumentnøkkel: PDT52-0A6P8-BV7YJ-XK8TA-ILIS6-PIMPK
This document is digitally signed using Penneo.com. The digital signature data within the document is secured and validated by the computed hash value of the original document. The document is locked and timestamped with a certificate from a trusted third party. All cryptographic evidence is embedded within this PDF, for future validation if necessary. How to verify the originality of this document This document is protected by an Adobe CDS certificate. When you open the document in Adobe Reader, you should see, that the document is certified by Penneo e-signature service <penneo@penneo.com>. This guarantees that the contents of the document have not been changed. You can verify the cryptographic evidence within this document using the Penneo validator, which can be found at https://penneo.com/validator The signatures in this document are legally binding. The document is signed using Penneo™ secure digital signature. The identity of the signers has been recorded, and are listed below. “By my signature I confirm all dates and content in this document.” G Ge ei ir r M Mo oe en n S St ta at ts sa au ut to or ri is se er rt t r re ev vi is so or r On behalf of: KPMG AS Serial number: 9578-5999-4-2322213 IP: 80.232.xxx.xxx 2023-04-11 11:33:45 UTC Penneo document key: PDT52-0A6P8-BV7YJ-XK8TA-ILIS6-PIMPK
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78 Annual Report Photocure – Results 2022 Alternative Performance Measures (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: EBITDA & EBIT 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.
79 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 Revenue growth in constant currency 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
80 Annual Report Photocure – Results 2022 1st quarter 2022: May 11 2nd quarter 2022: August 10 3rd quarter 2022: November 2 RESULTS Annual General Meeting: April 28, 2022 Financial Calendar 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
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 109 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. About this report Photocure’s ESG reporting journey Photocure adopts the GRI standard for its ESG reporting journey The company publishes its ﬁrst ESG report for the reporting year 2019 Photocure becomes signatory of the UN Global Compact committing to its ten principles within human rights, labour, environment and anti-corruption Photocure has been publishing integrated Annual Reports / ESG Reports for the years 2020-2022 2019 June 2020 April 2021 Since April 2021 GRI standard 1st report Integrated report UN Global Compact
83 Contents 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 Photocure’s stakeholders ......................................................................................................................................................................................... 108 GRI Content Index ............................................................................................................................................................................................................... 109
84 ESG Report Photocure – 2022 CEO letter 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.
85 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 high- performance 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.”
86 ESG Report Photocure – 2022 86 About Photocure 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-in- class 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. Photocure value chain oversight Photocure Suppliers Customers Product Quality Oversight Supply Chain Oversight Intellectual Property Risk Management Active substance manufacture Semiﬁnished product manufacture Finished Product manufacture Transport | Storage | Distribution to Hospitals, Wholesalers, Pharmacies purchase the product Marketing Authorization Holder Product Quality & Safety Surveillance Sales & Marketing Customer Support & Training Ensures Access to the product & BLC procedure Supports further Research & Clinical Trials in Bladder Cancer End users Bladder Cancer Patients get staged | diagnosed | follow up procedures Urology Healthcare Professionals conduct the BLC procedure with the Product Medical Equipment for Blue Light Cystoscopy is provided by 3rd Party Medical Device companies, depending on Market Authorizations Value Chain Oversight
87 Additionally, Photocure distributes Combat BRS and Combat BRS kits for the Hivec TM 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. Locations 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). Employees per region: Location Total Oslo / Global functions 24 Europe commercial 34 Princeton / Global functions 10 North America commercial 38 Total 106
88 ESG Report Photocure – 2022 Corporate governance Photocure has made a strong commitment to ensure trust in the company and to enhance shareholder value through eﬀective decision- making 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 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
89 Be Agile Adapt to changes Demonstrate ﬂexibility Be responsive Be quick We Care... about all that we do and all who we touch. We value diversity and are respectful, inclusive and operate with the highest level of integrity. Take Ownership Be accountable for your actions Drive for results Act Professionally Make an impact Be Passionate 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 Work Together Be inclusive and respectful Work collaboratively Have fun doing what you do Build trust 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: Take Ownership: Take initiative and responsibility Be Passionate: Care deeply about what we do Be Courageous: Take action in the face of obstacles Be Agile: Move quickly, act decisively Be Curious: Have the desire and interest to learn new things, grow and develop Work Together: Think individually, act as One Team to achieve more Care & Respect Council: 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 in the workplace Awareness and appreciation of diversity and inclusion Healthy and sustainable work life balance
90 ESG Report Photocure – 2022 Stakeholder prioritization and dialogue 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. Materiality assessment 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’s approach to sustainability Photocure Employees Customers/ Patients Suppliers Investors/ Shareholders Government Authorities Civil Society Photocure’s stakeholders Stakeholder descriptions: see appendix p. 108
91 Materiality matrix Product quality & safety - Global Quality Management System - Product Safety Surveillance Human Rights & Supply chain responsibility - Respect for UNGC Human Rights standards - Societal and Community Impact - Access to Healthcare - Labor Standards - Responsible Supply Chain: Supplier Assessment on Environmental Criteria & Certiﬁcations - Energy Consumption - Risk Assessment on Water scarcity areas Environment & climate impact - Photocure Oﬃce Facilities - Scope 1 and 2 Emissions - Transportation, waste and packaging - Pharmaceutical residuals in water Working environment - Health & Safety in the Workplace - Human Resources & Talent Management - Employee turnover - Gender Equality, Diversity & Inclusion - Employee Engagement - Employee training and development Data Protection & IT Security - Privacy & Data Management - IT / Cybersecurity Ethical pharmaceutical research & development - Publication of studies and results openly - Ethical R&D & Animal Welfare Business ethics & transparency - Compliance program - Anti-corruption - GRI-standard ESG Reporting - Stakeholder Relationship Management - Board Composition & Structure - Audits & Risk Management - Corporate Governance Policies - Remuneration - Board Independence - Accounting transparency - Responsible/ethical marketing and disclosure Human Rights & Supply chain responsibility Product quality & safety Environment & climate impact Working environment Business ethics & transparency Ethical pharmaceutical research & development Data Protection & IT Security Importance of topic impact to Stakeholders & Society Importance of topic impact on Photocure’s business & operations Material Topics
92 ESG Report Photocure – 2022
93 In this chapter, the company’s management approach, activities, goals and performance for the reporting period is described for each of the material topics. Product quality and safety 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 Reporting on material topics Abbreviations: 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 GMP HC Compliance GCP GDP GDPR GVP FDA QMS
94 ESG Report Photocure – 2022 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. Goals and targets for 2023 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. Human rights & Supply chain responsibilit Human rights 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 sub- contractors for raw materials. Out of 15 suppliers contributing to our product 2 were rated as “medium risk” and 13 as “low risk”. Within the supply chain no new contracts were signed in the reporting period. The two rated as medium risk are subcontractors of one of our suppliers. 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. Goals and targets for 2023 Discuss the “medium risk” rated sub-contractors in business review meetings with the supplier Review the procedures to identify further improvement of the oversight of human rights and indecent working conditions risks. 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.
95 Supply chain responsibility 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. Within Supply Chain several notable achievements can be reported for 2022: Environmental, social and governance topics were followed up in regular business review meetings. The status of ESG topics related policies from all critical suppliers was assessed. The two critical suppliers not having formal policies in line with UN Global Compact, were encouraged to implement this. One of them did provide evidence of such a policy during 2022. Goals and targets for 2023 Include following up on environmental, social and governance topics in regular business review meetings. Assess the status of ESG topics related policies from all critical suppliers. Encourage and support critical suppliers to implement policies in line with UN Global Compact. 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.
96 ESG Report Photocure – 2022 Environment and climate impact 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. Energy use (electricity) from Photocure locations: Scope 1: Not applicable Scope 2: Indirect emissions from energy use (electricity & heating) from Photocure locations: Photocure Location kWh electricity kWh district heating Total Kg C0 2 e 2021 2022 2021 2022 2021 2022 Headquarter (Oslo) 75 560 68 818 32 416 57 284 1 980 kg CO 2 e* 1 410 – kg CO 2 e Europe (Düsseldorf) 5,214** 1 1 097*** NA 26 077 1 630 – kg CO 2 e 13 530 – kg CO 2 e North America (Princeton)**** 48 148 37 958 - - 10 740 kg CO 2 e 8 460 kg CO 2 *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 CO 2 -equivalents) from Photocure locations. Calculated and validated by Variable AS (https://variable.co), in accordance with the GHG Protocol.
97 97 Critical supplier screening; manufacturing and supply chain 2021 2022 Total number of critical suppliers in Photocure’s manufacturing and supply chain 11 11 Critical suppliers with Environmental policy available on website or shared otherwise with Photocure 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 Oﬃce locations & emissions Photocure’s headquarter is located in an oﬃce building in Oslo that is certiﬁed by the BREEAM Code for a sustainable built environment. The certiﬁcate is renewed annually, and the building obtained “very good” in the asset performance and building management categories. In addition, a best-in-class approach (100%) to waste was highlighted in the April 2022 BREEAM assessment, analyzing that the real estate “assets have adequate space for waste stream separation on site, allowing for recycling to take place and thus reduce waste being sent to landﬁll or for incineration.” The oﬃce building in Princeton, USA, had its “Energy Star” certiﬁcation renewed in 2021 and the commercial real estate company is included in the GRESB: The Global Real Estate Sustainability Benchmark, the worldwide portfolio-level standard for environmental, social and governance (ESG) benchmarking for real estate Corporate Level Disclosure. The real estate company also earned the BOMA 360 label for operational best practices of its building management. In response 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, third- party 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. Supply chain monitoring, packaging & transportation 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.
98 ESG Report Photocure – 2022 Environmental risk related to Photocure’s medicinal product: 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 non- reactive 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*. In conclusion: Environmental risk: Use of HAL has been considered to result in insigniﬁcant environmental risk. Degradation: The predicted environmental concentration of HAL is so low that it did not reach the prespeciﬁed action limit for further risk investigations at time of approval (2010). Bioaccumulation: HAL has low potential for bioaccumulation. Goals and targets for 2023 Draft & implement a group environmental policy. Continue annual environmental topics monitoring of real estate providers for Photocure locations and include them in any new real estate searches. Continue stakeholder dialogue to assess evolving environmental and climate reporting needs. * REACH is a European Regulation and is an acronym for the Registration, Evaluation, Authorization and Restriction of Chemicals
99 Working environment 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 well- being and spirit of the team after the long Covid-19 period of constraints. Employee engagement 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 92% 93% 87 % (91% / 89 people in 2021) (94% in 2021) (89% in 2021)
100 ESG Report Photocure – 2022 Policies & workplace key ﬁgures 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 non- discriminating, secure work- environment, 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-the- job 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 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 Employees by Region
101 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 Breakdown of employees Gender equality and diversity 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. Compensation equity 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: US sales force women earn 99.88% of men Europe sales force women earn 102.41% of men Dec-22 Headcount Dec '22 New Hires (last 12 month) Terms last 12 month Turnover % last 12 month Regret. Turnover (last 12 month) TOTAL 106 20 12 12.04% 4.0% Turnover Regions as listed on p.100, all numbers are provided in FTE and at the end of the reporting period.
102 ESG Report Photocure – 2022 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 Breakdown of employees and board members by gender: Goals and targets for 2023: Maintain engagement to be measured by low regrettable turnover, high participation (>80%) and high overall score in the employee survey (>75%). Continue to build a strong performance driven Culture where all colleagues feel respected and are motivated to do their best work. Build a pipeline of talent that can meet the future needs of the organization driving towards a strong, diverse pool of successors to key positions in the organization. Encourage and support our colleagues to have a learning mindset and to think innovatively by providing opportunities for training and development and through experiential projects. Within working environment several notable achievements can be reported for 2022: All colleagues on-boarded have received the on-boarding training needed 92% response rate in Pulse Survey with over 80% indicating satisfaction with the Company Leadership training program continued – 8 sessions oﬀered, 385 participants and 78% attendance of those invited Succession planning for key functions implemented with development plans being established for key talent and successors Conducted a mandatory harassment prevention training for all colleagues across the globe A paid parental leave policy was implemented for U.S.-based employees in September 2022.
103 Business ethics and transparency 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 in May 2022. 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 non- compliance with laws and regulations in the reporting period, and no ﬁnes or non-monetary sanctions were incurred or paid. Compliance Program 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: Code of Conduct Anti-corruption policy Supplier & Partner Code of Conduct Quality and Compliance policy Quality and compliance manual 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.
104 ESG Report Photocure – 2022 Ethical marketing and disclosure 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. A transparent disclosure regarding payments and transfers of value between the medical community and the pharmaceutical industry is important to keep a trustworthy and healthy relationship with patients, health care professionals, government oﬃcials and the public, and it also strengthens the company’s commitment to keeping a high ethical business standard. 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. Suppliers and Partners 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 anti- corruption laws. To strengthen the internal awareness of the importance
105 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. Reporting & Monitoring 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. Within Business ethics and transparency several notable achievements can be reported for 2022: The Code of Conduct was updated with clearer statement for human rights. Supplier procedures updated to ensure correct assessment of risk for corruption, based on location, and risk for human rights breaches in line with the Norwegian Transparence Act. All new employees were trained in business ethics and compliance. All employees training in the revised documents. Goals and targets for 2023 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. Research activities: 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 long- term 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.
106 ESG Report Photocure – 2022 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 Security tickets and breaches Data protection and IT security 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. Notable achievements in Data protection and IT security in 2022: Kept security tickets with severity “critical” to zero. Held a GDPR refresher training to make sure every employee gets a better understanding on how to handle personal data in their daily work. Implemented multi-factor authentication to access all Intility- based IT services to improve IT-security in our international organization. Goals and targets for 2023: Keep security tickets with severity “critical” to zero Improve e-mail security by increasing the impersonation protection, security checks of links and e-mail attachments and surveillance of attempts to compromise e-mail accounts Continue to increase awareness of the security situation and reporting of suspicious e-mails by annual reminders to all employees Hold an annual GDPR refresher training and IT awareness training for employees Attend network for data privacy to stay compliance with the data protection legislation
107 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 impact Include environmental topics in the monitoring of real estate providers for Photocure locations ESG reports from our oﬃce landlords received and reviewed. 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 Goals & Targets 2022 Complete Work in progress / partly achieved Not started APPENDIX:
108 ESG Report Photocure – 2022 Photocure’s stakeholders Employees Photocure’s employees are directly aﬀected by the company’s internal policies and activities, and directly aﬀect the company through their performance and actions. Customers/Patients 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. Suppliers 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. Investors/Shareholders 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 authorities Government and regulatory authorities aﬀect the company’s operating conditions directly and indirectly. Civil society 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 Goals & Targets 2022 Complete Work in progress / partly achieved Not started
109 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) GRI content index Photocure has reported in accordance with the 2021 GRI Standards for the reporting period January 1 st to December 31 st , 2022.
110 ESG Report Photocure – 2022 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. Disclosure Disclosure description Reference Omission
111 2-25 Processes to remediate negative impacts Corporate governance policy and annual review (risk management and internal control) + Business ethics and transparency (Reporting & monitoring) 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. 2-26 "Mechanisms for seeking advice and raising concerns" Business ethics and transparency (Reporting & monitoring) 2-27 Compliance with laws and regulations Business ethics and transparency (Reporting & monitoring) 2-28 Membership associations Board of Directors Report (Corporate Social Responsibility) + About Photocure 5. STAKEHOLDER ENGAGEMENT 2-29 Approach to stakeholder engagement Stakeholder prioritization and dialogue 2-30 Collective bargaining agreements Policies and workplace key ﬁgures MATERIAL TOPCIS GRI 3: MATERIAL TOPCIS 2021 3-1 Process to determine material topcis Stakeholder priotitization and dialogue + Materiality assessment 3-2 List of material topics Stakeholder priotitization and dialogue + Materiality assessment + CEO letter HUMAN RIGHTS + SUPPLY CHAIN RESPONSIBILITY 3-3 Management of material topics Human Rights + Norwegian Transparency Act + Supply chain responsibility + Stakeholder prioritization and dialogue GRI 412: HUMAN RIGHTS ASSESSMENT 2016 412-1 Operations that have been subject to human rights reviews or impact assessments Norwegian Transparency Act 412-3 Signiﬁcant investment agreements and contracts that include human rights clauses or that underwent human rights screening Norwegian Transparency Act Disclosure Disclosure description Reference Omission
112 ESG Report Photocure – 2022 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
113 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 Disclosure Disclosure description Reference Omission
114 ESG Report Photocure – 2022
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PHOTOCURE ASA Hoffsveien 4 0275 Oslo, Norway +47 22 06 22 10 info@photocure.no PHOTOCURE INC. 202 Carnegie Center, suite 101 Princeton, NJ 08540, USA +1 609 759 6500 info@photocure.com PHOTOCURE GMBH Marc-Chagall-Str. 2 40477 Düsseldorf, Germany kontakt@photocure.com #2023021 WWW.PHOTOCURE.COM